Between 2007 and 2014, the number of people experiencing homelessness in California declined from 140,000 to 114,000. However, after that, homelessness began to rise again, even as billions of dollars in federal, state, and local funding were allocated to address the issue. Several factors have contributed to the persistence of homelessness in California despite these investments, including a continued lack of shelter beds, high housing costs, and changes in policies around drug use.
This brief will discuss the challenges that have characterized the last decade of homelessness policy and the unintended consequences of certain policies. It will also provide an overview of the complex organizational and funding structure of efforts to combat homelessness — a key factor undermining their oversight and impact. Lastly, it will examine potential policy changes that could affect the trajectory of homelessness policy going forward and offer recommendations.
What distinguishes homelessness in California is its scale — the largest in the nation at over 187,000 in 2024. The state also has a high rate of unsheltered homelessness, with a large share being single men. For instance, while New York has more homeless per capita than California, only 5% are unsheltered. By comparison, two-thirds of the homeless in California are unsheltered, making up 45% of the nation’s total unsheltered population. This visibility has generated open-air drug markets and public drug use, which have affected residents’ perceptions and satisfaction.
About 88% of San Francisco residents said homelessness has worsened, and 70% said quality of life has declined in recent years. Similarly, in Los Angeles, 60% said homelessness has worsened, contributing to one of the lowest life satisfaction ratings in the last nine years. Citizens’ concerns regarding rising homelessness and drug abuse have helped lay the foundation for new punitive policy initiatives, including a reform of Proposition 47 in the November 2024 election.
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Homelessness in California: Recent challenges and new horizons
Between 2007 and 2014, the number of people experiencing homelessness in California declined from 140k to 114k. But, after that, homelessness began accelerating (Figure 1), even as billions of dollars in federal, state, and local spending poured in to address the problem. Several factors have contributed to the persistence of homelessness in California despite these investments, including a continued dearth of shelter beds, high and rising housing costs, and changes in policies around drug use. n nIn this brief, we will discuss these challenges that have characterized the last decade of homelessness policy and the unintended consequences of certain policies. We will then provide an overview of the complex organizational and funding structure of efforts to combat homelessness — a key factor undermining their oversight and impact. Lastly, we will examine potential policy changes that could affect the trajectory of homelessness policy going forward and policy recommendations. n nFigure 1: Homelessness in California, 2007-2023 n nWhat’s unique about homelessness in California? n nWhile some other states have higher rates of homelessness per capita than California, what distinguishes homelessness in the Golden State is its scale — the largest in the nation at over 187,000 in 2024. To make things worse, the state has a high rate of unsheltered homelessness, a large share of which is single men.[1] For instance, while New York has more homeless per capita than California, only 5% are unsheltered (Figure 2). By comparison, 2 out of 3 homeless in California are unsheltered, making up 45% of the nation’s total unsheltered population. Nationwide, single men are more likely than other demographics to be homeless, but in California the ratio is much more extreme. Over 9 out of 10 homeless men in California are single, whereas roughly half of homeless men in New York are single (HUD 2024a). These characteristics make homelessness in California, especially in the state’s metropolitan areas, more publicly visible. Concentrations of homelessness in San Francisco and Los Angeles have generated open-air drug markets, public dealing, and use of illicit drugs (AP News 2024, FOX 11 2024), which have had profound effects on residents’ perceptions and satisfaction. n nAbout 88% of San Francisco residents said homelessness has worsened, and 70% said quality of life has declined in recent years (San Francisco Chamber of Commerce 2021). Moreover, 71% of respondents cited increased visibility of homelessness as the main reason they feel less safe (The San Francisco Standard 2022). Similarly, in Los Angeles, 60% said homelessness has worsened and 64% that the problem has affected their own neighborhoods, contributing to one of the lowest life satisfaction ratings in the last 9 years (ULCA 2024, USC 2024). Citizens’ concerns regarding rising homelessness and drug abuse helped lay the foundation for an array of new punitive policy initiatives, including a reform of Proposition 47 in the November 2024 election. We will return to these initiatives in later sections. n nFigure 2: Unsheltered Homelessness by State n nDearth and inefficiency of shelter n nShelters provide a crucial first line of defense against sleeping on the street and the health and safety risks that come with it. Yet California faces a severe undersupply of shelter beds. In 2024, 187,084 people in the state were homeless.