Newsom’s Final Budget Disappoints Housing, Homeless Advocates

After years of championing new funding to combat California‘s housing shortage and homelessness crisis, Gov. Gavin Newsom‘s final budget was a retreat from the major investments of years’ past and left many advocates disappointed.

The budget proposal, released Friday, projected a modest $2.9 billion shortfall — a significantly rosier picture than the $18 billion anticipated by the Legislative Analyst’s Office — and emphasized accountability and streamlining over new cash investments to address homelessness and bolster affordable housing.

It comes as the state faces federal funding cuts and expected policy changes that could restrict how much money agencies can spend on permanent housing for people exiting homelessness. As the governor works on finalizing his budget proposal in May, affordable housing groups hope they can sway the administration to fill the funding gaps.

“I am disappointed,” said Heather Hood, who helms the nonprofit housing provider Enterprise Community Partners’ Northern California work. “We hear over and over that housing affordability is a major concern for Californians and the governor, and yet we’re not seeing it reflected in the budget.”

But Newsom kept promises he made last year: The proposed budget includes $500 million for one of California’s largest homelessness services programs, the Homeless Housing, Assistance and Prevention (HHAP) Grant — contingent on “enhanced accountability and performance requirements” — after it received no new funding last year.

“We have invested a significant amount over these last seven years,” Joe Stephenshaw, director of the state’s Department of Finance, said during a press conference on Friday announcing the budget proposal. “Prior to this administration, there were no significant investments at the state level in combating homelessness.”

While affordable housing and homelessness services organizations say the $500 million is welcome, they had hoped to see funding levels ramp back up to what they were earlier in Newsom’s tenure, when the state consistently dedicated $1 billion to the program.

“We believe we have to be much bigger and bolder in sustaining and growing our investments in affordable housing if we’re going to deliver the housing and services Californians really need right now,” said Chione Lucina Muñoz Flegal, executive director of advocacy organization, Housing California.

During Newsom’s State of the State address on Thursday, he said he wants cities and counties to bring people off the streets, out of encampments and into housing and treatment. “No more excuses,” he said.

But Hood said the comment misrepresents the cash-strapped situation many municipalities face when trying to fund services and housing.

“There’s only so many places the counties and cities can go,” she said. “They’re not getting the money from the feds, and they’re not necessarily getting it from their residents and voters, and so that’s why there’s been a shift to the state.”

Without dedicated cash in the budget, she said the strained environment puts more pressure on securing a $10 billion statewide affordable housing bond. Two bills aiming to put the bond on this fall’s ballot are currently making their way through the legislature.

In addition to the homelessness funding, the governor’s budget proposal nodded to achievements in previous years and pointed to the state’s Housing and Homeless Agency, a new department set to become operational by July, which promises to transform California’s fragmented housing finance system into a more streamlined machine.

During Thursday’s address, Newsom said the number of people sleeping in tents, cars and RVs dropped by about 9%, according to preliminary federal data from 2025 from a subset of counties. He contrasted that decrease with the nation’s 18% increase in homelessness last year.

But affordable housing advocates worry that, without further investment, those numbers may backslide, due to federal cuts.

In March, the U.S. Department of Housing and Urban Development (HUD) said it would not dedicate any new funding to the Emergency Housing Voucher program, which has provided rental assistance to about 70,000 households nationwide, according to a report from UC Berkeley’s Terner Center for Housing Innovation. That funding is set to run out by the end of 2026.

Later in November, the department announced that jurisdictions applying for federal funds can only spend 30% of a key homelessness services grant on permanent housing and urged applicants to instead focus on temporary and emergency housing. The competitive grants also deprioritized funding for agencies that recognize transgender people, use harm reduction practices and follow Housing First principles.

Susannah Parsons, director of policy and legislation for the advocacy organization, All Home, said it’s not the time for California to pull back from investing in affordable housing and homelessness services.

“Now it feels more important than ever that we backstop against some of these federal threats to ensure that the progress we’re starting to see doesn’t evaporate in the next 12 months,” Parsons said.