California’s Homelessness Crisis: $26 Billion Walking Away

🔍 What we do know

• The United States Attorney’s Office for the Central District of California (USAO-CDCA) launched the Homelessness Fraud & Corruption Task Force in April 2025 to examine misuse of funds allocated for homelessness across seven Southern California counties. https://laist.com/news/housing-homelessness/federal-task-force-to-investigate-potential-fraud-and-misuse-of-homelessness-funding

  
  

• Two criminal cases have been publicly charged so far:

  https://laist.com/news/housing-homelessness/bill-essayli-federal-charges-homelessness-homekey

  • Cody Holmes: Arrested in connection with alleged misuse of ~$25.9 million in state “Homekey” funds. https://www.justice.gov/usao-cdca/pr/beverly-hills-man-arrested-brentwood-man-charged-separate-criminal-cases-linked-fraud

  • Steven Taylor: Charged with bank fraud, identity theft and money-laundering related to misuse of public homeless-housing related funds. Los Angeles Times+1

• The task force says these two cases are “just the tip of the iceberg”. We say the two cases add up to a joke compared to the disappeared $26 billions (0.014 %).

  https://laist.com/news/housing-homelessness/bill-essayli-federal-charges-homelessness-homekey

  
  

• Audits of the Los Angeles Homeless Services Authority (LAHSA) found major deficiencies: poor documentation, unclear contract oversight, inability to track whether services were provided, and millions in unaccounted advances. https://apnews.com/article/los-angeles-homeless-audit-spending-transparency-45a5aa98fc0d4ff88a08b8ad43b530a6

  
  

• In response, LA County moved to pull ~$300 million+ in funding from LAHSA, restructure oversight and shift employees into a new county-agency model. https://calmatters.org/housing/homelessness/2025/05/la-homeless-agency/

  https://apnews.com/article/los-angeles-homeless-audit-spending-transparency-45a5aa98fc0d4ff88a08b8ad43b530a6

🧮 Summary of where things stand

• Investigations: The task force has been formed and is actively working; two cases have been publicly charged.

• Oversight reforms: Some local agencies (e.g., LAHSA) are being restructured; state audits have flagged major tracking/oversight deficiencies.

• Completed recoveries/accounting: Very limited; publicly known cases cover only tens of millions of dollars out of billions spent.

$26 Billion, 15,000 Units, 187,000 Homeless

California has poured $26 billion into homelessness programs over the past few years, yet the results are staggering in their inefficiency and opacity.

Take Project Homekey: the state has created roughly 15,000 housing units by converting hotels and motels, but careful analysis shows that only 15,000–20,000 individuals are actually housed. Meanwhile, over 187,000 people remain homeless, leaving tens of thousands still living on the streets.

The Math is Simple — But the Truth is Confusingly Obscured

If you do the math — yes, the math is simple — one Homekey unit per person. That’s it. No magical multiplication of residents. Yet official reports claim “residents served” numbers that suggest far more people (65,000) have been helped. How is this even possible? 4 people living in a single person unit? Nonsense.

That’s accounting that stretches the truth and confusing definitions: when officials say “residents served,” it can mean people who stayed only temporarily, whole families counted as just one unit, or even people who got services like meals or counseling without actually having a bed to sleep in.

$238K Per Unit? How the Cost Ballooned to Such Dizzying Heights for a Single-Person Studio

Even the cost math is shocking. Per-unit costs average $238,000, which includes hotel acquisition (often well above market rates), renovations, furniture, and projected operating costs. For a bare-bones hotel room with a shower and a wall-mounted wardrobe, this is absurd. The real market cost for such a renovation would realistically be $50,000–$100,000 for acquisition plus $15,000–$30,000 for renovation — far below the inflated public numbers.

What makes it worse: building brand-new, modest luxury bungalows in some rural areas would cost a fraction of these amounts, while still providing safe, private, and livable housing. Instead, the state is buying run-down inner-city hotels at inflated prices, lining the pockets of developers, and drastically reducing the number of people who could actually be housed with the same funds.

$238K Per Unit? How the Cost Ballooned to Absurd Heights for a Single-Person Studio

Even the cost math is shocking. Per-unit costs average $238,000, which includes hotel acquisition (often well above market rates), renovations, furniture, and projected operating costs. For a bare-bones hotel room with a shower and a wall-mounted wardrobe, this is absurd. The real market cost for such a renovation would realistically be $50,000–$100,000 for acquisition plus $15,000–$30,000 for renovation — far below the inflated public numbers.

