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On January 14, as the combined forces of recession and foreclosure continued their long, cruel assault on the Rust Belt, Cleveland’s public school system marked the new semester with a troubling piece of data: the number of students who had been homeless at some point during the school year had jumped to 1,728. Compared with the same date in 2006, this number represented a spike of nearly 150 percent and served as further confirmation that, for all the whingeing of Wall Street executives, the poor and vulnerable have been hardest hit by the flailing economy. Not that Cleveland’s poorest students needed reminding. In December, when Project ACT, a social service program for homeless students run by the Cleveland Metropolitan School District, asked a group of homeless parents what they wanted for Christmas, the parents responded with wish lists worthy of Little Dorrit: toilet paper, bleach, paper towels, food.

“We figured they’d be asking for some nice things, [but] they were asking for basic, basic household things,” said Marcia Zashin, Project ACT’s director. “Times are tough. They’re very tough.”

Such are the stories pouring out of schools and homeless shelters these days, evidence of a crisis that many fear is bound to get worse. Throughout the country, homelessness is rising, with ever more families in ever more towns and cities sleeping in shelters, surfing friends’ couches and camping in their cars. In San Bernardino, California, for instance, the City Unified School District counted roughly one-third more homeless students in the 2007-08 school year than in the previous one, part of a stomach-churning trend that has pushed the number of homeless students in the state past 224,000, according to local officials. In Boston the number of families without homes shot up 22 percent, from 3,175 in December 2007 to 3,870 in December 2008. And in New York City, which shelters an astonishing 36,000 homeless people each night (including nearly 16,000 kids), the number of newly homeless families entering the shelter system hit an all-time high in autumn, with the influx in November 44 percent higher than the previous year. Along the way, the total number of homeless families bedding down each night in shelters topped 9,700–the highest number since the city began keeping records more than twenty-five years ago.

By most accounts, there’s little mystery to this rise in the ranks of shelter seekers. It’s the economy and, more specifically, the recession and the foreclosure crisis. As people have lost their paychecks, or as the homes they were renting were foreclosed–most of today’s homeless foreclosure victims are renters who were evicted, even though they paid rent, because their landlord had not kept up with the mortgage–their tenuous grip on stability has slipped away. And many housing experts think this could be just the beginning. Because the recession is far from over; because the unemployment rate hit 7.2 percent in December and is expected to climb; because the foreclosure crisis has more misery to dole out; and because homelessness is a lagging indicator–families tend to cling to their homes as long as they can, forgoing food, clothes and medication just to keep their roof–the number of homeless families will likely continue to spike.

But there’s another essential point, one that bears fundamentally on how we understand–and tackle–this crisis. While the recession has swollen the ranks of the homeless population, modern homelessness has been with us for more than a quarter-century. Long before subprime mortgages, credit default swaps and the most recent stock market crash, the United States was in the grip of the longest period of sustained mass homelessness since the Great Depression. Indeed, even before the current economic downturn some 3.5 million Americans (including 1.4 million children) experienced homelessness during the course of a year. For this we can thank not a periodic dip in the business cycle but an affordable-housing crunch spawned by nearly three decades of slash-and-burn housing policy.

Just as the Wall Street meltdown can be traced to the deregulate-at-any-cost ideology of the Reagan years, modern homelessness and the widening housing affordability gap were fostered in the Gipper’s free-market nursery. From the earliest days of his administration, Reagan set about systematically dismantling federal housing programs, slashing funds for federal rental vouchers and public housing. He also initiated the shift in federal low-income housing policy away from subsidized development to tax-credit programs, which fail to help the poorest families. The reason was pure conservative hocus-pocus: the idea that housing is a commodity best created and priced by the unregulated, unfettered market and that government should play little or no role in guaranteeing shelter to its poorest citizens.

During the next decades, this ideology never disappeared, and it enjoyed a particularly virulent renaissance in George W. Bush’s America. Even as the Bush administration made a show of doling out small increases to the homeless services budget (though never enough to meet the need), it hacked away at public housing, Section 8 vouchers and other housing programs, undermining any attempt at reducing family homelessness. Indeed, since 2004 funding for affordable housing programs has declined by $2.2 billion. The result is a country in which only one in four eligible low-income households receives federal housing assistance while those forced to go it alone, without any government assistance, face an increasingly harsh landscape of rising rents and declining wages. It’s no wonder the number of poor renters paying more than half their income for rent rose by more than 1 million households, or 29 percent, between 2001 and 2007.

Fortunately, we have a chance to rewire the country’s housing policy, an opportunity born of the start of Barack Obama’s administration and a climate made more receptive to public investment by the awful imperatives of the economic meltdown. More than at any time in recent history, this moment calls for the kind of visionary and dramatic action too rarely seen from leaders–certainly not Republicans but also many Democrats, who have spent much of the past two decades fidgeting on the margins of federal housing programs.

There are a lot of ways President Obama could begin tackling such a challenge–including a bold and unequivocal commitment to ending homelessness once and for all. As another critical first step, the Obama team (including New York City housing commissioner Shaun Donovan, who is expected to be confirmed as the new head of the Department of Housing and Urban Development) and Congress can adopt a $45 billion proposal, drafted by the National Low Income Housing Coalition and forty other progressive policy groups, as part of the stimulus package. This plan is premised on years of academic research: that the best way to solve homelessness is to provide people with homes–to create permanent supportive housing (i.e., affordable housing with support services) for people living with mental illness and other special needs and to offer affordable housing assistance (in the form of vouchers or low-income housing) to homeless families.

Toward this end, the plan calls for a minimum of 400,000 new rental vouchers as well as a $10 billion infusion over two years in the recently created National Housing Trust Fund–a move that would jump-start construction of badly needed low-cost homes. To help address more imminent needs, the plan suggests expanded aid for victims of foreclosures and another $2 billion for vital homelessness prevention services. Additional investments of $15.4 billion would address the long-neglected upkeep of public housing and help these and other subsidized developments “go green” by improving energy efficiency. Taken together, these initiatives will help more than 800,000 vulnerable households and create more than 200,000 jobs.

Of course, cleaning up the wreckage of three decades of failed federal housing policy will take more than one stimulus; these measures are just the beginning of what’s needed. But if change is the order of the day, dismantling the Reagan-Bush legacy of modern homelessness would be a promising way to start.