With a budget surplus bonanza, Gov. Newsom calls for spending $12 billion more to end homelessness in California. One idea: expanding motel conversions, an emergency plan during the pandemic.

From the lobby of a former extended-stay motel in San Diego, Gov. Gavin Newsom announced what he called a historic proposal to end a California crisis by converting thousands more hotel rooms into housing for people who are homeless.

In all, he proposed spending $12 billion over two years, about 10 times what he proposed spending on homelessness in January, thanks to a budget windfall pegged at more than $100 billion.

“What we’re doing here today is multiples of what any state in American history has committed to address this crisis of homelessness,” Newsom said Tuesday in calling for a massive expansion of Project Homekey, an emergency program launched during the COVID-19 pandemic that is regarded as one of his administration’s biggest victories tackling homelessness. 

The program streamlines local zoning and environmental laws that make building in California so difficult, at a fraction of the cost, to convert mostly rundown hotels and motels into shelters and, eventually, affordable housing. The state spent $846 million on 94 Project Homekey conversions last year, including the San Diego motel that now houses 177 formerly unsheltered people. 

Newsom called on one of them to speak: Lindsey Grace, a mother whose toddler was taken into foster care while she was living on the street last year.

“Because of this opportunity, and because the Housing Commission let us live here, I got my daughter back,” she said. “I’m 18 months sober; she’ll be 19 months old on the 22nd of this month.”

It was day two of Newsom’s statewide tour to promote his $100 billion “California Comeback Plan,” leading up to submitting his revised proposed budget to the Legislature at the end of the week. He’s able to propose such expensive initiatives thanks to a historic $76 billion state budget surplus, plus $27 billion in federal aid. He pointed out that his homelessness plan is a financial commitment equal to the tax rebate plan he outlined Monday.


Newsom is also ramping up to fight an almost certain recall election late this year. A new UC Berkeley Institute of Governmental Studies poll showed growing support for the governor: 49% of voters surveyed opposed the recall while 36% supported it. But of the various issues asked about, Newsom’s weakest spot was his handling of homelessness, with 57% of voters rating his job performance as poor or very poor and only 13% labeling it good or excellent.         

“We can solve homelessness once and for all,” Newsom said in unveiling his new plan.

The plan includes a whopping $7 billion for the conversion of old buildings into shelters and affordable housing, plus $1.75 billion for shovel-ready projects, $1.6 billion toward homeless prevention and rental support, $447 million to address student homelessness at state colleges and universities and $150 million to rehouse people who benefitted from the state’s temporary COVID-19 shelters.

The governor’s office said this package would provide housing for 65,000 people, offer housing stability for more than 300,000 people and create 28,000 new beds and housing placements for those with behavioral health issues and seniors.

Even if those estimates prove true, they would not cover the state’s entire homeless population, which experts say will only grow in the coming months as low-income families reel from the effects of the pandemic and the statewide eviction moratorium ends June 30.

Nearly 250,000 people accessed homeless services in California last year, according to the state. By another count, last conducted in January 2020, more than 161,000 people experience homelessness on any given night in California. That one-night count was before COVID-19 ravaged the economy and just before Newsom made homelessness the focus of his State of the State speech.

State and local officials as well as advocates agree: The spending Newsom is now proposing is unprecedented. And it aims to address what residents up and down California have repeatedly named as the biggest issue facing the state.

But some worry that the governor’s plan fails to address the need for long-term solutions, or to provide flexible, long-term funding for cities and counties.

“This is bold. It’s historic,” San Jose Mayor Sam Liccardo, chairperson of a coalition of mayors from California’s 13 largest cities, told CalMatters. But, he added: “It’s not a secret we asked for more.”

Both the state Senate and Assembly budget blueprints call for $20 billion to address homelessness over the next five years. While Newsom is proposing more money per year, it’s not the long-term investment Liccardo and other mayors were hoping to see.

“We are concerned about future years and ongoing operations as we get past this moment where federal money is falling from the sky,” Liccardo said.

Assemblymember Phil Ting, a San Francisco Democrat who leads the Assembly Budget Committee, said the exact allocations of the $20 billion proposed by his committee hadn’t yet been hammered out. But he worries there isn’t enough in the governor’s budget proposal for flexible local spending.

The biggest programs to provide flexible local dollars: the Homeless Housing, Assistance and Prevention Grant Program and a similar local funding source introduced by Gov. Jerry Brown. It’s unclear whether the program has any allocations in the governor’s budget.

“One of the biggest areas of concern is the lack of flexible funding to cities and counties and continuums of care,” Ting said. “We’ll want to make sure there continues to be some level of flexible funding for those government agencies that are on the front lines of this crisis.”

Programs like this one, however, have raised significant concerns at the state level. A February report by the California state auditor found little accountability for the flexible dollars given to local jurisdictions over the past few years. And in his announcement, Newsom stressed the need for greater accountability in homeless spending.  

“We definitely agree with him that there needs to be greater accountability,” Ting said. “We’re looking at trying to make a huge dent in homelessness, and the governor is as well. We just need to get our heads together and figure out how we can do that together.”

Margot Kushel, director of the UC San Francisco Center for Vulnerable Populations and the UCSF Benioff Homelessness and Housing Initiative, said the governor’s proposal is “a really good start, but it can’t be the end.”

Kushel said that Project Homekey was remarkable because of how it got around red tape. Normally, projects can take years to even get approved. Homekey was up and running months after it was announced. 

A motel in Marin County was scheduled to be converted into housing for the homeless under Project Homekey. Photo by Anne Wernikoff, CalMatters

But solving homelessness is not possible without addressing housing affordability, which is pushing thousands of Californians onto the street each year. According to estimates by the California Housing Partnership, California faces a shortfall of 1.3 million affordable rental homes.

“That’s fundamentally at the heart of the problem,” Kushel said. “There’s no way around that.”