Homelessness is dropping in California counties. But funding cuts could derail that progress

California counties are reporting decreases in homelessness, suggesting the state is finally making progress in solving one of its most difficult and persistent problems.

But even as Gov. Gavin Newsom and local officials are celebrating, the money that made those wins possible is at risk of evaporating.

President Donald Trump’s administration this month tried to block organizations that don’t support its social agenda from accessing federal homeless housing funds — causing experts in the field to worry that politically liberal California could find itself blacklisted from crucial dollars.

Cuts to state homelessness funding are also on the horizon, and some local jurisdictions are pulling back funds as they struggle with their own budget deficits. That has counties, nonprofits and industry experts worried California’s homeless counts will soon go right back up.

“I do think that we’re doing something right,” Sharon Rapport, director of California state policy for the Corporation for Supportive Housing, said of the recent decreases. “That all may come to a crashing end with a lot of concerns with what’s happening at the federal level, federal policy changing and funding cuts happening.”

Of the 29 places in California that reported an official homeless census this year, more than half saw a decrease compared to 2024, according to an analysis of point-in-time counts by the Hub for Urban Initiatives. That includes drops of about a quarter in Contra Costa and Sonoma counties, 20% in Santa Cruz County, 16% in Ventura County and 14% in Merced County.

San Diego and Los Angeles counties each saw a decrease of less than 10%. For LA County, this marks the second year in a row that homelessness is down.

But funding worries loom like a black cloud over those promising results. As purse strings tighten, service providers will have to cut staff, programs and bed capacity, meaning they can help fewer homeless people. For years, California cities, counties and nonprofits have been pushing the Newsom administration to provide an ongoing source of homeless funding, so service providers can plan ahead without worrying each year about how much money they’ll get.

Some organizations already are feeling the squeeze.

From December through July, Union Station Homeless Services in Los Angeles County turned away 700 families who needed housing, said CEO Katie Hill.

“We just don’t have anything available for them,” Hill said.

The county cut housing vouchers as the city and county struggled with financial fallout from recent wildfires, falling property tax revenues and increasing legal payouts.

Other organizations are closing their doors for good. Downtown Streets Team, which helps unhoused residents in 16 California cities find housing while earning money cleaning up local streets, plans to close next month after two decades of service.

“The financial and political environment we operate in has shifted dramatically in recent months,” CEO Julie Gardner said in an emailed statement. “During this time, (Downtown Streets Team) lost several significant contracts and grants, creating a multi-million-dollar loss in overall funding. When combined with other factors, including rapidly rising operational costs, these losses made it impossible to continue running the organization in a financially sustainable way.”

‘I just don’t think we’re going to see that funding’

Congress in 2023 appropriated $75 million for something called the Continuum of Care Builds grant, which was supposed to help support the construction of new homeless housing. Former President Joe Biden’s administration started the application process for those grants in 2024. When Trump took the helm in 2025, his administration re-started the process with new criteria, making applicants apply again.

Then, at the start of September, the Trump administration made everyone apply a third time — with a very different set of criteria seeming to disqualify organizations that support trans clients, use “harm reduction” strategies to prevent drug overdose deaths or operate in a “sanctuary city.”

Applicants had to attest that they don’t deny the “sex binary in humans or promote the notion that sex is a chosen or mutable characteristic.” They had to promise not to distribute drug paraphernalia or allow the use of drugs on their property.

Applicants also had to attest that they operate in a city, county or state that cooperates with federal immigration enforcement. Newsom has resisted Trump’s immigration crackdown at a state level, and recently signed a set of bills intended to further check ICE.

And applicants were required to operate in a city, county or state that prohibits public camping and enforces that rule. That one could be an easier lift: Arrests and citations for camping-related activities have soared in some California cities over the past year, after the U.S. Supreme Court gave cities more leeway to crack down, and Newsom encouraged cities to ban camping. But two recent statewide attempts to ban homeless camps from near schools and other areas fell flat.

The new funding rules were a major blow to Contra Costa County-based Hope Solutions, which was initially selected to receive $5.5 million to build 15 tiny homes for homeless 18-24-year-olds in Pittsburg. After staff spent at least 100 hours completing the project proposal, they learned this month that they’d no longer qualify because of the new criteria. The Pittsburg Police Department says it does not participate in immigration enforcement. In addition, the new program rules specify the money must go to buildings that serve elderly residents — an about-face that takes Hope Solutions’ youth project out of the running.

