California’s battle against homelessness has reached a critical juncture, marked by both encouraging progress and looming threats to the very funding that made recent successes possible. Over the past year, counties across the state have reported notable decreases in their homeless populations—a rare glimmer of hope in a crisis that has long seemed intractable. But as officials tout these gains, a new set of federal restrictions and budgetary uncertainties threaten to reverse the trend, putting California’s most vulnerable residents at renewed risk.
According to an analysis by the Hub for Urban Initiatives, more than half of the 29 California communities that conducted official homeless censuses in 2025 saw reductions compared to the previous year. Standout examples include Contra Costa and Sonoma counties, which each posted about a 25% drop, Santa Cruz County with a 20% decrease, Ventura County at 16%, and Merced County at 14%. Even the state’s largest counties saw improvement: San Diego and Los Angeles each registered a decrease of less than 10%, with Los Angeles marking its second consecutive year of decline.
This progress is no accident. State and local officials, led by Governor Gavin Newsom, have poured billions into homelessness prevention and response—expanding shelter capacity, launching targeted programs, and adopting a hands-on approach to encampment management. One recent example came on September 23, 2025, when Newsom’s State Action for Facilitation on Encampments (SAFE) Task Force joined forces with Los Angeles Mayor Karen Bass and the county to clear a persistent encampment along the 110 freeway. The operation, which began with outreach and service delivery days earlier, resulted in all 40 individuals at the site accepting shelter and support, while crews removed more than 340 cubic yards of debris—roughly three large shipping containers’ worth.
“No one should live in a dangerous or unsanitary encampment, and we will continue our ongoing work to ensure that everyone has a safe place to call home,” Governor Newsom declared during the operation, according to a statement released by his office. He emphasized the importance of pairing urgency with dignity, highlighting the state’s commitment to providing wrap-around services and shelter for those in need.
The SAFE Task Force is not a one-off effort. It forms part of a larger, statewide strategy to address encampments on rights-of-way in California’s ten largest cities—including Los Angeles, San Francisco, Oakland, San Diego, Sacramento, San Jose, Long Beach, Anaheim, Bakersfield, and Fresno. The approach draws on expertise from emergency management, social services, health care, substance use support, resource and land management, and public safety. By working closely with local governments, the task force aims to connect unsheltered individuals with suitable shelter options and comprehensive support.
Los Angeles, in particular, has emerged as a model for coordinated action. Under Mayor Bass’s Inside Safe Program, the city has resolved over 100 longstanding encampments and brought thousands indoors. Last year alone, LA increased its year-round bed count by more than 7.5%. The city has also leveraged state funding to bolster behavioral health services, targeting those most at risk. Through voter-approved Proposition 1, Los Angeles received approximately $1.58 billion to expand behavioral health infrastructure and supportive housing for people experiencing or at risk of homelessness.
These efforts have yielded measurable results. Initial reporting shows a nearly 8% drop in unsheltered homelessness in LA, and overall homelessness in the city has declined for two years running—a milestone not seen in recent memory. Statewide, the 29 communities that conducted counts in 2025 tallied a total of 131,209 homeless individuals, a 4% decrease from the previous year’s figures for those same areas.
But despite these gains, a storm is gathering on the funding front. The Trump administration, which took office in early 2025, has imposed a new set of restrictive criteria on federal homeless housing funds. These changes, announced in September, have sent shockwaves through California’s homelessness response community. The new rules for the $75 million Continuum of Care Builds grant, appropriated by Congress in 2023, require applicants to pledge they do not support trans clients, use harm reduction strategies, or operate in sanctuary cities. Applicants must also attest that they do not deny the “sex binary in humans” or promote the idea that sex is a mutable characteristic, and that they cooperate with federal immigration enforcement—a stance that puts California, with its sanctuary policies and progressive leadership, squarely at odds with federal priorities.
The impact has been immediate and severe. Hope Solutions, a Contra Costa County-based nonprofit, was initially selected to receive $5.5 million to build 15 tiny homes for homeless youth in Pittsburg. After spending over 100 hours on their application, staff learned this month that they’d been disqualified due to the new criteria. “It felt like a gut punch,” CEO Deanne Pearn told reporters, “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.”
Other organizations are already feeling the squeeze. Union Station Homeless Services in Los Angeles County turned away 700 families from December 2024 through July 2025 due to a lack of available housing. “We just don’t have anything available for them,” CEO Katie Hill explained. The financial strain has forced the organization to cut housing vouchers, as the county grapples with the fallout from wildfires, declining property tax revenues, and rising legal costs. Downtown Streets Team, a nonprofit that has helped unhoused residents in 16 California cities for two decades, will close its doors in October after losing several major contracts and grants, resulting in a multimillion-dollar funding shortfall.
The new federal rules have not gone unchallenged. The National Alliance to End Homelessness recently sued the Trump administration, arguing that the criteria would render all projects in California and dozens of other states ineligible for funds. Earlier this month, a federal judge sided with the Alliance and temporarily blocked the government from distributing the $75 million in grant money while the case proceeds. In a separate lawsuit, San Francisco and Santa Clara Counties challenged contract conditions that barred recipients from using federal funds to promote “gender ideology,” “elective abortions,” and “illegal immigration.” They, too, won a temporary block on those restrictions in August.
Yet the uncertainty persists. The Emergency Housing Vouchers program, which has helped more than 15,000 Californians pay rent since its launch during the COVID-19 pandemic, is expected to run out of money in 2026. Meanwhile, the main federal homelessness funding stream—the Continuum of Care Program, which directed about $600 million to California in 2023—could soon be subject to similar restrictive requirements. “Personally, I just don’t think we’re going to see that funding,” said Hill of Union Station Homeless Services.
On the state side, the outlook is equally fraught. California’s Homeless Housing, Assistance and Prevention program, which has provided $1 billion annually in recent years, will receive no new funding in 2025 and is slated to shrink to $500 million in 2026. Local jurisdictions, facing their own budget deficits, are also pulling back support. “We are significantly concerned about the cuts that are coming,” said Christy Saxton, director of Health, Housing and Homeless Services for Contra Costa County, “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.”
As California stands at this crossroads, the stakes could hardly be higher. The state’s recent progress in reducing homelessness demonstrates that well-funded, coordinated action can make a difference. But with federal and state dollars both in jeopardy, advocates and officials alike are bracing for a challenging road ahead—one that will test their resolve and ingenuity as they fight to prevent hard-won gains from slipping away.
