The True Costs of Homeless Interventions

LA BUDGET - The mayor’s recent proposal for the City’s FY 2023-34 budget calls for about $1.3 billion for homelessness programs. That’s a $250 million increase from the current fiscal year, a staggering amount of money, especially if one considers it is aimed at one percent of the city’s population. But it is by no means the only cost of homeless intervention in Los Angeles. Significant resources from the LAPD, LAFD, LASAN and LADOT budgets are spent on homeless response, and they may not be reflected in the new budget; for example, the proposed budget includes an additional $8.3 million in police overtime to cover areas near interim housing, but part of that is taken up by normal cost of living increases, and it does not reflect response to other homelessness-related issues.  The mayor’s budget includes $38 million in payments to LAHSA, the county’s homeless response agency, but LAHSA’s total budget is $845 million; since 60 percent of the county’s homeless are in Los Angeles, we can assume about 60 percent, or $507,000,000, of LAHSA’s budget is dedicated to the City. 

These are just local government costs.  The costs to the private sector include insurance payouts for fire damage, (the LAFD estimates 54 percent of its calls are related to homeless encampments), repairs from vandalism and damage caused by people with untreated mental conditions, inventory loss from shoplifting, private security, and a host of other expenses. 

Besides the cost in dollars, there is a homeless crisis imposes a heavy human toll. Five unsheltered people die from exposure and overdose every night. Many more fall victim to property and personal crime, including sexual assault.  Residents fear assault by people experiencing uncontrolled psychotic breaks.  Neighborhoods are denied the use of public spaces that have become semi-permanent camps. The environment suffers when human and other waste is dumped into storm drains, to flow, untreated, to the ocean.  And society at large suffers from the callousness that has developed as a defense mechanism to deal with tents, camps, and their often-disturbed or unconscious inhabitants,  throughout the city. 

There really is no way of knowing what the entire cost of homelessness in L.A. is. Many public agencies don’t track the direct costs of work related to unhoused people, and private sector costs aren’t readily available. But we can use the mayor’s proposed budget as a base amount and figure a cost per person for each of the 41,000 unhoused people in L.A.  

The $31,700 figure needs some context to put in perspective.  According to the U.S. Department of Labor, the average individual income in Los Angeles in 2021 was $39,380.  The direct city costs per person for homelessness programs are 84 percent of the average income.  The average household income in 2021 was $69,780.  Let’s suppose two people live in the typical RV; at $31,700 per person, the cost would be $66,420, or 95 percent of the average family income in L.A.

$31,700 per person is probably a very low estimate. If you add in 60 percent ($507 million) of LAHSA’s budget, and then deduct the City’s share of $38,000,000, the total becomes $1.83 billion, or $44,650 per person, which is 113 percent of the average individual income.  Even that number is probably low, because it excludes expenditures by non-profits that aren’t funded by the City or LAHSA, nor costs that simply get lost in the bureaucracy. 

By way of comparison, the LAPD’s budget is about $2 billion. Since everyone in the City gets some benefit from police presence, one could make the argument that the department serves all 4 million residents. $2 billion divided by 4 million people is $500 per person.  

Nor can we assume $1.3 billion will be the top of the spending curve. According to the Times, in 2013, the City’s homeless budget was $10 million.  By 2015 it was $100 million.  In 2021 it was $1 billion, a hundred-fold increase in less than 10 years. Also, as the Times reported in the same article, more of the burden is being borne by the City and its residents. While Bass’ budget includes hundreds of millions of dollars in state grants and Proposition HHH funds, those amounts are declining.  The new budget includes about $150 million in anticipated revenue from Measure ULA, the so-called “mansion tax”, that comes directly from property sales in the City. 

The recent receivership of Skid Row Housing Trust properties will inevitably put City taxpayers on the hook for millions in repairs and maintenance.  None of those costs are mentioned in the mayor’s budget.  As The Times said, “However, city officials acknowledge that public funds will inevitably be required for the trust rescue because many of the trust’s buildings operate at a loss and have covenants restricting rent increases — and thus have no value to borrow against.” 

By any objective standard, there is precious little to show for the monumental expenditures. Rather than declining, homelessness has increased every year since 2014.  Despite massive expenditures from Proposition HHH funding, housing construction is “unacceptably slow” as Controller Ron Galperin noted in a 2022 report.  By concentrating on expensive and time-consuming construction projects, little has been done to address the epidemic of untreated mental illness and substance abuse among the unhoused, a major contributor to the costs of public safety response and housing costs. 

Rather than adopting a new model, the City seems to be doubling down on financially risky models similar to the one that bankrupted the Skid Row Housing Trust. On April 19, the City Council heard arguments for a new “social housing” model that allows tenants and non-profits to manage housing projects built on city property.  The city would lease the facilities at low costs to keep  rents remain low. Unlike the Skid Row Trust properties, these social housing units would be backed by the City’s finances. Since the government’s official policy is No Barrier Housing First, 50 to 70 percent of the people who are supposed to manage these projects have serious mental health or substance abuse problems.  They’ll be “supported” by a network of non-profit agencies that are already reaping hundreds of millions of dollars of taxpayer money through the current system. 

At costs per person that approach or exceed the average income in Los Angeles, homelessness programs are no longer intervention programs; they are income replacement programs. Imagine the progress that could be made if the City simply wrote checks for some people.  Those who do not need intensive support services could get back on their feet financially and avoid the trauma of extended homelessness. The city and county could target their limited staff resources at the people most in need.  The City could even afford to buy all of the derelict RV’s from campers and safely dispose of the them.  

But all that would mean admitting the City will never build itself out of the homeless crisis, and that housing costs alone aren’t the cause of homelessness. The entire financial structure that developers and non-profits have built for themselves would collapse.  And we have seen time and again, they, and the politicians they sponsor, will never allow that to happen.

(Tim Campbell is a resident of Westchester who spent a career in the public service and managed a municipal performance audit program.  He focuses on outcomes instead of process.)