California lawmakers blocked legislation requiring a comprehensive audit of the state’s multibillion-dollar Homekey program. Fortunately, a nonprofit news site undertook the very investigation state leaders refused to demand.
The newly-released findings sharply undercut Gov. Gavin Newsom’s repeated claims that his pandemic-era Homekey program has been a “phenomenal success.”
Built on roughly 250 projects and more than 100 public-records requests, the two-year investigation exposed a familiar pattern in Newsom’s governance style: massive spending, glowing political rhetoric, weak oversight, and deeply underwhelming results. In a state already plagued by oversight failures involving Medicaid, hospice care, in-home supportive services, and homelessness spending itself, the revelations were troubling, though hardly surprising.
California spent $3.8 billion to rapidly convert hotels, motels, offices, and other properties into life-long subsidized shelter, “permanent housing,” for the homeless. The result: roughly 13,000 people housed. But the broader story is that thousands of promised units remain unfinished or continue functioning only as temporary shelter. Projects have run years behind schedule, costs have ballooned far beyond original estimates, and multiple developments were abandoned altogether after millions in taxpayer dollars had already been committed.
Yet Newsom continues to describe Homekey as a “phenomenal success.”
That disconnect captures the heart of California’s homelessness crisis. The failure is not only one of policy, but of execution — compounded by a political culture increasingly unwilling to measure outcomes honestly, to welcome scrutiny, or to honestly confront evidence that favored approaches are failing.
Homekey was sold as proof that the Newsom administration could move urgently and creatively to address homelessness. Local governments were handed extraordinary funding and broad flexibility to bypass traditional bureaucratic hurdles in the name of speed and compassion. But accountability was never supposed to be optional.
Instead, the CalMatters investigation revealed a program plagued by systemic dysfunction from the start. By the end of 2024, roughly 3,000 promised units — one in five — remained unfinished. Another 2,000 units were still operating only as temporary shelter rather than permanent housing. Ten projects were canceled altogether, wiping out more than 500 anticipated units after millions in taxpayer dollars had already been committed.
This “phenomenal success” was, in reality, yet another example of the governor’s failed execution on homelessness. Cities and counties with little experience as real-estate developers were suddenly tasked with managing complex acquisitions and renovations under compressed timelines. Predictably, projects stalled, costs ballooned, and dysfunction followed.
In Gardena, a former Travelodge conversion dragged on for more than five years as repair estimates exploded from $50,000 to nearly $3 million. The property sat vacant, boarded up, and covered in graffiti. Vallejo’s Broadway Project finished years late and massively over budget after contractor failures and internal disputes. Other projects collapsed entirely after structural problems, financial instability, or poor planning surfaced only after taxpayer money had already been spent.
Even more troubling, weak oversight opened the door to scandal and abuse. Shangri-La Industries received nearly $115 million in public funds to create roughly 500 units. Federal prosecutors later alleged fake bank records and financial misconduct while company executives reportedly spent lavishly on Beverly Hills rent, luxury jewelry, and exotic cars. Meanwhile, projects faltered, properties fell into foreclosure, and vulnerable tenants faced displacement and eviction.
Since 2019, California has authorized more than $24 billion across homelessness initiatives. Yet the state’s homeless population remains near historic highs at roughly 180,000 people.
The state’s own audit previously concluded California lacked the data necessary to determine whether homelessness programs were achieving meaningful outcomes at all. Yet instead of responding with greater transparency, lawmakers rejected additional audits of Homekey itself.
That decision may be among the clearest signs of the deeper problem. Confident leaders do not fear audits.
No serious person disputes the moral urgency of helping people off the streets. The individuals who found stability through Homekey matter deeply. But isolated success stories cannot be used to shield a multibillion-dollar program from scrutiny.
When government spends billions, success cannot be defined by the fact that some people benefited. The standard must be whether outcomes justified the investment, promises were fulfilled, and measurable results were achieved.
By those standards, Homekey falls far short.
California’s homelessness crisis is not merely a policy failure; it is a governance failure. It is the product of leaders who announce bold initiatives, spend unprecedented sums, resist scrutiny, and then declare victory regardless of the results.
Until its leaders demand accountability with the same enthusiasm they demand spending, programs like Homekey will remain billion-dollar monuments to political ambition, failed governance, and broken promises — while tens of thousands of people continue to suffer on the streets.
Michele Steeb is the founder of Free Up Foundation and author of “Answers Behind the RED DOOR: Battling the Homeless Epidemic,” based on her 13 years as CEO of Northern California’s largest program for homeless women and children. She is a Visiting Fellow with the Discovery Institute’s Fix Homelessness Initiative. Follow them on Twitter: @SteebMichele and @ DiscoveryCWP.