Homeless Funding Plan Raises Concerns as San Francisco Looks to Narrow Budget Deficit

San Francisco’s Department of Homelessness and Supportive Housing (HSH) could lose about $10 million dollars from the city’s general fund, due to budget cuts meant to address a gaping deficit.

That’s according to city officials who presented the department’s budget outlook at a Board of Supervisors hearing on Wednesday. The proposed cuts come as San Francisco faces a nearly $643 million budget shortfall over the next two years, and the mayor’s office is looking to trim hundreds of millions of dollars in spending across city departments.

The plan alarmed some advocates, who say the city could desperately use more funding for its homelessness response.

“It looks like it is a decrease in the [homelessness] budget, but it is not a decrease, and services will not be cut,” Sophia Kittler, the mayor’s budget director, said to supervisors about the funding changes at Wednesday’s hearing. She stressed that the city is not proposing any cuts to actual homeless services, and rather moving funding around to meet the goal of reducing the general fund deficit.

“It is a one-time revenue that is going away,” Kittler said.

To avoid cuts to services, Mayor Daniel Lurie’s office wants to replace that revenue with an increase in funding from another source: a business tax known as Proposition C, or Our City, Our Home, that was created to support homeless services.

But advocates say that if the city has a surplus of Proposition C funds, the mayor’s office should direct more money to shelters and permanent supportive housing, rather than using it to back-fill other cuts.

“It does seem like, then, if it’s not a service reduction, we could be doing more, because we have money,” Supervisor Shamann Walton said at the hearing. “Since we’re not losing services, but we have surplus, we could actually be doing more to address homelessness.”

He was not the only supervisor to question why the city is not directing the recent surplus in Proposition C funds toward homeless services.

“I do believe the best way to solve homelessness is actually to prevent it from happening in the first place,” Supervisor Connie Chan said. “That means to increase subsidies, particularly rental subsidies. And of course, rapid rehousing.”

The number of people experiencing homelessness in San Francisco has steadily increased over the last two decades, as the cost of housing in the city has skyrocketed.

More than 8,300 people were homeless in the city according to the 2024 Point-in-Time count, a federal survey, and more than 4,300 of those individuals were living in a homeless shelter.

While city officials said last year that the number of tents on sidewalks had decreased, there are hundreds of people waiting on the list for a San Francisco shelter bed on any given day.

HSH department officials said they have also cut 8 vacant positions as part of the proposed spending reductions.

The budget proposal arrives a year after the city reallocated some Proposition C funding set aside for permanent supportive housing to temporary shelter, a controversial decision that marked a shift in the city’s approach to homelessness.

Revenue generated from Proposition C came in higher than budgeted the last two fiscal years, according to Shireen McSpadden, HSH director.

The mayor’s budget proposal, which is not yet finalized, also includes one-time funding for the mayor’s homelessness plan, called the Breaking the Cycle initiative, through funds appropriated in the last budget cycle. That program funding ends in fiscal year 2027-28.

McSpadden presented data showing the city’s overall shelter inventory has increased consistently in recent years, totalling nearly 5,000 emergency and transitional housing beds. During Lurie’s time as mayor, the city has opened new shelter facilities like Hope House and Jerrold Commons.

But homelessness advocates who also spoke at the meeting pointed to how the city has simultaneously lost hundreds of non-congregate shelter beds, which offer people more space and, often, stability than a crowded shelter.

They pointed to the closures of shelters like the Adante and Monarch hotels.

Advocates and housing researchers at the hearing urged the city to invest more in the city’s permanent supportive housing inventory, pointing to evidence that many people are more likely to successfully exit homelessness once they have stable housing with support services.

“If you put all your eggs into the basket of shelter, you see people off the street at first. Then shelters become less efficient because shelter [beds] don’t turn over,” said Jennifer Friedenbach, who leads the Coalition on Homelessness. “When you do a deep investment in housing… you have a much more efficient system because the shelter beds turn over.”

But experts like Ryan Finnigan, deputy director of research at UC Berkeley’s Terner Center for Housing Innovation, said that permanent supportive housing can fall short when it’s under-resourced.

In many cases, funding for subsidized units in San Francisco has not kept up with costs for ongoing maintenance, adequate staffing and other needs to keep those housing options efficient, he said.

“There are limited opportunities for people to move from shelter programs into permanent housing solutions,” Finnigan said. “Undermining the effectiveness of permanent supportive housing leads to lower effectiveness to other programs in the overall homeless system, including shelters.”