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When California’s housing crisis slammed into a wealthy suburb, one public servant became a convert to a radically simple doctrine.
By Conor Dougherty
Published Feb. 13, 2020 – The New York Times
The City Council of Lafayette, Calif., met the public two Mondays a month, and Steve Falk liked to sit off by himself, near the fire exit of the auditorium, so that he could observe from the widest possible vantage. Trim, with a graying buzz cut, Mr. Falk was the city manager — basically the chief executive — of Lafayette, a wealthy suburb in the San Francisco Bay Area that is notoriously antagonistic to development.
With a population of just 25,000, Lafayette was wealthy because it was a small town next to a big town, and it maintained its status by keeping the big town out. Locals tended to react to new building projects with suspicion or even hostility, and over a series of Mondays in 2012 and 2013, Mr. Falk took his usual spot by the fire exit to watch several dozen of his fellow Lafayetters absolutely lose their minds.
A developer had proposed putting 315 apartments on a choice parcel along Deer Hill Road — close to a Bay Area Rapid Transit station, and smack in the view of a bunch of high-dollar properties. This wasn’t just big. The project, which the developer called the Terraces of Lafayette, would be the biggest development in the suburb’s history. Zoning rules allowed it, but neighbors seemed to feel that if their opposition was vehement enough, it could keep the Terraces unbuilt.
In letters to elected officials, and at the open microphone that Mr. Falk observed at the City Council meetings, residents said things like “too aggressive,” “not respectful,” “embarrassment,” “outraged,” “audacity,” “very urban,” “deeply upset,” “unsightly,” “monstrosity,” “inconceivable,” “simply outrageous,” “vehemently opposed,” “sheer scope,” “very wrong,” “blocking views,” “does not conform,” “property values will be destroyed,” and “will allow more crime to be committed.”
Mr. Falk could see where this was going. There would be years of hearings and design reviews and historical assessments and environmental reports. Voters would protest, the council would deny the project, the developer would sue. Lafayette would get mired in an expensive case that it would likely lose. As Mr. Falk saw it, anything he could do to prevent that fate would serve the public interest. So he called the developer, a man named Dennis O’Brien, and requested a meeting.
Mr. Falk had once taken a course on negotiation at Harvard, where he learned that people are supposed to be more reasonable when they bargain over food. He went to a deli and bought baguettes, a wheel of Brie and bunches of red grapes. He laid the spread on a conference room table and cut the bread into slices and put down little cheese spreaders and surrounded it with the grapes.
Mr. O’Brien was roughly the color of those grapes when he walked in with some aides, and Mr. Falk accepted that for the next few hours he would be the recipient of the developer’s frustrations. But before it got to that, he told everyone, he wanted them to eat.
The room was silent. Mr. Falk explained the whole deal about his negotiation class. The room remained silent. Mr. Falk looked at Mr. O’Brien and said, Dennis, look, I don’t even know you, but you have to eat something, even if it’s one grape, before I’ll talk to you. That at least got people laughing, and pretty soon everyone acceded to the bread and cheese and grapes.
It was imperative they cut a deal. Much more was at stake than just one building on one plot of land in one suburb.
America has a housing crisis. The homeownership rate for young adults is at a multidecade low, and about a quarter of renters send more than half their income to the landlord. Homelessness is resurgent, eviction displaces a million households a year, and about four million people spend at least three hours driving to and from work.
One need only look out an airplane window to see that this has nothing to do with a lack of space. It’s the concentration of opportunity and the rising cost of being near it. It says much about today’s winner-take-all economy that many of the cities with the most glaring epidemics of homelessness are growing centers of technology and finance. There is, simply put, a dire shortage of housing in places where people and companies want to live — and reactionary local politics that fight every effort to add more homes.
Nearly all of the biggest challenges in America are, at some level, a housing problem. Rising home costs are a major driver of segregation, inequality, and racial and generational wealth gaps. You can’t talk about education or the shrinking middle class without talking about how much it costs to live near good schools and high-paying jobs. Transportation accounts for about a third of the nation’s carbon dioxide emissions, so there’s no serious plan for climate change that doesn’t begin with a conversation about how to alter the urban landscape so that people can live closer to work.
According to the McKinsey Global Institute, the state needs to create 3.5 million homes by 2025 — more than triple the current pace — to even dent its affordability problems. Hitting that number will require building more everything: Subsidized housing. Market-rate housing. Homes, apartments, condos and co-ops. Three hundred and fifteen apartments on prime parcels of towns like Lafayette.
Legislation is important, but history suggests it can do only so much. In the early 1980s, during another housing crisis, California passed a host of bills designed to streamline housing production and punish cities that didn’t comply. But the housing gap has persisted, and more recent efforts have also failed. In late January, the Legislature rejected S.B. 50, a bill that would have pushed cities to accept four- to five-story buildings in amenity-laden areas.
What this suggests is that the real solution will have to be sociological. People have to realize that homelessness is connected to housing prices. They have to accept it’s hypocritical to say that you don’t like density but are worried about climate change. They have to internalize the lesson that if they want their children to have a stable financial future, they have to make space. They are going to have to change.
