Even though I think of myself as a Market Urbanist and occasionally vote Libertarian, I am more supportive of public housing spending than I once was. The traditional libertarian argument against public housing is that in a regulation-free world, housing would become cheap enough for everyone, albeit perhaps at a low level of quality. For example, in the 1920s flophouses allowed people to sleep in spartan surroundings, and the most austere option allowed people to sleep en masse on indoor floors for a small sum of money - a not particularly desirable option, but still better than sleeping on the street. If there were no zoning and no building codes, presumably we’d go back to the 1920s, and street-sleeping would be a thing of the past.
However, I cannot imagine any city instituting such comprehensive deregulation. Even Houston (which lacks use-based zoning) has a wide variety of policies that make housing more costly, such as building codes, density restrictions, and minimum parking requirements. Some of these policies combat real problems; others do not. But even so, every single regulation does something to make housing more costly. Since these policies set a minimum floor under housing prices, even Houston has almost 2,000 people living on the streets, and a few thousand more living in homeless shelters.
Because these government policies effectively make people homeless, it seems to me perfectly reasonable that government should make up for the problem by providing people with some form of public or subsidized housing.
Michael Lewyn is an associate professor at Touro Law Center in Central Islip, NY. His scholarship can be found at http://works.bepress.com/lewyn , and he recently wrote the book "Government Intervention and Suburban Sprawl: The Case for Market Urbanism."