[2] If we add up all the interim housing beds available — emergency shelter (61,387), transitional housing (14,078), and safe haven (473) — and assume all beds are being utilized at 100% capacity (a strong and almost implausible assumption), an estimated 111,146 homeless people — close to 60% of the homeless population — lack a shelter bed (Figure 4). n nAnd, this is an understatement of the shelter bed need, as not every community in California enumerated its unsheltered homeless population in 2024.[3] The shelter shortage in California is staggering when compared to other states. In New York City, for example, there was roughly one shelter bed for every homeless individual in 2024; but in Los Angeles, the ratio was 1 to 2.5 (HUD 2024a, HUD2024b). n nFigure 3: Shelters, Transitional Housing, and Permanent Supportive Housing n nFigure 4: Interim Housing Bed Capacity as a Share of the Homeless Population in California (2024) n nMaking matters worse, not every shelter bed available is used. In a recent report, the LA City Controller found 1 in 4 beds in the Los Angeles interim housing system went unused between 2019 and 2023 at an estimated cost of $218 million. Some reasons cited for the insufficient utilization were a lack of timely data on shelter availability, a disjointed and opaque bed reservation system, and restrictive geographic catchment areas that prevent placements of individuals into shelters outside the zones where they are currently living (LA City Controller 2024). n nShelters themselves often impose restrictions that render access more difficult. For instance, some shelters do not take walk-ins, limit the personal belongings and family members one can bring, or prohibit pets. And, some shelters have been perceived as lacking safety and privacy, making them unsuitable for some people experiencing homelessness, especially those with histories of trauma or psychiatric conditions. For these reasons, some people living unsheltered opt to stay on the streets even when offered a shelter bed. Recent reporting captures this: In December 2023, San Francisco reported 60% of people offered shelter by a street outreach team in the previous month declined it. Simultaneously, city data showed 436 people on the waitlist for shelter (ABC7 2023). n nNewer, more innovative interim housing models, such as tiny homes and the conversion of hotels/motels, provide more privacy and flexibility. In some cases, these non-congregate models have achieved significantly higher occupancy rates compared to traditional congregate shelters — e.g., 86% vs. 65%, respectively, in Los Angeles (LA City Controller 2024). Thus, non-congregate shelter has emerged as a key component of encampment clearance efforts like Inside Safe in Los Angeles. n nFor the vast majority of people experiencing homelessness, long-term housing assistance comes in the form of vouchers or subsidies for market-rate apartments. Yet the average market-rate rent requires income over twice California’s minimum wage (California Housing Partnership 2024). The waitlists for vouchers can be years-long, and discrimination against voucher-holders remains all too common, despite being outlawed in many jurisdictions (CalMatters 2022, Los Angeles Times 2024). These challenging conditions help explain why only 13% of people exited shelter for any kind of permanent housing between 2019 and 2023 (CA State Auditor 2024a). n nHigh costs of housing n nAlthough shelters have remained in chronic undersupply, state and local policy efforts of the last few years have focused more heavily on channeling resources to permanent housing — the general housing supply as well as permanent supportive housing (PSH) for those with acute or chronic physical or mental health needs. Both interventions have encountered major cost hurdles in California. n nIn Los Angeles, Proposition HHH, passed by voters in 2016, issued up to $1.2 billion in bonds to create permanent supportive housing. The city had promised voters results within six months, but construction of these projects proceeded slowly and expensively.