Despite transparency concerns, the state auditor’s report says two programs focusing on housing and preventing homelessness are cost-effective.

By Mark Kreidler, Capital & Main

This story is produced by the award-winning journalism nonprofit Capital & Main and co-published here with permission.

A scathing new report by the California state auditor on governmental efforts to reduce homelessness put its emphasis where it needed to be. The auditor, Grant Parks, declared that he couldn’t really tell whether most homeless programs were working because so little useful data has been compiled on either spending or outcomes.

Parks’ complaint renewed focus on one of the central problems of the state’s work on the issue: California’s attempts to combat homelessness are so multipronged, with so many funding sources going to so many places, that it often appears nobody knows what’s working or even what is being spent. Tighter oversight and accountability are mandatory.

It’s interesting, though: Tucked into Parks’ report was one bit of information that has garnered no headlines. It turns out that two of the state’s programs appear to be doing what they’re supposed to do — including one for which Gov. Gavin Newsom has consistently taken heat.

Homekey, the Newsom-driven plan to mainly convert existing structures into temporary or permanent housing, has proved to be “likely cost-effective,” Parks’ office wrote in its audit report.

The program, which began as Project Roomkey for short-term relief during the early stages of the COVID-19 pandemic, uses federal and state funds to help cities and counties turn underused hotels, apartments and other residential buildings into homeless housing. On a more limited basis, the program converts existing office space into housing or buys single-family homes.

It’s a project that has been widely doubted by critics almost since its inception, and it still faces regular opposition. Homekey has also been hit with lawsuits by individual communities that want local control of the process (or to avoid homeless housing altogether), and it has not been immune from scandal regarding some of its disbursements.

But on the basis of cost and results, the auditor found, it works.

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During Homekey’s first round of funding, in 2020 and 2021, the project produced homeless housing at an average cost of $144,000 per unit — that is, per apartment or converted hotel/motel unit. The cost to build new affordable housing during that period was between $380,000 and $570,000 per unit, according to the California Department of Housing and Community Development.

That is a staggering finding, given the continued rise in affordable housing costs across the state. Experts say the average cost to build a single unit of affordable housing is now north of $600,000, and two years ago a Los Angeles Times report found that among seven affordable housing projects being built in Northern California, the average cost was more than $1 million per apartment.

“Homekey is a national model for rapidly creating affordable housing for Californians in need,” Newsom said in January while announcing that the state had crossed the 15,000-unit threshold through the program. “Homekey demonstrates what is possible when people think outside the box and refuse to accept the status quo.”

The state audit found that one other program, CalWORKs, which distributes funds to families on the verge of or already facing homelessness, was delivering results and was cost-effective. According to the report, the counties reviewed spent between $12,000 and $22,000 per household on support for those families, whereas the cost to taxpayers of one person experiencing chronic homelessness ranges from $30,000 to $50,000 annually.

For three other programs, Parks said there was such a glaring lack of data that his office couldn’t make a determination on whether the state’s money was being spent wisely.

Financially, the stakes on such findings are high. The audit noted that the state has poured $24 billion into efforts to fight homelessness over the past five years. Total Homekey funding so far stands at $3.6 billion, but the audit accounts for only the first round of state disbursements, with two more rounds in process. And the auditor’s frustration at the lack of transparency regarding both costs and outcomes for the various programs was evident in his letter accompanying the report to Newsom and state lawmakers.

“In general,” Parks wrote, “this report concludes that the state must do more to assess the cost-effectiveness of its homeless programs.”

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These aren’t never-ending projects, nor are they panaceas. Among other things, there are only so many existing hotels and apartments that can be repurposed for affordable housing.

Also, the public’s appetite for continued state funding of such measures is uncertain, especially in tight budget times. A convoluted $6.4 billion bond vote that would have in part increased housing for mental health patients barely passed last month despite Newsom lobbying heavily for it and its opposition spending almost nothing on the campaign.

On the other hand, the problem of homelessness isn’t going away. Even with Homekey’s additions to temporary and permanent housing, the state’s homeless population is rising, not falling.

Last year’s tally of 181,399 unhoused Californians represented an almost 40% increase from five years ago and accounted for 28% of the nation’s official homeless population, according to a federally mandated point-in-time survey. Many of those working in the field suggest the actual number is far higher.

A program like Homekey represents only the front end of finding solutions to the unhoused crisis in the state. For many homeless people, issues like addiction and mental health will remain long after they’ve been placed in a room, and California’s chronic housing shortage will continue to keep prices sky-high and increase the need for affordable solutions.

But the basic aim of Homekey has always been to find ways to get vulnerable Californians off the street and into either temporary or permanent housing, period. It is doing that, and at a fraction of the cost of building new units that would take years to complete. At a time when the state is trying desperately to deal with its rising homeless numbers, those are facts worth considering.

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