☆ Expert: Five Things San Jose Council should demand of staff to get housing and homelessness programs back under fiscal and strategic control
San Jose city government is once again taking big-time heat for its homeless spending--this time in the form of a devastating CA state audit that finds the city's programs are ineffective and unaccountable. Scott Beyer of the Market Urbanism Report provides a sorely-needed pathway for a return to fiscal and management sanity. An Opp Now exclusive.
In early April, the state auditor released a scathing audit on San Jose’s effort to solve its mass homeless crisis. The main takeaway is that the city can’t say for sure how much good the centi-millions it spends on the problem have done. In fact, it fails to set goals or establish performance metrics at all. City council’s response should be to ask hard questions and make demands.
Looking at both San Jose and San Diego, the audit found each city had ramped up spending on homelessness and installed new programs over the last 5 years, with poor transparency.
“[N]either city ... has an established mechanism, such as a spending plan, to track and report its spending,” the auditor states. But while San Diego has at least increased transparency by rolling out public dashboards, San Jose doesn’t make information available.
Looking particularly into Measure E, which imposed a new tax to fund millions in homeless prevention and affordable housing construction, the audit found that San Jose seldom sets coherent, achievable goals; doesn’t monitor spending; and hasn’t shown that it is fixing unsafe conditions in encampments.
San Jose didn’t establish its own homelessness plan until January 2024, instead contributing to a county-wide plan (a decision the audit faults for the current situation). Tracking is disorganized, with information spread across multiple disparate departments and documents. The city hasn’t included “measurable goals” for its own program spending, nor does it track how much money is spent on matters peripheral to homelessness, such as street cleaning.
Where goals exist, the city is behind - a point we’ve repeatedly noted for ONSV about its overall housing goals. Just 589 interim supportive units exist out of 1,300 planned. The city doesn't know how many beds are currently being occupied. While both San Jose and San Diego want “permanent supportive housing” (a controversial strategy), neither city has a clear, long term plan to fulfill this goal, writes the audit.
The city sometimes sets standards for 3rd-party providers, but “did not identify or report on how these targets helped or would help it achieve the county plan’s larger goals.” These providers get large sums with little accountability. In one egregious case, a provider claimed to exceed targets for helping low-income households with the $8 million it received in Measure E funds. But the city couldn’t say how the provider accomplished this. The auditor learned that this provider wasn’t counting how many total households it helped, but rather “its total financial assistance transactions.” But the auditor discovered when looking at records that the provider made far fewer payments than originally claimed. Because the city wasn’t tracking things anyway, though, it wound up extending the provider’s contract.
Rather than accepting responsibility for the audit results and promising change, San Jose city manager Jennifer Maguire wrote a letter criticizing the auditor. We will soon write a follow-up for ONSV that documents some of Maguire’s wrong-headed claims.
What would have been a better response from her and San Jose council? Taking meaningful steps to counter the problems described in the audit.
First, council needs to set a realistic spending plan that tracks when funding opportunities expire and reflects what the city can afford. Within the plan, allocation must be informed by important metrics: how many people live on the street now, how many beds are needed to provide shelter, where encampments exist, and the cost of cleaning them up and maintaining order. San Diego boosted its planned shelter capacity by tracking the need and calculating the money that would be required for it (the city is now moving aggressively on those findings, as ONSV recently reported).
Second, the city should consolidate homelessness services under one division to the fullest extent possible, and require all data on homelessness-related activity and spending to be collected and held by that division. It would track goals publicly, and report to council frequently on progress being made for the aforementioned spending and success metrics. Right now, provision is divided between the city manager, the deputy city manager for homelessness, and the housing department.
Third, the homeless service providers must be given clear expectations. Contracting with businesses and non-profits can be key to bringing innovation and competition into the field. But for every dollar allocated, they should aim to house x number of people and/or connect y number of them with needed services. Then the providers should report back to the city on whether that money has been spent effectively.
Fourth, council should ensure that the programs the city funds keep people off the streets and improve public safety. If the homeless go into shelters but end up shortly back on the streets, or enter permanent supportive housing but infest the area with drugs and crime, then nothing was accomplished. Funding should go to programs (transitional housing being one) that get people into stable lives, free of government dependency.
Fifth, council should identify ways to bring down the cost of shelter and affordable housing. That is what causes much of the homelessness to begin with. San Jose is getting better on this: while there are stories of homeless supportive housing throughout California costing in the high 6-figures per unit, San Jose has lowered this to under $200k through the use of tiny modular homes. It should consider expanding this program.
One thing audits like this will never address are the philosophical underpinnings as to why San Jose won’t get its act together on homelessness. Public choice economists, for example, have long shown how government bureaucracies don’t perform optimally, because they are not unified in driving towards profit. Instead, that profit motive is spread across diverse interest groups that compete for funding but don’t have an incentive to make entire agencies work well. Auditing San Jose’s homeless service apparatus works from the presumption that its agencies want to be lean and efficient - but that may not even be their desire.
As long as there’s government spending to solve homelessness, though, it should be done well, and that’s where audits are welcome. The findings of this one make clear that better goals and transparency are needed in San Jose. California should pursue more such audits to increase scrutiny on these programs and the persistence of its homeless crisis.
This article featured additional reporting from Market Urbanist content staffer Ethan Finlan.
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