🏘️ Project Homekey Housing Units Breakdown

County	Project Name	Units	Type	Funding Round
Los Angeles	Various (e.g., Boyle Heights, Inglewood, Lancaster)	720	Interim/Permanent	Round 2
Sacramento	Arden Star Hotel	124	Hotel Conversion	Round 3
Ventura	Valentine Road	136	Hotel Conversion	Round 3
Fresno	Valley Teen Ranch	96	New Construction	Round 3
Visalia	Majestic Gardens	42	Hotel Conversion	Round 3
Modesto	Travelers Inn	55	Hotel Conversion	Round 3
San Diego	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel Conversion	Round 3
Los Angeles	The Weingart Sycamore	109	Hotel Conversion	Round 3
Los Angeles	Abbott Street Apartments	13	Rehab Existing Units	Round 3
San Diego	Pacific Village	63	Hotel Conversion	Round 3
Oakland	Imperial Inn	49	Hotel

What makes it worse: building brand-new, modest luxury bungalows in some rural areas would cost a fraction of these amounts, while still providing safe, private, and livable housing. Instead, the state is buying run-down inner-city hotels at inflated prices, lining the pockets of developers, and drastically reducing the number of people who could actually be housed with the same funds.

💸 $238K Hotel Conversion vs $50K Rural Bungalow

Scenario: $26 billion allocated to housing for the homeless.

Key Takeaways:

• Hotel conversions: Only 15,000 people get housed — just a drop in the bucket compared to California’s 187,000 homeless population.

• Rural bungalows: Same $26B could provide over half a million units, drastically reducing homelessness and providing private, livable housing for everyone in need.

• Efficiency & impact: Rural or modular construction delivers 10+ times the impact per taxpayer dollar compared to overpriced inner-city hotel conversions.

Shady Deals: Where the Money Disappears

Where does the rest of the money go? That’s where the problem of shady deals becomes clear.

• Developers with political or financial connections benefit from inflated acquisitions.

• Contractors, consultants, and service providers capture high margins.

• Some operating costs are projected into the future and may never actually materialize.

Meanwhile, residents see little tangible improvement in their housing situation.

Consider this: the same $26 billion could have built tens of thousands of small bungalows or modular homes in lower-cost areas, delivering real housing instead of feeding bureaucratic overhead and developer profits.

🧾 Partial accountings that exist

1. State Auditor’s 2024 report (Report 2023-102.1)

   • Reviewed $9.4 billion of state homelessness spending across five programs.

   • Found: two programs could show cost-effectiveness; three could not because the state “did not collect data on outcomes or track whether funding achieved intended goals.”

   • Bottom line: $9.4 billion reviewed, not accounted for in results.

     
     

2. California Interagency Council on Homelessness (Cal ICH) annual reporting

   • Lists total homelessness allocations since 2018 — roughly $24 billion — spread across programs like Homekey, Project Roomkey, HHAP (Homeless Housing Assistance & Prevention), and No Place Like Home.

   • Provides top-level summaries (e.g., how many housing units funded), but no unified spending ledger linking dollars to verified outcomes.

     
     

3. City/County audits

   • Los Angeles audit (Controller Kenneth Mejia, 2024): City couldn’t reconcile all homelessness-program expenditures because accounting systems didn’t link contracts to results.

   • San José and San Diego audits: both cities couldn’t fully identify their total revenues and expenditures for homelessness efforts due to fragmented tracking.

     
     

4. HUD Inspector General audit (2024)

   • Reviewed $319 million in federal funds administered through California’s HCD.

   • Found insufficient anti-fraud controls, meaning funds were at risk but not yet quantified as lost.

     
     

🚫 What’s missing

• No consolidated state-level financial statement of all $24-26 billion.

• No public reconciliation showing how much reached actual housing, services, or beneficiaries.

• No verified outcome analysis connecting dollars to reduced homelessness.

Clawbacks Are Almost Impossible: Billions Slip Through the Cracks

Legally, clawbacks are possible only if fraud or mismanagement is proven, but the complex web of funding, layered contracts, shell companies, and corporate maneuvers — including purposeful bankruptcies — makes any meaningful recovery unlikely. Contractors and developers can declare bankruptcy, shift assets, or hide behind subsidiaries, effectively shielding themselves from accountability.

In the meantime, billions of taxpayer dollars walk away, with the contractors and developers lining pockets rather than housing people. Clawbacks exist on paper, but in practice, the system is rigged to let money slip through the cracks while the homeless remain on the streets.

The Solution: AI-Driven Oversight

So what is the solution? It’s radical but clear:

1. Freeze fragmented Federal funding until accountability is restored.

2. Centralize the system federally with a transparent, AI-driven platform for RFQs, auditing, and unit assignment.

3. Track every dollar from allocation to resident, cutting out unnecessary intermediaries, inflated deals, and politically motivated acquisitions.

4. Focus on efficient housing solutions, like modular homes or tiny home communities, which can house far more people for the same cost.

The AI system could instantly ...

• evaluate bids,

• monitor spending, and

• assign units based on verified need,

  
  

leaving no room for inflated costs, political favoritism, or obscure bookkeeping. Albania has already implemented a similar AI-driven government contracting system with impressive results — California should do the same and reclaim accountability.

Accountability or Waste? The Choice is Ours

California’s homelessness crisis is a moral and fiscal failure. The math doesn’t lie: $26 billion should have produced tens of thousands of housing units and lifted tens of thousands of people off the streets. Instead, political optics, overpayments, and opaque deals have left the system broken, residents underserved, and billions unaccounted for.

It’s time to demand transparency, efficiency, and accountability. Otherwise, the money will continue to walk while people continue to live on the streets.