Steve Falk changed. When he first heard about Dennis O’Brien’s project, he thought it was stupid: a case study, in ugly stucco, of runaway development. He believed the Bay Area needed more housing, but he was also a dyed-in-the-wool localist who thought cities should decide where and how it was built. Then that belief started to unravel. Today, after eight years of struggle, his career with the city is over, the Deer Hill Road site is still just a mass of dirt and shrubs, and Mr. Falk has become an outspoken proponent of taking local control away from cities like the one he used to lead.
A universal platform of more
Although he didn’t know it at the time, Mr. Falk’s transformation began in 2015, with a phone call from a woman he’d never heard of, with a complaint he had never once fielded in his 25 years working for the city. Her name was Sonja Trauss, and she thought the Deer Hill Road project was too small.
Ms. Trauss was a lifelong rabble-rouser and former high school teacher, who’d recently become a full-time housing activist. She made her public debut a couple of years earlier, at a planning meeting at San Francisco City Hall. When it was time for public comment, she stepped to the microphone and addressed the commissioners, speaking in favor of a housing development. She returned to praise another one. And another. And another.
In backing every single project in the development pipeline that day, Ms. Trauss laid out a platform that would make her a celebrity of Bay Area politics: how expensive new housing today would become affordable old housing tomorrow, how San Francisco was blowing its chance to harness the energy of an economic boom to mass-build homes that generations of residents could enjoy. She didn’t care if a proposal was for apartments or condos or how much money its future residents had. It was a universal platform of more. Ms. Trauss was for anything and everything, so long as it was built tall and fast and had people living in it.
The data was on her side. From 2010 to 2015, Bay Area cities consistently added many more jobs than housing units — in some cases at a ratio of eight to one, way beyond the rate of one and a half jobs per housing unit that planners consider healthy. In essence, the policy was to enthusiastically encourage people to move there for work while equally enthusiastically discouraging developers from building places for those people to live, stoking a generational battle in which the rising cost of housing enriched people who already owned it and deterred anyone who wasn’t well paid or well off from showing up.
Ms. Trauss organized supporters into a group called the San Francisco Bay Area Renters Federation, or SF BARF, which was amateur even by local activist standards. But amateur was the point, part of Ms. Trauss’s knack for getting attention. She drove a glittery orange Crown Victoria, showed up to municipal meetings in leggings and white cowboy boots, and spoke in pop philosophical monologues, like declaring that the reason people don’t like new buildings is that it reminds them that they’re going to die.
Her aims were explicitly revolutionary. She told people that her goal wasn’t to enact any particular housing policy, but to alter social mores such that neighbors who fought development ceased being regarded as stewards of good taste and instead came to be viewed as selfish hoarders.
Ms. Trauss started to attract the attention of wealthy donors like Jeremy Stoppelman, the co-founder of Yelp, who had started to worry about housing costs crimping economic growth. And her tactics got more sophisticated. With a friend, Brian Hanlon, who worked a desk job at the United States Forest Service, she co-founded a nonprofit called the California Renters Legal Advocacy and Education Fund, or CARLA. Its mission: “Sue the suburbs.” After reading about an obscure 1982 California law called the Housing Accountability Act, Ms. Trauss decided to try to use it to force Lafayette to build Dennis O’Brien’s 315 apartments.
By then — 2015 — Mr. Falk had been working on the Deer Hill Road project for years. Through dozens of meetings with Mr. O’Brien, he’d hammered out a deal for a more modest development of 44 single-family homes, as well as an agreement to build the city a soccer field and dog park. Mr. Falk was a frequent user of the analogy about sausage-making, and this was definitely some sausage, but he walked out of his talks with Mr. O’Brien feeling like an A‑plus public servant who might have a second career in conflict resolution. When Ms. Trauss phoned him to say the 44-home approach was entirely inadequate, Mr. Falk tried to persuade her otherwise. Of course, he never had a chance.
At a City Council meeting a week later, Mr. Falk noticed a gaggle of BARFers, throbbing with the conspiratorial energy of teenagers before a prank. The microphone was already going to be crowded. Neighbors had formed a vociferous nonprofit called Save Lafayette, which opposed both the 315-apartment idea and the 44-house compromise on grounds from view-ruination to carcinogenic construction dust. Mr. Falk sat by the fire exit and watched as BARF and Save Lafayette collided at the podium, one side arguing the project was too small, and the other arguing it was too big.
“I’m somewhat disturbed by all these parties from outside my neighborhood telling me that I should accept this degradation to my quality of life,” said one Lafayette resident, Ian Kallen.
“No human being is a degradation,” retorted an SF BARF member named Armand Domalewski. “Let’s talk about the economic benefits of adding people instead of simply treating them as costs.”
When it was Ms. Trauss’s turn to speak, she argued that the entire notion of public comment on new construction was inherently flawed, because the beneficiaries — the people who would eventually live in the buildings — couldn’t argue their side.
“An ordinary political process like a sales tax — both sides have an opportunity to show up and say whether they’re for or against it,” she said. “But when you have a new project like this, where are the 700-plus people who would initially move in, much less the tens of thousands of people who would live in it over the lifetime of the project? Those people don’t know who they are yet. Some of them are not even born.”
Ms. Trauss sued a few months later. The great irony was that nobody was more unhappy about it than Mr. O’Brien. He had spent years and millions of dollars proposing two completely different projects. Now some activist group he’d never heard of was suing the city, and him, on behalf of his original project — in essence, suing him on behalf of him.
