Nearly $1 billion in state homelessness funding will flow to California cities and counties after Gov. Gavin Newsom shifted his stance on limiting new spending on the state’s centerpiece program for shelters, services, and permanent housing.
That means nearly $1 billion in state homelessness funding will find it way to California cities and counties, according to a report in the San Jose Mercury News.
The Mercury News said that Newsom opposed new funding for the program last year, saying he wanted better results from the counties and cities that operate local safety net systems.
Officials in the Bay Area said his stance threatened progress made on unsheltered homelessness in the region.
According to the newspaper, it’s a victory for cities, counties and advocates for homeless Californians, and the 2026-27 budget agreement reached between Newsom and top Democrats in the state legislature includes $900 million for the state’s Homeless Housing, Assistance and Prevention grant program.
Created in 2019
Since Newsom created the program in 2019, it has been the principal way California funds services for homeless people, and is often credited for helping to shrink the state’s population of people without permanent homes or shelter.
The Mercury News said that via the program, more than 110,000 people statewide have been placed in permanent housing since January 2023, according to state data. Nearly 400,000 people have received services of some kind. Homelessness in the state declined 3% in 2025, according to federal data, the first drop since 2018.
The agreement represents a compromise, the Mercury News said. lawmakers won a larger investment than Newsom had proposed, while cities and counties will have to meet new reporting requirements and put up more local money to qualify, the newspaper said.
“That’s one of the battles we were picking to fight,” said South Bay state Sen. Dave Cortese, a Democrat. “We really didn’t want to back down on our side.”
In a statement, a spokesperson for Newsom said the agreement “reflects Governor Newsom’s longstanding commitment to addressing homelessness.”
The funding is contained in an add-on to the state budget, known as a trailer bill, that lawmakers expect to pass this week.
$4 Billion in Grants
“Cities are working every day to connect people experiencing homelessness with housing and services,” said Carolyn Coleman, CEO of the League of California Cities. The funding “recognizes this important work and helps build on the progress already underway,” she said.
The newspaper said that the program has awarded more than $4 billion in grants since 2019, citing state data. The biggest portion — $525 million — subsidized the operations of nonprofit service providers that hold city and county contracts to deliver services directly to homeless people. About $410 million went toward interim housing, such as tiny homes or motels, and $323 million for permanent housing.
Local governments and groups in the nine-county Bay Area have been allocated $754 million. Housing officials have long said the funding is critical.
Earlier this year, for example, Oakland closed two shelters in part because of lapses in state funding. Also, the Mercury News said that Santa Clara County and San Jose have expanded a rental assistance program seen regionally as a model for preventing homelessness and doubled the number of shelter beds, in part, with state funds.
Newsom and lawmakers poured billions of dollars into the program between 2021 and 2024, the Mercury News reported, and by that point, California’s population of unhoused people was still growing, but slower than the national pace.
The governor’s tone began to change after a blistering audit in 2024 found that agencies had failed to track at least $24 billion spent to combat homelessness between 2018 and 2023, the newspaper reported. Last winter, Newsom threatened to withhold funding from local governments that were not making progress on homelessness, it said.
