California’s homelessness crisis is often discussed as a failure of spending. The state has committed about $24 billion toward homelessness and housing programs between 2018 and 2023, yet homelessness has continued to rise.¹
According to the latest national housing report, more than 187,000 Californians were experiencing homelessness in 2024, the largest number in the nation.²
These two facts are frequently used together to argue that homelessness programs are failing.
But that interpretation misses the deeper cause.
The real driver of homelessness in California is not simply the availability of services. The underlying cause is the cost of housing itself.
California Has a Housing Shortage
For decades California has produced far fewer homes than its population needs.
State housing agencies estimate California needs about 180,000 new homes per year to keep up with population growth and economic demand.³
However, the state has historically produced fewer than 80,000 homes annually, creating a growing housing shortage.
The result is predictable: when supply falls far behind demand, prices rise dramatically.
Today only about 23% of California households can afford the median-priced home, according to housing market data.⁴
When housing becomes unaffordable for working people, more households fall behind on rent or mortgages — and more people become homeless.
Spending Alone Cannot Solve the Problem
Public spending on shelters, services, and temporary housing is important. But spending alone cannot fix a structural shortage.
If the cost of housing remains far above wages, new people will continue to fall into homelessness faster than programs can help them recover.
California must address the root cause: housing scarcity and cost.
Three Structural Reforms California Should Consider
1. Ensure Homes Are Primarily Owned by People
Large investment firms have increasingly purchased housing across the United States.
In California, owners with 10 or more properties hold roughly 207,000 single-family homes.⁵
Homes should first and foremost serve as human shelter, not primarily as investment assets.
Policies that limit large-scale corporate accumulation of single-family housing could help ensure that homes remain available for families.
Such reforms would not create new homes by themselves, but they could help stabilize prices and improve access for first-time buyers.
2. Require Counties to Permit Enough Modest Housing
California’s housing shortage is largely a permitting problem.
Many counties and cities restrict construction of:
- small starter homes
- duplexes and triplexes
- apartments
- manufactured housing communities
Builders are often incentivized to construct large expensive homes because they generate higher profits per permit.
The state should require counties to permit enough modest housing to meet the needs of lower-income residents.
This includes:
- small homes
- duplexes
- apartments
- modular housing
- manufactured housing
When enough modest housing is permitted and built, prices naturally fall.
Research consistently shows that increasing housing supply reduces rents and housing price growth.⁶
3. Return Vacant Homes to the Market Faster
California has more than one million vacant housing units, although many are seasonal or temporarily unavailable.⁷
Some homes remain vacant for years because of probate delays, estate disputes, or unpaid property taxes.
Local governments should streamline processes that return these homes to the market faster.
Vacant homes deteriorate over time, invite crime, and reduce neighborhood stability.
Homes are best maintained when they are lived in.
Housing Supply Is the Largest Lever
California currently has about 14.9 million housing units statewide.⁸
If construction increased enough to meet the estimated need of 180,000 homes per year, housing supply would grow substantially over time.
Economic models suggest that increasing housing stock by several percent could reduce housing prices by multiple percentage points compared to current trends.
While this may not immediately crash prices, it would meaningfully slow price growth and improve affordability.
Public Spending Should Be Targeted
It is not realistic for the state to directly build all needed housing.
At an estimated cost of $200,000 per modest home, building 180,000 units annually would cost about $36 billion per year.
California’s proposed 2026–2027 General Fund budget is about $248 billion, meaning such a program would consume a large share of state spending.⁹
Instead, the most practical solution is:
- private construction of most housing
- targeted public funding for low-income households
- statewide reforms that allow more modest housing to be built
Conclusion
California cannot spend its way out of homelessness if housing costs continue to rise faster than wages.
The durable solution requires addressing the housing shortage itself.
That means:
- ensuring homes primarily serve people rather than investment speculation
- permitting far more modest housing
- returning vacant homes to use quickly
When housing becomes affordable again, homelessness will fall as well.
REFERENCES
- California State Auditor
https://www.auditor.ca.gov/reports/2023-102-1/ - U.S. Department of Housing and Urban Development
https://www.huduser.gov/portal/sites/default/files/pdf/2024-AHAR-Part-1.pdf - California Department of Housing and Community Development
https://www.hcd.ca.gov/policy-and-research/addressing-variety-housing-challenges - California Association of Realtors
https://www.car.org/marketdata/data/haitraditional - California State Library – California Research Bureau
https://www.library.ca.gov/crb/quick-hits/institutional-landlords/ - Housing supply research summarized by
Upjohn Institute for Employment Research
https://www.upjohn.org/research-highlights/new-construction-makes-homes-more-affordable-even-those-who-cant-afford-new-units - United States Census Bureau
https://www.census.gov/housing/hvs/index.html - United States Census Bureau
https://www.census.gov/quickfacts/CA - California Department of Finance
https://dof.ca.gov/budget/
The Liberty and Prosperity Plan 
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