Funding Cuts Threaten California’s Homelessness Initiatives

by Vanguard Staff

California’s spending on homelessness has dropped sharply in recent years, even as data indicate that prior investments helped reduce unsheltered homelessness and expand housing placements, according to a new analysis by the California Budget Center.

The brief finds that homelessness-related spending peaked at $6.8 billion in the 2022–23 fiscal year, fueled largely by one-time pandemic-era revenues and flexible federal funds, before declining to $2.5 billion in 2024–25 and an estimated $1.5 billion in 2025–26.

The drop reflects the winding down of temporary funding sources and the failure to allocate the most recent round of Homeless Housing, Assistance and Prevention Grant Program dollars in the current budget year.

At the same time, the scale of California’s homelessness response has expanded. In 2024, homeless service providers served more than 350,000 Californians, demonstrating increased system capacity built with earlier state investments. According to the brief, early point-in-time count data show unsheltered homelessness declined by 9 percent in 2025, youth homelessness has fallen 24 percent since 2019, and more than 90,000 Californians have been moved into permanent housing since 2023.

The report warns that these gains depend on sustained state funding, particularly as the federal government scales back support for housing and social services. The analysis points to actions by the Trump administration, led by Donald Trump, and a Republican-controlled Congress that have reduced or threatened evidence-based homelessness programs and housing assistance that help Californians afford rent.

The brief also highlights a shift in how state dollars are being used. While overall homelessness investments have declined, a growing share of funding has moved away from permanent housing solutions toward temporary housing and institutional responses. Spending tied to institutionalization, including the Incompetent to Stand Trial program, has remained stable or increased, despite not resolving homelessness and reflecting broader gaps in community-based alternatives.

The HHAP program has become the backbone of California’s homelessness response, according to the analysis. More than 93 percent of HHAP rounds 1 through 5 funds awarded statewide have been obligated as of Nov. 30, 2025, with nearly 70 percent already spent. Local governments and service providers have primarily used these dollars for operating costs and interim housing, covering essential expenses such as staffing, utilities, shelter operations, motel vouchers, navigation centers, and supportive housing.

Because HHAP eligible activities and reporting categories have changed across funding rounds, the brief notes that some overlap in spending categories reflects reporting differences rather than double counting. Even so, the reliance on HHAP for core operating functions underscores how the program has shifted from a temporary funding source to a central pillar of the state’s homelessness infrastructure.

Under the governor’s proposed 2026–27 budget, the only major state homelessness investment is $500 million for a new round of HHAP funding, a level the brief describes as a 50 percent cut from prior allocations. The proposal includes no new state General Fund dollars for affordable housing.

The analysis concludes that, as remaining HHAP funds are spent down, communities could face service reductions, staff cuts, and the loss of existing housing placements, potentially pushing people back into homelessness as early as next year.

The report also questions whether other funding streams can fill the gap. While state leaders have pointed to the Behavioral Health Services Act as a source of ongoing support, those dollars flow through county behavioral health departments and are limited to people with qualifying behavioral health conditions. Counties have indicated that the funds will largely be absorbed by existing operating costs and will not significantly expand capacity.

Federal policy adds additional uncertainty. The proposed federal Transportation, Housing and Urban Development appropriations bill for 2026–27 largely maintains current housing assistance levels, but the brief notes that this still falls short of meeting statewide need and could change during congressional negotiations.

The analysis also cites recent federal actions that criminalize homelessness, roll back Housing First approaches, and impose stricter eligibility rules in programs such as CalFresh, changes that are expected to disproportionately affect people of color, older adults, people with disabilities, LGBTQ+ Californians, and mixed-status families.

Without new, long-term state revenue to sustain housing and homelessness investments, the brief concludes that California risks reversing recent progress and deepening its homelessness crisis, even as large corporations stand to benefit from federal tax reductions.

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