Tiny Homes, Big Ambitions: Matt Mahan’s Run for Governor Spotlights His Shelter Strategy

Some mayors have airports as legacy projects. Others have downtown arenas. Matt Mahan has tiny homes.

Last week, Mahan, the mayor of San José and Democratic candidate for California governor, celebrated the opening of a tiny home project in North San José. A six-acre patch of dirt next to the Valley Transportation Authority’s Cerone Yard was transformed into a hub of 162 private rooms for people experiencing homelessness.

The Cerone ribbon-cutting marked the end of an ambitious expansion of shelter in the state’s third-largest city — the last project the city had budgeted in a construction sprint. In the last year, 11 temporary housing sites opened their doors and an existing site more than doubled in size, adding a total of 1,319 beds.

“This phase of shelter expansion may be over for now,” Mahan said at the site’s opening. “But our fight to end unsheltered homelessness continues.”

The shelter building boom is sunsetting just as a new chapter in Mahan’s political career begins. At the Cerone opening, the mayor’s usual cadre of city staff were joined by new faces: members of a campaign team guiding Mahan’s run for governor.

In that campaign, Mahan will likely tout his ability to take on the state’s most vexing problems by pointing to his experience as mayor. The tiny homes, converted motels and RV parking lots that together make up San José’s Emergency Interim Housing system stand as the visual embodiment of Mahan’s tenure — the fruit of multiple budget fights and political clashes.

To Mahan and his supporters, the interim housing network is pragmatism in practice — an example of the type of “bias for action” prized in Silicon Valley that has delivered quick results on voters’ top issue. For critics, the tiny homes are monuments to political expediency, with a growing price tag that could weigh on the city’s books long after Mahan leaves office.

“San José set a goal to create a lot more shelter units, and they’ve done it,” said Jennifer Loving, CEO of Destination: Home, a housing nonprofit.

But the city’s new shelter focus has only solved “part of the problem,” Loving said. “Because obviously people can’t live in those places forever.”

The interim housing sites have filled up just as quickly as they have opened, offering residents a more comfortable alternative to traditional congregate shelters. And on Mahan’s most prized metric, reducing unsheltered homelessness, the tiny homes appear to be delivering: last year’s point-in-time count found the number of people sleeping outdoors had dropped by 10% since January 2023, when Mahan took office.

But as this phase of the tiny home buildout winds down, nearly 4,000 people are still without shelter in San José — and the system’s future is uncertain.

Mahan and the council have committed to operate the shelter system in perpetuity, with no guarantee of ongoing funding help from the county, state or federal government.

Interim housing costs are outstripping the city’s dedicated homeless fund, and by 2029, the shelters could require an infusion of nearly $60 million from the city’s general fund, which pays for basic services like police and fire.

“We have leaned out in a big way in — some would say — taking a risk on going it alone and building out a system that is very expensive,” Mahan said. “The fact that we did that, though, and have shown that it’s working, I think has shown that we are committed to ending this crisis and has actually built the social and political capital to get others to the table.”

A funding reversal

In 2023, the South Bay ranked last among large California Continuums of Care (HUD-designated regional homeless planning bodies) in shelter capacity, according to an analysis by the Public Policy Institute of California.

The San José, Santa Clara City and County Continuum of Care had 29 shelter beds per 100 people experiencing homelessness — well behind San Diego (61.1 beds per 100 homeless individuals), San Francisco (50.9), Riverside (40) and Los Angeles (34.9).

Mahan won an upset victory in the 2022 mayoral election on a vow to reduce unsheltered homelessness. But city funding was largely dedicated to building affordable apartments that offer a permanent path off the streets — though they typically take longer to build.

To engineer San José’s shift toward a shelter-focused strategy, Mahan eyed a pot of money created by voters in a 2020 ballot initiative, Measure E. The tax on high-value real estate sales raises around $50 million to $60 million a year — roughly 75% of which is dedicated to building permanent affordable housing.

In his first year as mayor, a council majority rejected Mahan’s proposal to redirect a larger share of the Measure E revenue toward interim housing.

But over the next two years, Mahan evinced a political savvy in spearheading the reversal in city homeless funding.

