After spending nearly $37 billion on homelessness since 2019, California is responding to a statewide audit it cannot reconcile, a federal judge threatening receivership over Los Angeles, and a homeless population that has grown 53 percent in a decade — by creating another agency.
On July 1, 2026, the state’s Business, Consumer Services, and Housing Agency will formally split into two cabinet-level entities: the new California Housing and Homelessness Agency (CHHA) and a slimmed-down Business and Consumer Services Agency. The reorganization, which the Legislature authorized in July 2025, is funded by a $4.0 million General Fund augmentation in 2025‑26 that grows to $6.2 million ongoing by 2026‑27, plus $23 million in transition costs — on top of the billions already flowing through programs that state auditors say they cannot evaluate.
The restructuring arrives in the same budget cycle that the California State Auditor publicly confirmed the state still cannot tell taxpayers whether its marquee homelessness programs work. It also coincides with a Los Angeles collapse so severe that U.S. District Judge David O. Carter has floated a receivership, and the county has voted to dismantle its decades-old homeless authority.
An Audit the State Cannot Answer
The April 2024 California State Auditor report Homelessness in California: The State Must Do More to Assess the Cost‑Effectiveness of Its Homelessness Programs (Report 2023‑102.1) found that nine state agencies had spent roughly $24 billion across at least 30 programs in the five fiscal years ending in 2022‑23 — yet the California Interagency Council on Homelessness (Cal ICH) had stopped tracking program spending and outcomes in June 2021.
Of five major programs the auditor attempted to evaluate, only two — the Department of Housing and Community Development’s Homekey program and the Department of Social Services’ CalWORKs Housing Support Program — had enough outcome data to be judged cost‑effective. Auditors said three others could not be assessed at all:
- The State Rental Assistance Program, which served more than 370,000 households but lacked eviction outcome tracking.
- The Homeless Housing, Assistance and Prevention program (HHAP), in which auditors found roughly one-third of program exits recorded as “unknown destinations.”
- The Encampment Resolution Funding program (ERF), where four of ten grantees reviewed had incomplete data and the state relied on unverified self-certifications.
Those three programs received a combined $9.4 billion, according to the auditor’s findings summarized by CBS News and CalMatters. The auditor recommended the Legislature mandate annual cost-and-outcome reporting by March 2025 and require Cal ICH to publish a program scorecard. As of this month, that scorecard has not been released.
During the same window, the homeless population the state is trying to serve grew substantially. The auditor reported that more than 180,000 Californians experienced homelessness in 2023 — a 53 percent increase from 2013. Governor Gavin Newsom’s own budget documents acknowledge that 337,000 people cycled through Continuum of Care programs in 2023 alone, with another 310,000 through partial 2024 data.
Los Angeles: “A Slow Train Wreck”
If Sacramento illustrates an accountability gap, Los Angeles illustrates what happens when the gap is allowed to compound for nearly two decades. A $2.8 million forensic-style audit ordered by U.S. District Judge David O. Carter and released in March 2025 concluded that the Los Angeles Homeless Services Authority (LAHSA), the City of Los Angeles, and Los Angeles County failed to provide complete or reliable financial data for the billions routed through the regional system.
The auditors, whose findings were summarized by L.A. Public Press, documented wildly inconsistent provider costs for similar services. Personnel expenses at shelters ranged from $67 per bed-day at some sites to as little as $7 at others, with no documentation explaining why. Invoice reviews largely verified how much money flowed out, not whether the contracted services were delivered.
In a court hearing after the audit’s release, Judge Carter — who has presided over federal homelessness litigation in the Central District of California since 2020 — told city and county officials, “This is a slow train wreck,” and warned the elected leadership, “I am your worst nightmare.” He invited the city to consent to a forensic fraud audit and threatened to appoint a third-party receiver to take operational control of homelessness spending if no voluntary agreement was reached.