“It felt like a gut punch,” said CEO Deanne Pearn, “and really disheartening to know that we had spent so much time and asked so much of our county partners and others, and that that time could have been spent elsewhere.”

The camp where a person experiencing homelessness lives on a hillside above U.S. Route 50 in Sacramento, on Oct. 25, 2024.

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Fred Greaves

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CalMatters

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Hope Solutions is still moving forward with the project, which Pearn hopes the organization can fund with its own financial reserves. But that means the nonprofit won’t have that money for its next project.

The National Alliance to End Homelessness recently sued the Trump administration over the new grant conditions, claiming that all projects in California and three dozen other states would be ineligible for funds. Earlier this month, a federal judge sided with the Alliance, and temporarily barred the federal government from distributing those funds.

Now, that $75 million is frozen as the case moves forward.

While the new conditions at issue in the lawsuit apply only to one specific federal homelessness grant, experts worry it’s an ominous sign for California. Service providers expect applications to open this fall for the main source of federal homelessness funding — the Continuum of Care Program — which funneled about $600 million to California counties in 2023.

If that application poses similar requirements, California could be in trouble.

“Personally, I just don’t think we’re going to see that funding,” said Hill, of Union Station Homeless Services in Los Angeles County.

In a separate lawsuit, San Francisco and Santa Clara Counties sued the Trump administration over contracts that prevented recipients of federal homeless funds from using the money to promote “gender ideology,” “elective abortions” and “illegal immigration.” The counties won an early victory last month, when a judge temporarily blocked the administration from imposing those conditions.

Other federal cuts are looming, too. The Emergency Housing Vouchers program, which launched during the COVID-19 pandemic and now helps more than 15,000 Californians pay their rent, is expected to run out of money next year.

That’s not even counting the cuts to housing vouchers and other federal housing and homelessness programs Trump proposed in May, which are still being negotiated in Congress.

California turning a corner on homelessness

California appears to be decreasing its homeless population, according to the Hub for Urban Initiatives, a California organization that helps local communities shape their homelessness policy, apply for grants and survey their homeless populations.

The 29 California communities that counted and reported their homeless populations this year tallied a total of 131,209 people — a 4% decrease from what those same communities reported last year. That’s a significant step for a state where the homeless population has been stubbornly rising for years.

That data comes from the federally mandated homeless point-in-time count, where teams of volunteers count the unhoused people they see on the street on one night in January. The counts are imperfect, as volunteers can overlook people sleeping in out-of-the-way places, and different counties use different methods — while some places count every year, others count every other. Of the 44 “continuums of care” required to count in California (some small, rural communities combine multiple counties into one continuum of care), 14 didn’t count this year.

The federal housing department will release an official total for the state later this year.

Newsom trumpeted the initial decreases, taking credit for pouring money into homeless housing and other services. He’s not wrong.

Contra Costa County, which saw the state’s biggest drop in homelessness this year, attributes its success largely to the recent boost in state funding, said Christy Saxton, director of Health, Housing and Homeless Services for Contra Costa County. Over the past two years, the county increased its homeless shelter and housing capacity by more than a third.

A big piece of that was the Homeless Housing, Assistance and Prevention program, which Newsom launched in the 2019-20 budget year to fill what until then had been a void of state homelessness funds. For the past few years, that program gave cities and counties $1 billion each year.

Those funds support programs such as Contra Costa County’s Delta Landing temporary housing site in Pittsburg, which opened 172 units in 2021. Until then, that part of the county had about 20 beds for its unhoused residents, Saxton said.

But instead of making that state funding ongoing, Newsom’s administration opted to dole it out in one-time grants each year, leaving cities and counties continually guessing what next year’s budget will bring.

This year, that state program will get no new funding (because of the glacial pace at which the state distributes these funds, cities and counties have yet to receive money from the last round). Next year, the amount is set to shrink to $500 million.

“We are significantly concerned about the cuts that are coming,” Saxton said, “because it has taken an influx of money in order to see those decreases, and we need that to continue on now more than ever.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.