Lacking the executive power of other big-city mayors, he trumpeted warnings that the city could face fines for its lack of shelter; urged his colleagues to continue approving new shelter construction (adding pressure to find revenue to support the costs); and built a roster of allies on the council.

Last year, the council voted to permanently dedicate 90% of the homeless fund toward shelter, with the remaining 10% earmarked for homeless prevention.

The funding reversal was complete, and construction of tiny home villages continued apace — in Downtown, Berryessa and South San José. Neighborhood opposition, which once threatened to derail the program, began to soften.

At the beginning of Mahan’s tenure, the city was operating seven interim housing facilities. Now there are 23 — a mix of individual room projects such as Cerone, modular studio apartments, converted motel rooms and parking lots for lived-in vehicles.

Investments ‘started to bear fruit’

By the beginning of 2025, the South Bay had already caught up to the shelter capacity of other large California jurisdictions.

HUD has not yet released point-in-time counts of people experiencing homelessness in 2025 or the annual Housing Inventory Count of shelter. But seven of the state’s largest Continuums of Care provided the data they reported to HUD, either publicly or in response to a request from KQED.

In two years, the South Bay’s ratio of beds per 100 people experiencing homelessness had jumped from 29.0 to 40.6.

Throughout 2025, San José opened a dozen more interim projects, adding more than 1,000 additional beds that were not reflected in the count, which typically takes place at the beginning of the year.

Vacancy rates for the new tiny homes have remained low — in part because San José’s shelter expansion looks very different from the large congregate shelters that offer a cot or bunk-bed in a large room.

Congregate shelters can leave residents without privacy and dignity — and open to crime and abuse, said Benjamin Henwood, director of the Homelessness Policy Research Institute at USC.

“People sort of voted with their feet, meaning they opted out of these shelters,” Henwood said. “They preferred living unsheltered without all of those risks that came with a congregate shelter.”

While the designs of San José’s tiny home shelters vary from site to site, nearly all offer a private room with a locked door — and access to case managers who can help coordinate medical needs and search for permanent housing.

The tiny homes have consistently been more than 95% full. The utilization rate across 13 locations tracked on an ongoing basis stands at 96% over the last seven months.

Miguel Torres moved into the Rue Ferrari interim housing community in South San José last year. He had been living in his car for a year, by a train station on Monterey Road.

“Work was slow, and it was hard for me to find jobs and all that,” he said. “I didn’t have no resources in the car, and it’s hard to drive here and there.”

One day, Torres saw outreach workers knocking on nearby tents. They were offering spots at Rue Ferrari, which expanded this year from 124 to 268 beds.

He jumped at the opportunity but had concerns about what life would be like in short-term housing.

“I heard a lot of stuff [about] shelters because, you know, you live with a lot of people in bunk beds,” Torres said. “But here it’s peaceful, you get your own room, they kind of show you how to be independent more.”

“And for me, because I get a little anxiety, it’s perfect for me,” he said.

Four months later, Torres has settled into his one-bedroom, one-bathroom unit. His bed is covered with a San Francisco 49ers blanket, and a TV and speakers sit at the foot.

“Earlier today I was shaving, cutting my hair, and I had the music bumping — not too loud, respect the neighbors — but, ah man, you can’t complain, dude,” Torres said.

A growing price tag

Thousands of new shelter beds, with high rates of usage, have contributed to a decline in the number of people sleeping outdoors in San José — from 4,411 in January 2023 to 3,959 in January 2025.

A countywide financial assistance program also helped — Notre Dame researchers credited it with dramatically reducing the number of people becoming homeless in the first place.

“The investments that the city has been making have really started to bear fruit,” said Anthony Tordillos, a city council member representing downtown. “By bringing that additional capacity online, the city’s been successful in actually being able to move people from the streets and get them into more secure housing.”

But San José is still thousands of beds short of the 5,477 shelter beds the city estimated last year would be needed to achieve “functional zero” homelessness — meaning anyone who lost their housing would be able to access a bed.

Barring any influx of state or federal funding, the city’s shelter system won’t be greatly expanding anytime soon.

And just maintaining a system the size of San José’s could be difficult.

