The Safety Net Should Be a Trampoline, Not a Trap

California continues to spend billions responding to homelessness, yet remains home to the largest unhoused population in the nation. Each year, policymakers debate new shelter models, behavioral health investments, and housing production targets. All are important. But far less attention is paid to a quieter structural problem that keeps people stuck in homelessness longer than necessary: our tax and benefit systems actively penalize reentry into work.

SF Bay Area

That contradiction sits at the center of America’s homelessness crisis.

During my years working directly with people experiencing homelessness, I met countless individuals who had not “opted out” of work. They had been working full-time jobs, paying taxes, and renting housing. A job loss, illness, or family disruption pushed them off a financial cliff. Once there, the systems designed to help them recover often made forward progress riskier than standing still.

The Work Disincentive No One Likes to Talk About

For people receiving Supplemental Security Income (SSI), the math is unforgiving. In 2025, the federal SSI benefit is roughly $943 per month for an individual, with modest state supplements varying by jurisdiction. That amount is already far below what’s needed to rent housing anywhere near market rates. In most Bay Area counties, Fair Market Rents (FMRs) for a one-bedroom apartment exceed $2,300 per month, and even a shared unit often requires income well above 30 percent of Area Median Income (AMI).

Yet the moment an SSI recipient considers part-time work, they face a stark choice:

• Earn modest wages and risk losing benefits that provide the only predictable income they have

• Or remain unemployed, even if they are capable of working some hours, because the downside risk is too high

  
  

Even at higher minimum wages, the equation doesn’t pencil out. A person working 15–20 hours per week at or near minimum wage still struggles to cover basic needs, especially without stable housing. Add payroll taxes, benefit cliffs, and administrative uncertainty, and the rational decision for many is not to work at all. This is not a failure of motivation. It is a failure of policy design.

A Simple Reform With Outsized Impact

There is a straightforward way to remove this barrier while reducing public spending: temporarily waive payroll taxes for people exiting SSI and reentering the workforce, as long as the foregone tax revenue is less than the SSI benefit they would otherwise receive.

Here’s how it could work:

• An individual voluntarily opts out of SSI while employed

• During that period, payroll taxes are waived up to a defined income threshold

• If the job ends, the individual can seamlessly re-enter SSI without months-long reapplication delays

• Eligibility is determined by a simple test:

  • If payroll taxes owed would be less than the SSI benefit, the exemption applies

    
    

In practical terms, if the government forgoes roughly $900 per month in SSI payments in exchange for allowing a worker to keep several hundred dollars more of what they earn, everyone wins:

• The individual has higher take-home pay, stronger work attachment, and a real path out of homelessness

• The government reduces benefit expenditures

• Communities see fewer people cycling between street homelessness, emergency services, and public systems

  
  

This isn’t radical. It’s basic cost-benefit logic.

The Fiscal Case

Even modest participation would generate savings. In San Francisco alone, tens of thousands of residents receive SSI, representing millions of dollars annually in public expenditures. Historically, only a small percentage of SSI recipients engage in formal employment at any given time. If even a fraction of that group were empowered to work without facing immediate financial penalties, the public savings would be meaningful—and the human upside far greater.

More importantly, this reform aligns with what research consistently shows: income volatility, not chronic incapacity, drives a large share of homelessness. When people can stabilize earnings—even part-time—housing outcomes improve, especially when paired with light-touch supports.

Housing Costs Make the Stakes Higher Than Ever

Rents have outpaced wage growth. AMI thresholds continue to rise faster than incomes at the bottom. The gap between public benefits and real housing costs has widened. Without structural fixes, we will continue spending public dollars managing homelessness rather than shortening it.

If policymakers are serious about prevention, exits, and fiscal responsibility, they must be willing to interrogate the systems that quietly hold people back. The safety net should help people regain their footing, not punish them for trying.

Logan McDonnell