California has spent an estimated $37 billion since 2019 to combat its growing homelessness crisis. State leaders, including Governor Gavin Newsom, promised bold action and sweeping programs to reduce homelessness and build affordable housing. But despite the historic investment, homelessness has increased, services are failing to deliver consistent results, and many of the agencies handling the money are under intense scrutiny. Critics are calling the entire system broken, while recent audits reveal troubling details about waste, mismanagement, and a lack of accountability.
A Growing Crisis Despite Billions Spent
When Governor Gavin Newsom took office in January 2019, he declared homelessness a state emergency and pledged to launch what he called a “Marshall Plan for affordable housing.” The goal, according to Newsom, was to “lift up the fight against homelessness from a local matter to a state-wide mission.”
However, that mission has fallen far short of expectations. In 2015, California’s homeless population stood at about 116,000. By 2019, the number had grown to 151,000. As of the most recent statewide count, the total number of homeless people in California is estimated at around 187,000 — a 60 percent increase since 2015 and a 24 percent jump since Newsom’s pledge. That number is almost certainly an undercount. A report from the Legislative Analyst’s Office (LAO) warned that the state’s annual “point-in-time” count likely misses many people, especially in a large and diverse state like California. The LAO wrote, “Since the count is only a snapshot of people experiencing homelessness on one given night in a year, and those conducting the count may miss individuals who are hidden from view at the time, the homelessness data collected is an undercount.”
To give some perspective, 187,000 homeless people would form a population roughly equal in size to cities like Fort Lauderdale, Florida or Akron, Ohio.
Where the $37 Billion Went — and Where It Didn’t
According to state data, the $37 billion in homeless funding came from a mix of state budgets, federal contributions, and local government programs. The money was funneled through various agencies and programs, including the Los Angeles Homeless Services Authority (LAHSA), the Department of Housing and Community Development, and Governor Newsom’s Encampment Resolution Funding (ERF) program. The funding was supposed to provide housing, support services, and shelter infrastructure for unhoused individuals across the state.
But several audits have found that the state cannot reliably track how this money has been used. A March 2025 audit by the consulting firm Alvarez & Marsal found that the City of Los Angeles and LAHSA were unable to reconcile funding with actual services delivered. According to the Los Angeles Times, the services were “disjointed and lacked adequate data systems and financial controls,” which left the system open to waste and fraud.
The same audit noted that LAHSA had failed to track millions of dollars in cash advances to contractors and had delays in paying service providers even when funds were available. A November 2024 report found similar issues.
A federal audit went further, giving the state the lowest possible score for its failure to detect fraud in homelessness funding. The audit found that California lacked basic protections to prevent abuse of $319.5 million in federal funding.
The LAO also found that “no data have been provided to the Legislature on how many people living in an encampment have received permanent housing.” They added that the state also has no consistent method to measure “the number of encampments that have been resolved” or even how many individuals have received services like case management or housing assistance. Without this information, lawmakers cannot determine whether the programs are effective or worth continuing.
High Costs, Low Results
One of the main approaches California has taken is building permanent housing for the homeless. However, the cost of construction has reached staggering levels. A 2022 article in the Los Angeles Times reported that “low-income housing routinely costs more than $1 million per unit to build.” Santa Monica approved a 122-unit high-rise for homeless residents near the beach at a cost of $1 million per unit, not including the value of the land. The building is located three blocks from Ocean Avenue and about a block from Wilshire Boulevard, some of the most expensive land in the country.
The LAO also noted that of the $856 million awarded for ERF grants, $598 million remains unspent. Agencies receiving funds from earlier rounds of the ERF program are required to submit results by April 2026. Until then, there is no way to know if the funds have accomplished anything meaningful. As the LAO stated, “We recommend the Legislature wait to decide on funding another ERF round until it receives compelling evidence that program goals are being met.”
A System Riddled with Gaps
The problems go beyond just spending and tracking. California’s homelessness strategy is based on the principles of harm reduction and “Housing First.” Harm reduction assumes that society should accept continued drug use and focus on minimizing its dangers. Housing First prioritizes placing people into permanent housing before addressing addiction or mental health issues.
But this approach has raised concerns. The state does not require people to be sober or in treatment to receive housing. This has led critics to argue that the system encourages continued substance abuse and mental instability without meaningful paths to recovery. An estimated 75 percent of chronically homeless individuals in California suffer from severe mental illness, drug addiction, or both.
The RAND Corporation, a respected research organization, also raised questions about the accuracy of the state’s homeless counts. “These once-per-year counts likely represent a significant undercount of unsheltered homelessness,” the group wrote. They cited problems like counting on cold winter nights and using lightly trained volunteers. “Some of these reasons, such as conducting the count on a winter night, represent explicit policy choices,” RAND noted.
Are Taxpayers Helping Out-of-State Residents?
A surprising finding from a 2023 University of California, San Francisco study revealed that 34 percent of California’s homeless population came from outside the state. That means as much as $12.6 billion of California’s homelessness spending could have gone toward supporting people who did not originally live in California.
This adds another layer to the frustration felt by taxpayers, many of whom feel they are paying more while seeing worsening street conditions, growing encampments, and increasing crime in their communities.
Calls for Reform
In response to the March 2025 audit, LA County Supervisor Lindsey Horvath posted on social media, “I’m introducing a motion to create a consolidated County Department to end this nightmare. It’s another reminder of what we already know: the current system is broken.”
Governor Newsom’s office pushed back, saying, “The state distributed funding to local governments to address homelessness through numerous state programs — all the money is accounted for.” However, that claim conflicts with multiple audits showing a lack of performance data and inadequate oversight.
Until California can consistently track how the money is spent and prove that its programs work, many officials and citizens believe no additional funds should be approved. The Legislative Analyst’s Office put it plainly: “The Legislature is not yet able to determine whether — and where — the funds are achieving their intended goal.”
California has spent $37 billion — an average of $245,000 per homeless person as of 2019 — and the problem has only gotten worse. With mounting audits, rising costs, and little accountability, both the public and lawmakers are demanding answers. Unless the state takes serious steps to reform how it tracks spending and measures success, the homelessness crisis is likely to remain one of California’s most expensive and unresolved challenges.
FAM Editor: This is insane. Newsom is just incompetent.