CARLA’s lawyer had the impossible job of trying to convince a judge that Lafayette had unfairly forced Mr. O’Brien to build 44 houses instead of 315 apartments, while Mr. O’Brien sat on the other side more or less going, No they didn’t. CARLA lost the argument, but after it threatened to appeal, Mr. O’Brien ended up agreeing to pay its legal fees. He had now argued, and paid for, both sides of the same case.
Other litigation continued. Members of Save Lafayette sued to force a referendum where residents could rescind the 44-home plan, and eventually, they succeeded. Ms. Trauss and her fellow insurrectionists moved on to other battles, filing more lawsuits for more housing until they started winning. Meanwhile, the movement she helped found — YIMBY, for Yes in My Back Yard — has become an international phenomenon, with supporters in dozens of housing-burdened regions including Seattle; Boulder, Colo.; Boston; Austin, Texas; London and Vancouver.
‘Looking out for people who don’t live there yet’
Development battles are fought hyperlocally, but the issues are resonating everywhere. In late 2018, Minneapolis became the first major city in America to effectively end single-family zoning. Oregon followed soon after. California and New York have significantly expanded protections for renters. And as more economists give credence to the notion that a housing crisis can materially harm G.D.P., by exacerbating inequality and reducing opportunity, all of the Democratic presidential candidates have put forth major housing proposals.
They run the gamut from tax breaks for renters, to calls for more affordable housing funds, to plans for bringing federal muscle to bear on zoning reform. These ideas share a central conflict: Can city leaders — who in theory know local conditions best — be trusted to build the housing we need? Or will they continue to pursue policies that pump up property values, perpetuate sprawl, and punish low-income renters?
Mr. Falk began his career on the local control side of that debate. But somewhere along the Deer Hill odyssey, he started to sympathize with his insurrectionist opponents. His son lived in San Francisco and paid a fortune to live with a pile of roommates. His daughter was a dancer in New York, where the housing crunch was just as bad. It was hard to watch his kids struggle with rent and not start to think that maybe Ms. Trauss had a point.
“I’m not sure individual cities, left to their own devices, are going to solve this,” he told me once. “They don’t have the incentive to do so, because local voters are always going to protect their own interests instead of looking out for people who don’t live there yet.”
So he started to rebel. When California’s governor at the time, Jerry Brown, threatened to override local control with a proposal to allow developers to build urban apartments “as of right” — bypassing most of the public process and hearings — Lafayette citizens were apoplectic. Mr. Falk, against his own interest, wrote a memo in favor of the idea.
“Cannot be trusted,” “ineptitude,” “disingenuously manipulating the City Council,” “should be publicly and explicitly reprimanded” — these were some of the things citizens said in response. His future was untenable. The City Council reprimanded him, and when it came time for his contract negotiation, members of Save Lafayette protested a clause that would guarantee him severance of 18 months of pay if he was ever fired; a few months later he forfeited the amount — close to half a million dollars — and resigned.
“A city manager has a choice: You can just sit there and be this kind of neutral policy implementer, or you can insert yourself,” Mr. Falk said. “Sitting in your office all day long, you have to ask the question, ‘Why am I here, why am I doing this work?’ At some point, I just think it’s natural that you start making recommendations that you think are in the best interest, not just for the community, but society.”
It’s hard to look at what happened in Lafayette and see a population that acted rationally. After the 44-home plan was derailed, Mr. O’Brien activated an insurance policy that few people knew about: The terms of his negotiation with Mr. Falk allowed him to return to his original plan for 315 apartments. When residents learned at a City Council meeting that their agitation might have brought them full circle, they got so angry that a sheriff offered to escort one of Mr. O’Brien’s employees to her car.
Mr. Falk, on the other hand, seems at peace. At the council meeting marking his departure, he sat, uncharacteristically, up front. The mayor gave him the honor of leading the room in the Pledge of Allegiance. Mr. Falk had a resignation letter in front of him, but told the audience that he was only going to read it in part.
The portion he read was polite. It was about how he loved the city and believed Lafayette was a model of civility and democratic engagement and had a brilliant and professional staff. Afterward, people said nice things and Mr. Falk nodded thank you. The paragraphs he didn’t read became public soon enough — and started making the rounds on Twitter.
“All cities — even small ones — have a responsibility to address the most significant challenges of our time: climate change, income inequality, and housing affordability,” Mr. Falk had written. “I believe that adding multifamily housing at the BART station is the best way for Lafayette to do its part, and it has therefore become increasingly difficult for me to support, advocate for, or implement policies that would thwart transit density. My conscience won’t allow it.”
Sarah Brundage – Enterprise Community Partners
Erika Kerber – February Meeting
Can Washington do something to help them? A growing number of politicians think so.
NY Times December 13, 2019 by Emily Badger
Among the millions of recent eviction cases researchers have begun to compile across the country, there are a startling number of modest sums. There are dozens of families in Texas evicted with money judgments — unpaid rent, late fees, court costs — totaling $516. There are multiple families in Cumberland County, N.C., who owed all of $301. There is a household in Providence, R.I., whose 2016 court record shows a debt of just $127.
