Legislative Analyst’s Office (LAO) Report Updates Upcoming Homelessness Funding

• Homeless Housing, Assistance and Prevention Program (HHAP) Round 5 prioritizes funding activities that are largely different from prior rounds of HHAP.
• Family Homelessness Challenge (FHC) Grants and Technical Assistance Program Round 2 funds will only be awarded to Round 1 awardees who remain compliant with FHC Grants Round 1 requirements and demonstrate progress towards their objectives.
• Encampment Resolution Funding (ERF) Program Rounds 1 – 3 include a total amount of $750 million of which $96 million has been awarded and $654 million to be awarded through 2024.
• Homekey Program Rounds 1 – 3 include a total amount of $3.7 billion of which $2.8 billion has been awarded leaving $900 million more to be awarded.

The 2023-24 Budget: Updates on Recent Housing and Homelessness Augmentations and Overview of Proposed Budget Changes report was released on March 29. As noted, this report provides updates on some of the major spending actions authorized in recent years, including how much funding has been spent, when remaining funds are anticipated to be awarded, and some preliminary findings from spent funding.

The report also notes that, While the state has taken a larger fiscal role in funding and supporting local jurisdictions, funding increases have been almost entirely one-time or temporary in nature. 

Homeless Housing, Assistance and Prevention Program (HHAP) Round 5

The Legislative Analyst’s Office (LAO) report states on page 36 that prioritizing funding activities different from prior rounds of HHAP would help ensure local entities are using state resources in a manner that aligns with legislative priorities and support recent state spending. However, the trade-off is that this result is some limitation in local flexibility compared to prior rounds.

Prioritized eligible uses of funds for HHAP Rounds 1 – 4 included:

• Rapid rehousing
• Operating subsidies
• Street Outreach and Services Coordination
• Systems Support
• Delivery of Permanent Housing and Innovative Housing Solutions
• Prevention and Shelter Diversion
• Interim Sheltering

Prioritized eligible uses of funds for Round 5 includes

• Operating subsidies to support permanent and supportive housing sites, whether new or existing, to include programs such as Homekey
• Operating subsidies to support new or existing residential care facilities, funded by the Behavioral Health Continuum Infrastructure Program and/or the Community Care Expansion Program
• Sustaining interim and permanent housing funded by previous allocations of HHAP and various programs such as Project Roomkey
• Supplementing resources to address housing placements and/or direct client services for eligible participants in the program known as CARE COURT
• Street outreach to assist persons experiencing homelessness, including but not limited to persons experiencing homelessness from encampment sites and those transitioning out of encampment sites funded by the program known as the Encampment Resolution Grant consistent with Health and Safety Code 50251 to access permanent housing and services (note: A program recipient shall not use funding from the program allocated under this section to supplant existing Encampment Resolution Grant funds)
• Establishing new and additional permanent housing units by means of master leasing of sites or capital expenditures, or as site conversion, renovation, and gap funding for other capital projects.

Applicants may apply for eligible uses outlined in HHAP Rounds 1 – 4 but only upon approval of the California Interagency Council on Homelessness (Cal ICH).

Family Homelessness Challenge (FHC) Grants and Technical Assistance Program Round 2

The LAO report notes on page 18 that the 2021-22 budget allocated $40 million towards two rounds of funding and that nearly $17 million was awarded for Round 1. Page 19 states

FHC Round 2 applications will be available by December 31, 2023. Only awardees that remain compliant with FHC Round 1 requirements and demonstrate progress towards their objectives may apply for FHC Round 2.

Ten (10) California communities were awarded $17 million of the total program amount of $40 million for Round 1 leaving $23 million for Round 2. The 10 awardees are:

• City of Fontana
• City of Livermore
• City of Los Angeles
• City of Oakland
• City of Salinas
• City of San Diego
• Mendocino County
• Pasadena Continuum of Care
• Sacramento City & County Continuum of Care
• Santa Clara County

Encampment Resolution Funding (ERF) Program Rounds 1 – 3

Rounds 1 – 3 approved funding totals $750 million of which $96 million has been awarded and $654 million to be awarded through 2024.

Approximately $50 million was awarded in Round 1.

Round 2 funding will be awarded in two disbursements. The LAO report notes that the first disbursement was almost $50 million, which was awarded to Round 1 applicants that met program requirements but were not funded because funds had been exhausted.

A recent report from Cal ICH noted that 52 applications requesting $380 million were received before the upcoming June 30 deadline for Round 2 applications or until all funds are exhausted, whichever comes first.

The 2022-23 budget authorized $400 million for additional spending in 2023-24 for Round 3, which will begin to be made available later this year. 

Homekey Program Rounds 1 – 3

Homekey Program Rounds 1 – 3 include a total amount of $3.7 billion, of which, nearly $2.8 billion has been awarded leaving $900 million more to be awarded in the future. As noted on page 11 of the report, the total number of units created is 12,774 by 210 projects across the state, and of these units, 6,467 are permanent units, 2,720 are interim units, and 3,502 are interim-to-permanent units.

Page 10 notes the details that are in the following table:

There is no additional funding authorized or proposed for Homekey beyond Round 3 at this time.

A Notice of Funding Availability (NOFA), Round 3 recently announced the availability of approximately $736 million in Homekey funding for local governments to build or purchase housing for individuals experiencing homelessness.

The announcement stated that 

Due to the potential for program oversubscription, Eligible Applicants are encouraged to submit their completed application as soon as possible. The Department will be accepting the applications on a continuous, over-the-counter (OTC) basis from the release of the Homekey application on April 24, 2023 through July 28, 2023, or until the available funds are exhausted, whichever occurs first. Applicants must submit a complete application available on the Homekey website. 

What Next

Proposed 2023 legislation and proposed budgeted funding may influence and change the homelessness funding sources described above. The legislative process includes meetings of the legislative policy and appropriations/fiscal committees in which proposed legislation concerning homelessness is agendized and addressed.

Next legislative steps also include proposed budgeted funding. Every year, the Governor and the Legislature adopt a state budget that provides a framework and funding for critical public services and systems that include housing and homelessness. The Governor first proposed a budget before January 10^th which is a state requirement.

Proposed budgeted funding will also occur by mid-May, also known as the May Revision.

The Governor will release an updated budget on or before May 14^th that adjusts proposed expenditures or withdraws policy initiatives included in the Governor’s proposed budget in January.

The Legislature must pass a balanced budget bill by midnight on June 15^th for the upcoming fiscal year that begins July 1st. The Governor may sign the budget bill and budget-related bills by July 1^st.