[4] In the first five years of the program, the city built a mere 1,142 apartments; over an eight-year period, only 5,487 units were completed (LA City Controller 2022, Los Angeles Times 2016, Los Angeles Housing Department 2024). Relative to the 71,201 people currently experiencing homelessness in Los Angeles, the 5,487 PSH units provided relief to only a very small subset of people at exorbitant cost. n nAnd this high cost of permanent housing construction is not exclusive to Los Angeles. In the Bay Area, the average cost of permanent housing is $500,000 to $600,000 per apartment unit, compared to an average of $43,000 per shelter bed and $150,000 per modular transitional apartment unit (Bay Area Council Economic Institute 2021). Similarly, the conversion of a historic hotel in Sacramento into housing for the homeless is estimated to cost $600,000/unit (The Sacramento Bee 2023). n nThe push to build PSH over the last decade often came with the stated intent to serve the chronically homeless with the most acute and often chronic needs, including addiction, mental health disorders, and/or physical disabilities. For this subpopulation in particular, PSH was widely believed to be more cost-effective in the long run by reducing reliance on more expensive emergency services. However, it is unclear to what extent this housing has served its stated purpose, as less than 30% of PSH beds were dedicated for the chronically homeless across the state in 2024, according to the most recent Housing Inventory Count (HUD 2024b).[5] n nSome studies have found PSH to be more effective on average than shelter at reducing the probability someone will return to the street or a shelter, and the benefit can be especially pronounced for specific subpopulations, such as minorities and the elderly (Cohen 2021, Schachner et al, 2025). However, exits can still be high. Research by the California Policy Lab found that more than 1 in 5 PSH residents in Los Angeles returned to shelter or street homelessness between 2010 and 2019, with even higher rates among Black residents (Milburn et al. 2021). n nPSH programs vary in structure and quality, and these broad study results, while helpful, tell us little about which programs are working, for whom, and what needs to improve. Additionally, less is known about the impact on other non-housing outcomes, such as health, drug use, and employment, for which the evidence has been mixed or inconclusive (Cohen 2021, Streeter 2022). At a cost of five shelter beds for every one PSH unit, it’s crucial to ensure PSH is delivering desired outcomes for the most vulnerable individuals through accurate and timely oversight. n nDrug use n nHomelessness is associated with higher rates of drug abuse and overdose. In a recent survey, around 30% of people experiencing homelessness across California reported regular drug use (excluding marijuana), and research suggests higher rates of drug use among the chronically homeless (Assaf et al. 2025, Streeter 2022). In 2023, nearly half of all deaths among people experiencing homelessness in LA County was due to drug/alcohol overdose — a mortality rate 49 times greater than that of the general population (LA County Department of Public Health 2025). n nFigure 5 shows that several California cities, including San Francisco and LA, experienced a spike in the drug overdose death rate after 2016. This increase followed two major developments. First, more potent drugs became more readily available across the U.S., particularly in these cities. As shown in Figure 6, fentanyl, which is 50 times stronger than heroin and 100 times more potent than morphine, replaced heroin to become the main illicit drug on the street in 2016. Among people experiencing homelessness, overdose deaths involving fentanyl increased dramatically, from 12.5% in 2018 to 70.4% in 2023 (LA County Department of Public Health 2025). n nFigure 5: Drug Overdose Death Rate (per 100,000 population) n nFigure 6: California Drug Overdose Mortality Rate by Drug Type (per 100,000 population) n nAt the same time, a key tool for incentivizing people into treatment was undercut with the passage of Proposition 47 in November 2014. This ballot initiative aimed to decrease prison overcrowding and redirect savings from reduced incarceration to rehabilitation. In practice, Prop 47 recategorized two major groups of non-violent offenses from felonies to misdemeanors: (1) burglary and theft under $950 and (2) possession of illicit drugs, including fentanyl, methamphetamine, cocaine, and heroin. Despite its well-intended goal, Prop 47 has been criticized for its unintended consequences, particularly its impact on drug offenders and the rise in retail thefts. n nBefore Prop 47, drug courts provided a carrot-and-stick approach to treatment for drug offenses: If a person completed drug treatment, felony charges would be dismissed. Prop 47 essentially took away the stick by reclassifying the same offenses as misdemeanors, which carry much less severe legal consequences. As a result, the arrest rate for felony drug offenses plummeted by over 85 percent between 2014 and 2023 (Figure 7) and participation rates fell dramatically in over half of California’s drug courts (Arnold et al. 2020). n nFigure 7: Arrest Rate for Felony Drug Offenses in California (per 100,000 population) n nHaving recognized Prop 47’s unintended consequences, 64.8% of Californians approved Prop 36 in the most recent 2024 election season to increase penalties for theft and repeated drug offenses. Under Prop 36, a person possessing hard drugs (including fentanyl, heroin, cocaine, and methamphetamine) and with two or more past drug convictions could be charged with a “treatment-mandated felony” and avoid jail or prison time by accepting an opportunity to receive treatment. Upon successful treatment completion, charges would