Such relatively small sums suggest that, for all of the intractable problems of poverty and affordable housing driving the nation’s eviction crisis, a little intervention could help many people. And politicians in Washington increasingly have such ideas in mind: court translators, more legal aid, mediation — even emergency rent assistance.
One bill, introduced in the Senate on Thursday by a Democrat, Michael Bennet of Colorado, and a Republican, Rob Portman of Ohio, would create a federal grant program to fund local emergency aid for tenants at risk of eviction. The bill, which would also establish a national database tracking eviction cases, is the latest in a series of federal proposals aimed at a problem that touches high-cost coastal cities and smaller towns alike.
Several Democratic senators — Maggie Hassan of New Hampshire, Tim Kaine of Virginia and Chris Van Hollen of Maryland — introduced a bill this fall that would create federal grants for landlord-tenant mediation programs and translators. In the House, Alexandria Ocasio-Cortez has introduced a bill that would fund legal aid in states and cities that establish a right to counsel for tenants that is akin to a new mandate in New York City.
And in the Democratic primary, an anti-eviction agenda is now practically a required element of candidates’ housing plans. Bernie Sanders supports a national “just cause” standard, limiting the grounds on which a landlord can evict a tenant. Cory Booker wants to prevent consumer reporting agencies from listing eviction cases won by the tenant. Amy Klobuchar wants to create new kinds of savings accounts that renters could tap in an emergency.
Such strategies most likely would not address the structural problems of sluggish wage growth and a scarcity of low-cost housing that underlie the eviction crisis. But they imply that even if eviction is a necessary remedy for landlords, perhaps there could be less of it.
“Sometimes you hear this response from property owners who say, ‘What do I do if a tenant is behind five, six, seven months?’ And that’s a really important question,” said Matthew Desmond, a sociologist at Princeton whose eviction research has influenced politicians. In data his Eviction Lab has analyzed from 22 states, that situation of tenants deep in debt is rare. It’s far more common, the lab has found, that tenants owe the equivalent of less than a month’s rent.
“That suggests a shallower end of the risk pool that you could lop off,” Mr. Desmond said.
Failure to pay rent is by far the most common cause of eviction. Across the 22 states where the Eviction Lab has data covering at least some counties, the median money judgment for cases between 2014 and 2016 was $1,253. Because that total includes other costs accumulated during the court process, most tenants initially faced eviction for the failure to pay a smaller rent sum (which is often not documented in eviction records).
Nearly half of the money judgments the lab has analyzed in Virginia were for less than the median rent in the census tract where the eviction occurred. In North Carolina, that’s true in more than 40 percent of cases. Across the 22 states, about a third of money judgments were for less than the local median rent.
“That third of the people that can’t come up with a month’s rent, finding a way to stabilize their housing situation will actually be less costly than the remedy of throwing them out in to the street — for everybody,” said Mr. Bennet, who is also running for president. “Today, the externalities of that third of people are invisible to society.”
The public doesn’t see the cost of homeless shelters, or the cost to landlords of having to find new tenants, or the costs when newly homeless children change schools and classrooms are disrupted, said Mr. Bennet, who was previously the superintendent of the Denver Public Schools.
Many of these proposals are effectively trying to slow down the eviction process, or to create more alternatives to it.
“The court system has been set up so that the choice for the landlord is really eviction or nothing,” Ms. Hassan said.
Her bill would also charge the Department of Housing and Urban Development with studying insurance models that landlords or tenants could buy into to guard against the possibility of a missed rent payment.
“Most families in poverty that are renting are spending half their income on rent, with no margin for error,” said Mike Koprowski, who leads a network of advocacy groups through the National Low-Income Housing Coalition that has pushed for emergency assistance grants. “There’s no margin for the broken-down car, the unreimbursed medical bill, the hours cut at your job.”
Landlord associations respond that such precariousness is the real problem. Wages have stagnated for the poor, and the supply of housing affordable to the poorest renters has dwindled. Between 1990 and 2017, the national stock of rental housing grew by 10.9 million units, according to the Harvard Joint Center for Housing Studies. Over that same time, the number of units renting for less than $600 a month in inflation-adjusted dollars fell by 4 million. All net growth in rental housing in America, in other words, has been for higher-income tenants.
“We regard evictions generally as a symptom of a larger problem that we have, which is a lack of housing that’s affordable,” said Greg Brown, the senior vice president of government affairs for the National Apartment Association. “The question we have to ask ourselves is, do changes in the process address that core issue, or do they lengthen a process of eviction and really end up in the same place?”
One recent study linking eviction records in Cook County, Ill., with credit report and payday loans data suggests that policy interventions to the court process itself may be too late to help many poor families. The study found that in the years leading up to an eviction filing, tenants who would ultimately wind up in court had mounting and substantially higher debts, compared with random tenants in the same neighborhoods.
“The signs of that disruption and financial distress appear two to four years ahead of the eviction filings,” said Winnie van Dijk, one of the study’s authors. For policymakers who want to help these families, she said, “it’s not as simple as avoiding a court order for eviction, unfortunately.”
