How Gavin Newsom’s California made homelessness worse

California has about 12 percent of the U.S. population, but about 45 percent of the country’s unsheltered homeless population, at about 116,000 individuals.

That is down from 124,000 in 2024, but up 7% from 2019, when Gavin Newsom took office as governor.

The total number of homeless people, including those in shelters, was over 187,000 statewide as of 2024.

Since 2019, the state has poured nearly $37 billion into programs aimed at helping people get off the streets.

That generous sum works out to almost $200,000 per homeless person, reflecting what Sacramento calls “compassion” — and what everyone else would call a $37 billion fiasco.

But what have the state’s residents received in return for this spending?

Unfortunately, no one knows — because the state does not track where the money goes.

Three independent audits have reached the same conclusion: California simply does not know if its billions in spending on homelessness do any good. 

The state auditor found that “the State lacks current information on the ongoing costs and outcomes of its homelessness programs.” 

Federal auditors concluded that the California Housing and Community Development department “was not adequately prepared to prevent, detect, and respond to fraud risks.”

And the nonpartisan Legislative Analyst’s Office reported that “no data have been provided to the Legislature on how many people living in an encampment have received permanent housing.”

This is a shocking absence of basic accounting, and it is the largely Newsom’s handiwork.

In 2024, bipartisan legislation that would have addressed the problem by requiring annual public reports on homelessness spending passed the State Assembly and Senate without opposition. 

But Newsom vetoed it, just as he did a similar bill — also passed with no dissenting votes — months earlier. 

Newsom has pointed to an accountability law that he did sign, but that bill won’t make spending data public until 2027 — conveniently, after his term ends. 

While the governor talks a good game about accountability, he has kept the data necessary to achieve it under wraps.

The lack of transparency in the system has given rise to perverse incentives. Because funding is tied to the number of homeless people being served, rather than the number who enter stable housing, nonprofits and agencies have no incentive to reduce homelessness. 

A 2022 San Francisco Chronicle investigation found that participants in the city’s permanent supportive housing program were twice as likely to return to the streets or die than to find a lasting escape from homelessness. 

California has built a “homelessness-industrial complex,” and the losers are the taxpayers and homeless people themselves.

Making all this worse has been the state’s decade-long commitment to a failed “housing first” approach, which treats placement in supportive housing as a cure-all for the complex problem of homelessness, with predictably poor results.

At great expense, the state has tripled its permanent supportive housing units since 2010, and the homeless population has risen right alongside it.

Thankfully, this month the state ended its largest “housing first” grant program, all but acknowledging the failure. 

Now the question is whether Newsom and the activists controlling Sacramento will redirect that money toward things that actually work.

What’s needed is a clear-eyed understanding of what’s gone wrong. “Housing first” failed because this crisis of homelessness is not primarily a housing problem. Roughly 75 percent of the homeless population struggles with drug abuse or mental illness, yet “housing first” offers no requirement or incentive to seek treatment.

A better way lies in “housing readiness,” which addresses addiction and mental health as the path to stable housing. 

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California created “Community Assistance, Recovery and Empowerment (CARE) courts” to provide a court-supervised pathway into treatment for these individuals. However, the CARE Courts have failed because treatment plans are largely voluntary.

If the state and Newsom are finally serious about reducing homelessness, they will do the following:

• Cut off public money to failing programs;
• Embrace housing readiness by treating mental illness and addiction;
• Make it easier for CARE courts to compel treatment for the mentally ill and addicted;
• Repeal California Environmental Quality Act (CEQA) barriers to increasing the housing supply; and
• Encourage localities to adopt anti-camping ordinances.

There is nothing compassionate about watching our most desperate neighbors live in squalor, cycle through emergency rooms, or die of overdoses on our sidewalks. 

Real compassion demands action and accountability, not mindless spending.

Joshua Rauh teaches at Stanford’s Graduate School of Business and is the Senior Fellow in Economics at the Hoover Institution. 

Benjamin Jaros is an economist and research fellow at the Hoover Institution.