be fully expunged and no jail time would be required. This new law is expected to restore incentives for receiving treatment. However, concerns linger around adequate funding and resources to support this treatment. n nOther policies, intended to reduce barriers to housing and services for those with addiction, have had the unintended consequence of making recovery more challenging for some individuals. For example, current state Housing First laws preclude PSH providers from accepting or rejecting anyone based on sobriety status. On one hand, this law reduces barriers for the homeless to access housing, but, on the other hand, the ongoing exposure to drugs can make it very difficult for people in recovery to maintain progress and avoid relapse. A coalition of individuals in recovery, mental health experts, and state and local lawmakers has advocated amending these laws to allow for more sober housing (The San Francisco Standard 2024, Humphreys 2024). n nSpending and oversight n nEven with record-level funding for homelessness, lack of coordination and oversight of that spending has posed serious challenges to evaluating and improving outcomes. Homelessness interventions involve all levels of government in varying, sometimes overlapping, capacities. These many layers of government agencies and initiatives make it difficult to track the amount and effectiveness of the spending and hold specific entities accountable for their results. n nAt the federal level, the Department of Housing and Urban Development (HUD) serves as the primary funder of homelessness programs through grants for shelter, housing, and supportive services. HUD-designated local coordinating bodies called Continuums of Care (CoC), which are also responsible for conducting the annual homelessness Point-in-Time count, apply for and distribute these funds among service providers within their geographic jurisdictions. n nAt the state level, California funds homelessness through federal dollars, its own budgetary funds, and debt issuance. For instance, Project Homekey is a California initiative through which local governments can acquire and convert hotels into permanent housing for the homeless. It was originally funded through federal Coronavirus Relief Funds (CRF) in 2020, and in subsequent years the state has allocated billions of dollars from its general fund and other budgetary sources to continue supporting the initiative. Proposition 1 of 2024 is a recent example of the state borrowing from the public to combat homelessness. Under this proposition, the state will issue up to $6.38 billion in bond funding PSH for the homeless, as well as behavioral health and substance use treatment facilities. Overall, the state spent an estimated $24 billion on at least 30 programs to prevent and end homelessness in FY 2018-19 through FY 2022-23 (CA State Auditor 2024a). n nAt the local level, counties and cities fund homelessness through a combination of local taxes and municipal bonds, Housing Trust Funds, and general fund allocation. Los Angeles voters passed Measure H, calling for a quarter-cent sales tax increase that generated $355 million annually to address homelessness. In recent years, homelessness has accounted for a significant share of local government general fund allocation. In San Francisco, the city’s Department of Homeless and Supportive Housing (HSH) budgeted $846 million for fiscal year 2024-2025, primarily funded by the local general fund and local Prop C tax dollars (San Francisco Department of Homelessness and Supportive Housing 2024). n nOversight of, and accountability for, homelessness spending has lagged funding increases. In a recent report, the California State Auditor found the state has failed to consistently track spending and outcomes of its over 30 homelessness programs. As a result, the audit was able to determine cost-effectiveness for only 2 of the 30 programs; the rest lacked sufficient data to be evaluated (CA State Auditor 2024a). In a related audit of the cities of San Jose and San Diego, the State Auditor found neither city had established sufficient mechanisms and metrics for effectively tracking the spending and outcomes of the local, state, and federal homelessness dollars they manage. Both cities agreed with most of the report’s conclusions and described ongoing efforts to address these issues, which will be assessed in follow-up reports (CA State Auditor 2024b). n nOther local audits have uncovered similar trends. In Los Angeles, a recent audit by the County Auditor-Controller found glaring problems with LAHSA’s spending and accounting practices, prompting a motion by the LA County Board of Supervisors to pull its funding from the organization and direct it into a new county-run agency (LA County Auditor-Controller 2024, Los Angeles Times 2025). As many of these recent audits and reports have emphasized, without the necessary data, metrics, and accountability mechanisms, statewide coordination to address California’s homelessness crisis will continue to falter. Fixing these shortcomings should remain important priorities across all levels of government. n nLooking ahead n nNew