The Bennet-Portman bill envisions some outcomes where a tenant might lose housing they can’t afford but still land in a better place. The bill would also create a grant program to support community courts that might, for instance, be tied directly to local providers of social services. The Cleveland Municipal Housing Court currently operates a similar model, where the most vulnerable tenants facing eviction are flagged for social services. In 2018, about 17 percent of eviction cases that came before the court were referred to case workers who tried to find programs like mental health support and homeless services for tenants.
Sherrae Landrum, 74, was summoned to the Cleveland court last December for accumulating clutter that her landlord objected to. She ultimately lost her home, but a social worker the court connected her to helped her find a temporary homeless shelter and then a permanent home. The social worker drove her to doctor’s appointments and accompanied her to pay the deposit on her new apartment. She helped enroll Ms. Landrum in a home health aide service, a meal-delivery program, and a class to manage hoarding tendencies.
Eviction court can present, at least, an opportunity to connect tenants with agencies that might help halt cycles of poverty, said Casey Albitz, who runs the court’s social service referral program.
“It was a blessing,” Ms. Landrum said of her case. She has more resources and support now than she ever did before. “They did me a favor.”
Disability Scoop – Michelle Diament
Google is putting up $5.3 million to help make an inclusive apartment complex — catering to those with and without developmental disabilities — a reality.
The technology giant said this week that it will invest in The Kelsey Ayer Station, a development planned in San Jose, Calif. The fully-accessible 115-unit complex is designed to offer rents that are affordable to people of varying income levels and 25 percent of the homes will be reserved for people with developmental disabilities.
Earlier this year, Google pledged to create a $250 million investment fund to spur the development of at least 5,000 affordable housing units in the San Francisco Bay Area where the company is based. The commitment to The Kelsey represents its first project under that initiative.
“The Kelsey’s first development in San Jose will be a pioneering, inclusive housing community,” said Alexa Arena, Google’s San Jose real estate development director. “Google is very excited to be a part of The Kelsey and we’re looking forward to more opportunities to help with the creation and preservation of affordable housing.”
In a blog post, Micaela Connery, founder and CEO of The Kelsey, said the development will be a place where individuals with and without disabilities can “live, play and serve together.”
Located near a light rail station and in walking distance to downtown San Jose, there will be a spot for accessible transit to drop people off, a sensory garden and space for support staff. In addition, two staff members will live on site to help connect residents with each other and their community as well as the services and supports they need, Connery said.
Google’s investment will help with costs for the land purchase and design work, while encouraging others to provide financing and donations for the project, Connery said. It will also allow developers to follow through on their goal of moving in residents in four years, she said.
“The Kelsey Ayer Station will demonstrate what’s possible when people, funding and cities come together with a shared commitment to inclusion,” Connery wrote. “With help from companies like Google and cities like San Jose we’re well on our way and we’re confident that their support will attract others to step up to make inclusive community a reality.”
A radical fix for the U.S. health-care crisis.
By John Tozzi Bloomberg
In 1986, Congress enacted a law to bar hospitals from turning away patients who are unable to pay. Any hospital with an emergency room that participates in federal health programs must evaluate and stabilize every patient who comes through the door, including those who are uninsured, indigent, addicted to drugs, or mentally ill.
No institution has a similar obligation to ensure that those people have a safe place to sleep. As a society, we’ve effectively decided that people shouldn’t die on the street, but it’s acceptable for them to live there. There are more thanhalf a million homeless in the U.S., about a third of them unsheltered—that is, living on streets, under bridges, or in abandoned properties. When they need medical care or simply a bed and a meal, many go to the emergency room. That’s where America has drawn the line: We’ll pay for a hospital bed but not for a home, even when the home would be cheaper.
Jeffrey Brenner is trying to move that line. He’s a doctor who for more than 25 years has worked largely with the poor, many of them homeless. Recently, his place in the health-care system has shifted. After decades in shoestring clinics and nonprofits, he’s become an executive at UnitedHealth Group Inc., America’s largest health insurer. Brenner is expected to contribute to its bottom line. He plans to do it by giving people places to live.
The research and development lab for this experiment is a pair of apartment complexes in a down-at-the-heels corner of Phoenix called Maryvale. Here, Brenner is using UnitedHealth’s money to pay for housing and support services for roughly 60 formerly homeless recipients of Medicaid, the safety-net insurance program for low-income people. Most states outsource their Medicaid programs to private companies such as UnitedHealth, paying the insurer a per-head monthly fee—typically $500 to $1,000—to manage members’ care. The company’s 6 million Medicaid members produced $43 billion in 2018, almost 20% of total revenue.
It’s a profitable business overall. But the most expensive patients, who often present a complex blend of medical, mental health, and social challenges, cost UnitedHealth vastly more than it takes in to care for them. “Can you imagine people living on the street with these disorders? Heart failure, COPD. They’re rolling around with oxygen tanks, crazy stuff,” Brenner says. It isn’t hard to find people living in similar distress around Phoenix or any other American city. And despite their extreme costs, these patients often get poor care. “This is just sad. This is just stupid,” Brenner says. “Why do we let this go on?”
Sitting in a vacant studio apartment on the second floor of one of the complexes, Brenner shows me data on a patient named Steve, a 54-year-old with multiple sclerosis, cerebral palsy, heart disease, and diabetes. He was homeless before UnitedHealth got him into an apartment. In the 12 months prior to moving in, Steve went to the ER 81 times, spent 17 days hospitalized, and had medical costs, on average, of $12,945 per month. In the nine months since he got a roof over his head and health coaching from Brenner’s team, Steve’s average monthly medical expenses have dropped more than 80%, to $2,073.
