Homelessness is top of mind for many Californians. Why does the proposed budget eliminate funding for it?

State leaders have been talking a lot lately about cleaning up California’s homeless encampments and moving people indoors. But the tentative budget they’ve drawn up for the upcoming year has many asking: With what money?

Both Gov. Gavin Newsom and the Legislature have proposed gutting the state’s main source of homelessness funding in the 2025-26 budget, sending a wave of panic through the cities, counties and service providers that have been relying on that money for years. Now, those critics warn that thousands of Californians could end up back on the streets, undoing the tenuous progress the state has made in addressing the problem.

“It’s extremely frustrating,” said San Jose Mayor Matt Mahan, whose city had been receiving about $30 million a year from that pot of homelessness funding — enough to pay for about 1,000 interim housing placements. “Residents of California tell us consistently that ending unsheltered homelessness is one of their very top priorities…So the idea that the state can’t make a substantial, consistent investment in residents’ top priority makes me question whether or not they’re really listening to the people of California.”

The Homeless Housing, Assistance and Prevention program has doled out funds for cities and counties to spend on everything from temporary shelter to services to permanent housing since its creation six years ago. It started with $650 million in the 2019-20 budget, and has since grown to $1 billion last year.

Since 2023, the program has provided housing for more than 57,000 Californians, according to the Bring California Home Coalition, made up of affordable housing providers, advocates for homeless individuals and government staff.

But with the state facing an expected deficit of $12 billion this year, those funds ended up on the chopping block. The 2025-26 budget proposed by the Legislature June 9 allocates $0. Lawmakers passed a placeholder Friday, but the budget still has to undergo additional negotiations between Newsom and lawmakers before it becomes final. Even so, the governor already has indicated he’s fine with stripping homelessness funding.

At the same time, California could soon also be reeling from federal cuts. President Donald Trump’s proposed budget would reduce funding to the Housing and Urban Development department by 44%, slashing the rental subsidies and federal homelessness funding that flows to California.

Newsom has, in a sense, been preparing cities and counties for a blow to state funds. He has for years resisted calls to make homelessness money permanent, instead preferring to dole it out year by year in a one-time grant — making it easier to cut in a tough budget year.

Despite ramping up spending on the issue to unprecedented levels after taking office (last year the Legislative Analyst’s Office found the administration had spent $24 billion on housing and homelessness), the governor changed his tune in recent months. His message now is more along the lines of: I’ve done my part, now cities need to step up and take care of the crisis on their streets.

Newsom recently suggested cities do that by passing ordinances banning encampments.

“I’m not interested anymore, period full stop, in funding failure,” Newsom said last month, a refrain he’s been repeating often.

But the cities and service providers that rely on those funds say it appears he’s no longer interested in funding success, either: While California’s homeless population remains the biggest in the nation — with more than 187,000 people sleeping on the street and in shelters — it increased just 3% last year, compared to a nationwide increase of about 18%.

Critics worry gutting funding will erode that modicum of progress.

“Simply put, this choice will lead to more people moving onto California’s streets and fewer avenues off the streets,” the Bring California Home Coalition said in a statement.

In San Jose, the state homelessness funding has been crucial in the city’s push to move people out of encampments and into temporary placements in tiny homes and converted motels. Like other cities, San Jose still is waiting to receive its homelessness allocation from the last budget. But once that money is spent, probably by next summer, San Jose will feel the hit, Mahan said. When that happens, the city probably won’t have to close existing programs, because it’s lucky enough to have other funding sources, he said. But it won’t be able to build new units, effectively stalling the city’s plan to get everyone off its streets.

Mahan and other California mayors have for months been urging state leaders to reconsider ever since Newsom’s initial January budget proposal zeroed out the homelessness funds.

Instead, the Legislature suggested adding $500 million back into the state homeless funding program — but not until in the 2026-27 fiscal year. That would be a 50% reduction from last year’s allocation. And there’s no guarantee that money will come through at all. In addition, lawmakers proposed reducing another, smaller homelessness program — which provides money to cities specifically for cleaning up encampments and moving occupants indoors — by $100 million.

It’s not all bad news, pointed out Ben Metcalf, managing director of UC Berkeley’s Terner Center for Housing Innovation. The Legislature’s budget includes $500 million in low-income housing tax credits to fund the construction of new affordable housing, and $120 million for the Multifamily Housing Program, which provides loans for low-income housing.

But the Homeless Housing, Assistance and Prevention program may have been politically easier to gut, Metcalf said. That program doesn’t benefit from deep-pocketed lobbyists defending it in Sacramento.

And because of the complex, intractable nature of the homelessness crisis, the money hasn’t produced the kind of tangible, grand-slam results voters want to see on their streets. Instead, homelessness remains a persistent problem, and encampments still dot California’s cities.

But without that money, some shelters and housing programs are likely to close, Metcalf said. Others could simply become less effective. The state program provided funding for the types of counseling, case workers and other services that help people transition from shelters into permanent housing, he said. Without that extra help, people often languish in shelters.

“So what you end up with, probably, is more Band-Aids,” Metcalf said, “or patchworks of systems that are providing some modest amount of (improvement in) the quality of life but not really helping transition people permanently out of homelessness.”

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