approaches to the challenge of homelessness and attempts to correct some of the unintended consequences of past policies are taking shape in California. Whether this evolution will lead to a reversal of the last decade’s upward trend in homelessness remains to be seen, particularly as federal and state budgetary pressures increase. n nUnder Gov. Gavin Newsom, the state continues to use its legal and fiscal powers to improve coordination among local communities and align them on homelessness policy goals, including clearing encampments, building affordable housing, and tracking spending. Communities that oppose construction of shelters and affordable housing or fail to meet reporting requirements risk legal action or loss of state funding. In administering these large state grant programs, the state has taken a largely directional rather than managerial role, allowing for some variation in how local governments achieve these overarching goals. However, the state is also facing a $12 billion budget deficit that threatens these funding sources (CalMatters 2025). n nAt the local level, cities like San Francisco and San Jose are rebalancing their housing portfolios toward more shelter and investing in more flexible, non-congregate models to deliver it — though not without opposition. In the wake of the Grants Pass[6] decision last year, many localities are increasingly turning to more punitive approaches to induce changes, particularly for clearing outdoor encampments. However, this is not true everywhere, such as in Los Angeles, where Mayor Bass has resisted enforcement actions against those who refuse to leave encampments (CalMatters 2024). n nChanges at the federal level could also reshape homelessness policy. In its budget request for FY2026, the Trump administration has signaled an intent to dramatically scale down the federal role in homelessness and shift more responsibility to state and local governments. In addition to eliminating the Interagency Council on Homelessness, which coordinates federal policy across agencies and provides technical assistance to states and localities, the budget proposes consolidating all homelessness grants into a single Emergency Solutions Grant program with a 2-year eligibility cap and reducing grant funding by $532 million, a 13% cut from FY2024-enacted levels (Office of Management and Budget 2025). This would restrict the federal role in homelessness to funding short- and medium-duration programs, primarily shelter. At the same time, the budget proposes major funding cuts to tenant-based rental assistance and affordable housing. What spending and programmatic changes ultimately take shape depend on Congress, which authorizes and funds the major federal homelessness programs. n nAn ongoing area of concern across governments is availability of data to know who is homeless and benefiting most from which programs. The state has been making strides in collecting and publishing local data on those experiencing homelessness across the state and its funding programs. However, the data necessary to produce truly actionable insights go beyond top-line numbers on dollars spent and participant head counts. As such, much of the relevant data remains in bureaucratic silos that make it challenging even for governments themselves to track outcomes. Maintaining access to timely data is key to enabling the kind of research that can provide accurate answers to pressing questions about homelessness. n nRecommendations n nHomelessness has increased in California over the last decade, driven by multiple factors including ongoing shelter shortage, difficulties in expanding the housing supply, and policy shifts that reduced incentives for drug treatment and rehabilitation. Funding for homelessness has increased faster than the growth in homeless head counts. This pattern reflects, in part, the high costs of building housing but also inefficiencies and lack of oversight and accountability with regard to government programs. n nAlthough some progress has been made, there is still much work to be done. Innovative and ambitious approaches are needed, and evidence should remain at the core of new initiatives. Given the extent of unsheltered homelessness in California, the state cannot afford to take its foot off the gas in increasing cost-effective options to accommodate the homeless. However, it also cannot afford to plow ahead without proper navigation in the form of data and oversight on its spending without risking driving off a proverbial fiscal cliff. n nThings that are not measured cannot be improved. The monitoring of homelessness can benefit from further integration of data from different government agencies, including homelessness, housing, employment, health care, and criminal justice. Such efforts to merge data from different government agencies can be challenging due to restrictions on data ownership and data sharing. But if these challenges can be overcome, better policymaking and a more effective allocation of funds may result, helping mitigate the ongoing homelessness crisis in California.
— news from Stanford Institute for Economic Policy Research (SIEPR)