Carter recounted efforts dating to 2007 to audit LAHSA, noting that an 18-year record of reviews had repeatedly flagged the same problems: poor fiscal monitoring, vague goals, and unreliable data. The county’s response, documented by ABC7 Los Angeles, was to dissolve its LAHSA funding pipeline entirely and stand up a new Los Angeles County Department of Homeless Services, effective — not coincidentally — July 1, 2026, the same day the state’s new housing agency comes online.
Follow the Money: Rounds Continue Despite Unknowns
Even as the accountability picture has darkened, the funding has continued. On April 8, 2026, the Newsom administration announced $145.4 million in HHAP Round 6 awards to eight regions, bringing cumulative HHAP appropriations across all rounds to nearly $5 billion. The largest single award went to Santa Clara County and the City of San José at roughly $49.9 million, followed by Orange County and its partner cities at $35.1 million and Sacramento County and the City of Sacramento at $31.7 million. Riverside, Solano, Yolo, Lake, and Yuba counties also received allocations.
The administration’s release emphasized that Round 7 dollars will be conditioned on “expanded accountability metrics,” including local housing-supply policies, and that grantees face potential clawbacks for failing to demonstrate progress. That framing, however, runs directly into the Legislative Analyst’s Office’s own 2025‑26 spending plan analysis, which noted that the $500 million HHAP Round 7 placeholder is “contingent on the enactment of future legislation aimed at enhancing accountability requirements for grantees” — meaning the accountability rules the state is now promising have not yet been written into statute. The state has been pledging such rules since at least the 2023‑24 cycle, when Newsom paused an earlier HHAP round to demand local plans.
The Encampment Resolution Funding program, one of the three that the state auditor could not evaluate, received an additional $100 million in the 2025‑26 budget — bringing its cumulative General Fund support to nearly $1 billion since 2021‑22. ERF awards are paid largely on self-certified grantee reports.
More Agencies, Same Metrics
The state’s decision to respond to documented oversight failures by creating a new cabinet-level agency is not unique in California’s homelessness history. Cal ICH itself was reconstituted in 2017 after its predecessor, the Homeless Coordinating and Financing Council, was criticized for weak data collection. The Homekey program, launched in 2020, was layered atop the existing No Place Like Home and Multifamily Housing programs. Each expansion has added administrative infrastructure; none has yet produced the unified outcome dataset the auditor has been requesting for three years.
The new California Housing and Homelessness Agency will oversee five existing entities, including the Department of Housing and Community Development and the California Housing Finance Agency, according to the LAO. Supporters argue that elevating housing to its own cabinet secretary will force coordination across agencies that currently operate in silos. Critics — including Senator Roger Niello, who has cited the state auditor’s findings in calling for program consolidation rather than expansion — note that the same Cal ICH staff, and the same nine-agency funding structure the auditor flagged, will continue to administer programs under a new org chart.
There are signs of progress in the field. The administration reported a 9 percent decline in unsheltered homelessness in the 2025 point-in-time count, the first statewide drop in 15 years, and said HHAP has helped move more than 100,000 Californians into permanent or stable housing since 2019. Those figures, however, rely on the same continuum-of-care data whose reliability the auditor questioned, and they do not reconcile with the growth in overall homelessness documented in the same period.
What Remains Unknown
The core questions the state auditor posed in April 2024 remain unanswered in April 2026. Cal ICH has not published the statutorily recommended program scorecard. The Legislature has not enacted the accountability statute on which HHAP Round 7 is conditioned. And the federal court in Los Angeles has not yet ruled on whether to appoint a receiver for the nation’s second-largest homelessness system.
What is known is that on July 1, 2026, California’s homelessness bureaucracy will be larger, not smaller; that Los Angeles will have a new county department replacing a discredited regional authority; and that cumulative state spending will approach $40 billion with no publicly verifiable account of outcomes. The next Cal ICH action plan, and the Legislature’s response to the auditor’s March 2025 deadline — now more than a year overdue — will determine whether the latest reorganization is a course correction or another layer on a system that, as Judge Carter observed from the bench, has been a slow train wreck for 18 years.