LA Could Have To Cut Shelter Beds In A Couple Years As The City Faces Budget Deficit

The city of Los Angeles could be facing a multi-million dollar budget deficit in the next few fiscal years to keep its interim housing programs like A Bridge Home, Project Homekey, and Inside Safe up and running.

The city is expecting to lose several major sources of funding — $60 million from L.A. County and $164 million from the state — for its 146 interim housing sites and more than 8,000 rooms.

During L.A. City Council’s Housing and Homelessness Committee meeting on Wednesday, Matt Szabo, the city administrative officer, said the challenge begins in the 2025-26 fiscal year.

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The city gets several different types of funding for its interim housing beds, including from California’s Housing Assistance Program (HAP), Prop HHH, Measure ULA, and L.A. County, which has been giving the city $60 million a year to establish 6,700 units. But that money will stop once the agreement is met.

Szabo said the city would have a $52-million deficit “just to continue the interim housing interventions that we currently have in service.”

Szabo told LAist the programs have ramped up at a very fast pace to meet the needs of the city.

“It's been a financial challenge the entire way,” he said. “We'll continue to place this as our highest funding priority.”

The challenges are even more magnified in the 2026-27 fiscal year.

Szabo said not only will the city have lost the $60 million from the county, Gov. Gavin Newsom’s proposed budget doesn’t include another round of the state HAP funding, which he described as the lifeline for the city’s interim housing.

“So that $164 million that we will receive for 25-26 will not be there,” he said. “Our obligations will continue and it will open up a $200 million deficit.”

And that doesn’t include any new housing investments.

“We are currently essentially maxed out on the dollars that we have available to just maintain existing,” he said.

If the city can’t make up the funding gap for the next few fiscal years, Szabo said they may have to consider “demobilizing” some of those beds.

He noted that the city’s revenues have flattened, and even declined in some cases, but the demand for services has continued to increase.

“We will need to make choices, tough choices, as to what we prioritize,” Szabo said. “We won't be able to continue to do everything and in all places, but those are decisions that the mayor and council will make principally in this upcoming budget.”