After testing the idea in Phoenix, Milwaukee, and Las Vegas, UnitedHealth is expanding Brenner’s housing program, called MyConnections, to 30 markets by early 2020. It’s a business imperative. In January, after the company announced a $12 billion profit for 2018, Wall Street analysts pressed Chief Executive Officer Dave Wichmann on the performance of its Medicaid business. The return, he acknowledged, was “not at our target margin range of 3% to 5%.” Wichmann said it would hit the target margin range of 3% to 5%.” Wichmann said it would hit the target next year.
Patients like Steve wind up in the ER because they don’t fit into the ways we deliver health care. The U.S. system is engineered to route billions of dollars to hospitals, clinics, pharmacies, and labs to diagnose and treat patients once they’re sick. It’s not set up to keep vulnerable people housed, clothed, and nourished so they’ll be less likely to get sick in the first place.
The U.S. spends 18% of its gross domestic product on health care, vs. 8.6% in the other 35 countries in the Organization for Economic Cooperation and Development. America’s outsize spending on health care contrasts with much paltrier investments in social support—housing, food, education, cash assistance, and care for children and the elderly. Other nations in the OECD spend $2 on social services for every $1 they spend on health care, according to The American Health Care Paradox, a 2013 book by Elizabeth Bradley and Lauren Taylor. In the U.S., each dollar of health spending is matched by only 60¢ of social support.
Social Expenditures as Share of GDP
That a for-profit conglomerate like UnitedHealth is in the business of taking taxpayer money to care for poor people reflects the peculiarity of U.S. social policy. Medicaid was created in 1965 in tandem with Medicare—public insurance for older Americans. Congress has since expanded eligibility for Medicaid, most recently through the Affordable Care Act, and the program now insures 72 million people, more than 1 in 5 Americans. It pays for 42% of all births.
States split the cost of Medicaid with the federal government, but it takes up an ever-larger portion of their budgets—after education, it’s usually a state’s biggest expense. To keep down costs and avoid the difficulty of running a health-care system, most states contract with UnitedHealth and its competitors to establish what are called Medicaid managed-care programs. In 2017, $264 billion, almost 50¢ of every Medicaid dollar, went toward care for the 54 million people on private Medicaid plans.
Few entities outside the government exert as much influence over health care as UnitedHealth, based in Minnetonka, Minn. The company’s health-insurance unit, UnitedHealthcare, provides benefits to 43 million Americans. About 50,000 physicians work for its health-services unit, Optum Inc. UnitedHealth also owns pharmacies and a bank and Brazilian hospitals. Its revenue last year, $226 billion, surpassed that of all but five U.S. companies; it’s told shareholders to expect long-term earnings growth of 13% to 16% annually.
relates to America’s Largest Health Insurer Is Giving Apartments to Homeless People
Dr. Jeffrey Brenner
Photographer: Mark Peterman for Bloomberg Businessweek
Brenner, a smiley and cerebral 50-year-old, is an unlikely insurance company man. He studied neuroscience at Robert Wood Johnson Medical School in New Brunswick, N.J., and anticipated a career in research. After a stint at a free student-run clinic that served homeless people and undocumented Central American refugees, he switched to the less prestigious field of family medicine. He did his residency in Seattle and then moved in 1998 to Camden, N.J., at the time the poorest city in the U.S. Brenner started at a small practice with three exam rooms and eventually split off to practice solo. Almost all his patients were on Medicaid. He’d get up in the middle of the night to deliver babies.
Brenner also treated victims of violent crime, which led to an interest in developing an accurate picture of Camden’s crime. It wasn’t going to come from the city government, he learned, because so many victims didn’t file police reports. He went to the hospitals instead.
The data he saw there illuminated a gross imbalance in health-care spending: A tiny sliver of patients accounted for a large part of spending. In Camden, 1% of patients made up 30% of the cost. Brenner spotted patients who went to the ER hundreds of times a year, including a handful of individuals who cost the system millions of dollars each. “Like, for 1% of the spending here, we could open up 10 primary-care offices all over the city,” Brenner says.
He had to shutter his solo practice when he was unable to sustain it on Medicaid’s payment rates. (Medicaid pays doctors and hospitals about 30% less than Medicare does; Medicare in turn pays significantly less than private insurers.) Meanwhile, hospitals were expanding. “The system had become so distorted that it felt like a microcosm of what was going on in America, which is if you don’t take good care of people, they’ll get sick,” Brenner says. “Then you’ll need more hospital beds and hospitals to take care of them.”
In 2002 he founded the nonprofit Camden Coalition of Healthcare Providers. The group used hospital claims data to identify outlier patients and hot spots of medical spending, then tried to help people before they landed in the most costly settings, ERs and hospital beds. That work brought Brenner national prominence, including a New Yorker profile by Atul Gawande, the surgeon and MacArthur “genius” grant recipient, in 2011. Two years later, Brenner received a MacArthur fellowship himself.