In permanent supportive housing projects, tenants typically pay a small share of rent or are subsidized by a federal housing voucher. In interim housing, there is typically no rent to offset the mounting operating costs, which include staffing and utilities.

“It doesn’t appear that these are sustainable strategies because…you’re paying the operation cost on an ongoing basis,” said Henwood, the USC professor. “Those are sort of never-ending costs.”

Even the shift of Measure E funds from affordable housing to shelter will not be enough to completely pay for San José’s interim housing system in the years to come.

A preliminary budget forecast, presented to the council last week, found the interim housing system would need an infusion of $17 million in the upcoming fiscal year from the general fund — increasing to $58 million in 2029-30.

The city is already facing a budget shortfall of roughly $55 million to $65 million in the coming year, so maintaining the interim housing system could force difficult spending trade-offs with other city services.

“The city obviously took kind of a big bet making these investments to so dramatically expand our shelter capacity, and knowing that those do come with longer-term operational costs,” Tordillos said.

Now, Tordillos said, the city will need to pivot into “optimization mode,” by finding ways to drive down the costs of on-site services — and finding financial help from other levels of government.

‘Not respecting the taxpayers’

Federal funding for the interim housing program has dried up, and support from the state (which chipped in millions for projects including Cerone) has declined.

The state budget approved last year by the Legislature and signed by Gov. Gavin Newsom appropriated no new flexible homeless dollars (known as the Homeless Housing Assistance and Prevention — HHAP — program) for cities and counties in 2025-26 — a drop from the $1 billion approved in the previous budget.

To make up those costs, Mahan has turned to Santa Clara County, arguing in part that the city’s reduction in unsheltered homelessness is saving the county money by reducing the number of visits unhoused people make to the emergency room and jail.

But county leaders have been among the sharpest critics of Mahan’s shelter-focused approach. They already fund more than 2,000 shelter placements of their own and have long prioritized funding permanent housing.

“I don’t know that as a policymaker, I’ve ever proposed a program, a service, that I expected another entity to support,” Supervisor Sylvia Arenas said. “Collaboration does actually make sense, but that means that you meet…and you talk about what you’re building together and have the same objective.”

“I don’t know that we have the same objective,” Arenas said.

A former San José council member, Arenas said she had longstanding concerns about continuing to expand the interim housing system without a stable funding source.

“I think to build tiny homes, and then you forget, oh, we needed to also put in some money to operate all of these tiny homes, is not respecting the taxpayers,” she said. “And also not being true to what you’re actually providing.”

Accountability without resources

Despite harsh rhetoric between members of the council and board of supervisors last year — which nearly resulted in a rare joint meeting to hash out their differences in public — the city-county relationship over interim housing appears to be thawing.

Last year, Mahan endorsed a county-led ballot measure to raise the sales tax, and county leaders committed to sending health workers to bring medical services directly to residents at tiny home sites.

Mahan insists that city general fund spending on temporary housing should be on the table, given the priority residents have placed on reducing street homelessness.

“That’s the nightmare scenario, but we have to plan for that,” he said. “So [if] federal, state and county all pull back and choose not to invest in things that are working, we can sustain the system we have, though that is far from ideal.”

As mayor, Mahan faces the same challenge as many big-city leaders across the state, said Darrell Steinberg, the former mayor of Sacramento and president pro tem of the state Senate.

“I think the number one thing for a big-city mayor in California is that, aside from the HHAP funding, you have all the accountability but not the bulk of the resources,” Steinberg said.

If Mahan, the mayor, can’t secure money for the tiny homes now, he may be betting that Maha,n the governor, will be the program’s chief benefactor in the future, able to direct state resources toward the system he helped build in San José.

Miguel Torres has dreams of something more.

Sitting on a picnic table outside of his unit at Rue Ferrari, Torres said he feels like a weight has been lifted off his shoulders.

“Ever since I got a spot, a roof over my head, I ain’t got to worry about being in the street or anything,” he said. “So I’m focusing on a career, on a job.”

He’s hoping his tiny home will be a launching pad for the future he is already starting to envision.

“Just a regular little house, you know,” he said. “I got kids, so hopefully I could bring them in with me too — that’s pretty much my goal.”