Photographer: Eric Schwortz / Glasshouse Images/UIG via Getty Images

Cities Could Save Millions of Dollars by Preventing Evictions

Nearly two-thirds of New York households have fewer than $2,000 in liquid savings. One uncovered hospital visit could mean homelessness.

We know government can save money by funding services for poor patients so they don't end up in the emergency room, where health care is more expensive. New research suggests a surprising area where a similar cost-cutting strategy could work: household finance. 

For instance, nearly two-thirds of New York’s 3.1 million households have fewer than $2,000 in liquid savings, according to research (PDF) published this month by the Urban Institute. That puts those New Yorkers one financial shock away from eviction, which would cost the city thousands of dollars for homeless services, unpaid utilities, and uncollected property taxes. Add up those expenses, the Urban Institute researchers suggest, and New York is facing a potential annual cost from $280 million to $646 million. 

That's a wide range. You can find the whole, very detailed methodology here (PDF), but the short explanation is that the low number is based on research suggesting that in a typical year, 26 percent of households experience an income disruption due to job loss, health, or a pay cut of 50 percent or more. The high number is based on a separate study showing that 60 percent of Americans experience a financial shock each year, including both income disruptions and unexpected expenses. 

Here's what financial insecurity is costing 10 big cities, based on the high-end estimates in the Urban Institute research:

The wide range among different cities is mostly explained by the size of each city’s population and the amount each spends to house the homeless. Columbus, Ohio, for example, has twice as many households as Miami, but the two cities face similar costs from household financial insecurity, because Miami spends more than $13,000 annually for every homeless family, while Columbus spends a little under $4,000. Both cities face costs ranging from $13 million to $31 million, according to the Urban Institute estimates.

One metric common to these cities is the high share of residents who lack the wherewithal to withstand a financial shock. In Seattle, 46 percent of households have less than $2,000 in liquid savings, the lowest figure of the cities in the chart. (Nationally, the figure is 52 percent.) Some households can rely on friends and family, or the availability of credit, in times of need, though it's worth noting that families with smaller nest eggs are also less likely to qualify for loans. 

The Urban Institute report contains some general policy prescriptions for city governments, such as providing financial coaching or fund-matching programs that encourage households to build emergency savings.

Housing advocates in New York, meanwhile, have been lobbying the city government to set aside millions of dollars to pay attorneys' fees for tenants facing eviction, arguing that providing legal aid to a poor renter is cheaper than paying for a bed in a homeless shelter.

And recent research from Washington University in St. Louis suggests an additional way to keep Americans current on their rent and mortgage payments: Give them affordable health care. In that study, researchers showed that receiving subsidies to buy health insurance on Obamacare marketplaces made poor households 15 percent less likely (PDF) to be late on rent or mortgage payments.

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