UnitedHealth supported the nonprofit and eventually approached Brenner about a job helping the company with its own strategy to address patients’ social needs. “I said no, and said no a couple of times,” he says. But in 2017, convinced that UnitedHealth’s commitment was serious, he joined to test his ideas on a vastly larger stage. The company has 80 times as many Medicaid members as Camden has people.
Brenner, whose title is senior vice president for clinical redesign, manages a staff of 65. The team was a bit larger before a recent broad round of company layoffs; UnitedHealth says the reduction won’t affect the housing program. By early next year the company expects to house 350 homeless Medicaid patients whose annual health-care spending, while they’re on the streets, exceeds $17 million. The goal is for them to “graduate” within a year to paying their own rent. (Most get a disability check; those who don’t get help from MyConnections to apply.)
Insurers, including UnitedHealth, generally try to reduce costs by restricting medical care. They require prior authorization for expensive procedures, deny claims for care deemed inappropriate, and limit the drugs available on prescription plans. This is partly why the industry has a bad reputation—the perception that insurers are middlemen that profit by withholding needed care without adding value. It’s behind the argument Senators Bernie Sanders and Elizabeth Warren make for replacing private insurance with “Medicare for All.”
Brenner aims to reduce expenses not by denying care, but by spending more on social interventions, starting with housing. How to do it is still largely uncharted. “I don’t think we’ve figured any of this out,” he says. “We’re at a hopeful moment of recognizing how deep the problem is.” A trip to any big-city ER reveals the magnitude of the challenge.
Kara Geren is trained to detect what’s about to kill you. The 40-year-old attending physician pulls eight-hour shifts in the emergency department at Valleywise Health Medical Center, a 325-bed public hospital north of the Phoenix airport. The unit has a low dropped ceiling, Formica countertops, and a motley collection of curtains that separate beds packed close together. Geren has the kind of calm yet focused demeanor you’d hope to encounter if you found yourself wheeled into the ER. She isn’t rushing, nor is she wasting any time.
“In emergency medicine you always assume the worst,” Geren says. “What’s going to kill this person in the next five minutes? What’s going to kill this person in the next hour?” Valleywise has two trauma bays and a landing pad for medevac helicopter ambulances. As a Level 1 trauma center, it has to be prepared for any unexpected medical crisis that might arrive at any hour of any day.
That vigilance makes it one of the most expensive places to get health care, and many patients who visit the Valleywise ER shouldn’t be there. Some are immigrants who don’t know how to navigate the U.S. system, so they walk into the hospital for routine treatment. Some are uninsured, so other doctors won’t see them. Some come to get out of the summer heat; temperatures in Phoenix can top 100F for weeks on end. The city’s growing homelessness crisis exacerbates the burden. The number of unsheltered homeless people in Maricopa County, which includes Phoenix and its suburbs, has almost doubled since 2016, to about 3,200.
Some patients are combative, especially if they come in drunk or high. Others are simply seeking shelter and a meal, and complaining of chest pain at an ER is a sure way to get both. Frequent flyers, as nurses and doctors call them, may visit a few times a week or daily. “Sometimes in the same shift, you’ll have a patient come back who you discharged a few hours earlier,” says Heather Jordan, Valleywise’s nursing director for emergency services. “They get a medical screening exam and maybe get a sandwich and a Powerade, and they go back out to where they started.”
Homeless patients have few good options when they’re ready for discharge. Sometimes the hospital pays to send them in taxis to city shelters, which are often full when they arrive. Some go to behavioral health centers for further treatment of mental illness or substance-use disorders. Others go to a respite center run by a nonprofit called Circle the City, where they get medical care along with a bed in a shared dormitory. There are never enough beds to meet demand.
Some people who no longer require hospital care stay at Valleywise simply because more appropriate quarters aren’t available. “There’s a couple of patients who live upstairs that have been here for months and months and months, because we can’t find a place, a safe place, to put them,” Jordan says.
The cost for their care—$3,825 a day—is paid by Medicaid or, for those with no insurance, absorbed by the public hospital and ultimately the taxpayers who fund it. “We could put them in a residence for a fraction of that, and then we can keep ourselves available for that burn patient, that ICU patient, the people, the patients that need us critically,” says Kris Gaw, chief operating officer for Valleywise Health.
Valleywise has been able to place a small handful of homeless patients with MyConnections in Maryvale. The developments were known for drugs and prostitution before UnitedHealth and its nonprofit partner, Chicanos Por La Causa, took them over a couple of years ago. The insurer gave the nonprofit a $21 million low-interest loan to purchase, rehab, and manage the 500 units. Fixing it up was a challenge. One property manager says she got death threats for evicting drug dealers. Eventually, the frequency of police calls dropped sharply, and kids started playing in the courtyards and using the pools.
Most of the apartments rent to the public at market rates, starting at $609 a month for a studio. But up to 100 units are set aside for formerly homeless UnitedHealth Medicaid members. One empty studio with new wood floors at the end of a row on the second story is an office for five “health coaches.” They serve as case managers, counselors, and companions who look after the patients in the program.
One of the coaches, Ray Torres, 50, used to work as a case manager at a county-run clinic for the homeless. Some of his current clients are people he knew from his old job. He’d refer them to services, but they’d frequently just disappear back onto the streets. “Here, we’re on-site, we connect them, we knock on doors,” he says. Torres keeps the medical appointments for his 18 clients in his calendar. He calls taxis for them and occasionally goes with them to the doctor. Sometimes a knock on the door is critical. The week before we spoke, one client had forgotten about an appointment for kidney dialysis. The man had no phone, and Torres’s check-in likely prevented him from going into kidney failure in his apartment.
Torres and his colleagues bring a reservoir of patience deeper than what the homeless typically encounter. Much of the U.S. social safety net conditions assistance on certain behaviors, in an effort to inspire or force people to change. In homeless shelters, people are often required to earn privileges such as a locker or a larger space, eventually to be rewarded with placement in a group home or further housing assistance. Many programs are predicated on first kicking drug habits or adhering to medication. If people act out, they may end up back on the streets. “It’s a little like playing Sorry,” Brenner says. “You go back to the beginning and start over again.”
Brenner, by contrast, advocates a model known as Housing First, which recognizes that getting off the streets is often a necessary first step for people to adhere to treatment for addiction or mental illness—not the other way around. Many of the patients he’s concerned with have experienced early trauma, which has lasting health consequences. Exposure to adverse childhood experiences is a strong predictor of problems such as chronic illness, obesity, smoking, substance abuse, and, not incidentally, health-care spending.
“There’s a whole thread in health care around personal responsibility that this work evokes in people. As though scolding them, they’re going to go, ‘Oh, you’re absolutely right,’ ” Brenner says. “All of these things that we talk about, you know, people not taking personal responsibility—things happen to people. And what we’ve learned is that if you’re very young and you’re exposed to toxic stress, that brain formation is very different. The way that you navigate the world is different. Literally some of your circuits are different.”
One of Brenner’s greatest challenges is deciding who should benefit from the program. Giving patients housing sounds beguilingly simple, but the economics are a high-wire act. Medicaid isn’t paying UnitedHealth anything directly for housing assistance. The company spends from $1,200 to $1,800 a month to house and support each member, so it must save at least that much to break even on Brenner’s program.
On average about 60 members are enrolled in the Phoenix sites at any given time. Once a week, Brenner and his team get on the phone to evaluate potential candidates—anywhere from 2 to 14 people whose names have surfaced in UnitedHealth’s data. They want patients who are homeless and whose medical spending exceeds $50,000 annually, with most of that coming from ER visits and inpatient stays. People living on the streets with less extreme medical costs may need a home just as much, but it doesn’t pay for UnitedHealth to give them one.
For patients above the $50,000 threshold, the reductions in medical costs should let the company at least break even on its investment in housing and services. But it’s not as simple as running the numbers. Brenner is looking for people who not only need help but are ready to accept it. “We want a storyline around, Why is the housing going to make a difference? What’s going on in there? And then what’s the exit strategy?”
It’s a difficult judgment, made more complicated by a statistical concept called reversion to the mean. Simply put, an outlier will tend to go back to the average over time. Some of the most expensive homeless patients spontaneously become less expensive. Maybe they move in with family or get help from another program; maybe they stop visiting hospitals after being mistreated. Brenner says that his team doesn’t fully understand the phenomenon and that the rate at which spending on high-cost patients declines is different in each city. Either way, the housing units he’s allocating are scarce resources, and he doesn’t want to give them to people who would have reduced spending on their own.
He also wants to make sure the program actually does help people reduce their hospital use, and it doesn’t work on everyone. Some people resist it and continue going to ERs even after UnitedHealth puts them in housing. Brenner shows me an analysis of the first 41 patients in Phoenix to get the intervention. The housing and support services proved cost-effective for the 25 most expensive patients, reducing their overall costs dramatically. For the other 16, total spending increased. “The return’s only going to work out if we target the right people,” Brenner says. That’s why UnitedHealth is starting with just 10 subsidized apartments in each new city where it’s introducing the program, even in places where there might be hundreds of homeless Medicaid members on its rolls.
Brenner’s bet is that he can break the cycle for people like Cathy, a 56-year-old who was homeless for several years. She remembers “moving around like a giant turtle,” with her belongings stuffed into bags latched to her electric wheelchair, which she’d plug in to charge overnight at the Sun Devil Auto repair shop in downtown Phoenix. For months, she visited ERs almost daily. One night she left St. Joseph’s Hospital after eight hours and went directly to another emergency department a few miles away. “I was going to keep going every day if I had to, because I was having pain in my chest, and they couldn’t tell me why,” says Cathy, who asked that her last name be withheld.
Her long list of ailments includes dbetes and asthma. A heart attack left her with a stent, and a series of infections almost claimed her foot. That’s on top of depression, post-traumatic stress disorder, and what she describes as “extreme anger issues.” Two years ago, Cathy moved into a subsidized apartment in Phoenix. Torres has witnessed her transformation. “She had that wall put in front of her,” he says. “She had no trust with anybody.” Now the two share wry jokes. “Ray kind of kept trying to be positive, be all sweet and nice, like he is,” Cathy says.
Housing hasn’t solved all her problems. She still has depression, and another heart attack left her hospitalized again earlier this year. But it’s made a profound difference. For one thing, she no longer makes a stop at the ER part of her regular routine. That’s good news for UnitedHealth. And then there’s this: “I feel human again,” she says. “Before, I didn’t.”