Amid a serious budget crunch, L.A. faces pressure to pay more for homeless services

Good morning, and welcome to L.A. on the Record — our City Hall newsletter. It’s David Zahniser and Rebecca Ellis, giving you the latest on city and county government.

L.A.’s elected officials received a blunt warning this week about the rising cost of combating the city’s homelessness crisis.

The Greater LA Coalition on Homelessness, which represents dozens of homeless service providers across L.A. County, said those nonprofit groups have not been getting paid for the full cost of the services they provide at the city’s “interim” housing facilities, which serve Angelenos relocated from sidewalk encampments.

Unless the City Council significantly increases the amount it pays nonprofits to staff city homeless shelters, tiny-home villages and other facilities, some organizations will likely pull out to avoid losing more money, coalition members said.

That bracing message was delivered Monday at a closed-door meeting with Mayor Karen Bass’ team. It was repeated two days later at the council’s homelessness committee, where some warned that as many as 1,288 homeless beds — in as many as 14 facilities — are now at risk.

Rowan Vansleve, president of the nonprofit Hope The Mission, said homeless service providers are losing so much money that they’re facing the prospect of “demobilizing” certain interim housing sites. Without a hike in the rates, “14 sites across the system are going to be vanishing,” he told the committee.

“And this isn’t an isolated incident,” he said. “In fact, this is a clear warning that the homeless services system is on the verge of collapse.”

Vansleve made his remarks one day after voters passed Measure A, a countywide half-cent sales tax that is expected to generate $1 billion per year for homeless services and affordable housing. That measure, and its recent passage, is now a talking point in the fight over the rates the city and county pay homeless service providers.

“The people of Los Angeles want to see this crisis dealt with. They’re willing to fund real solutions. That’s what Measure A’s passage tells us,” said Jerry Jones, executive director of the Greater LA Coalition on Homelessness, which represents “55 nonprofit organizations on the front lines of homelessness.”

Jones and the coalition are pressing the city to hike the rate at certain homeless facilities to $89 per bed per night starting Jan. 1, up from a range of $60 to $66. Facilities with fewer than 50 beds should go even higher, he said, reaching $116 per bed per night.

The coalition also has been pushing for an even larger increase starting July 1 that would take the nightly bed rate up to $139. That amount, Jones said, would reflect the true cost of interim housing services — staffing, meals, security, insurance and other expenses. The figure first surfaced in an third-party analysis released earlier this year by the Los Angeles Homeless Services Authority, he said.

Jones said staffers at many interim housing sites are struggling to make ends meet, even as they perform critical work for the city. Their financial woes have contributed to high staff turnover at homeless service nonprofits, he said.

City budget officials acknowledge that they have not been paying the full costs incurred by homeless services groups and have proposed a series of rate increases over the next nine months. But their proposed increases are smaller than the ones sought by the coalition.

Under the city’s proposal, interim homeless housing facilities with 51 or more beds would see the nightly rate reach $69 on Jan. 1, then jump again to $89 per bed on July 1. Smaller facilities — those with 50 beds or fewer — would see the nightly bed rate jump to $79 on Jan. 1, then to $116 on July 1.

City Administrative Officer Matt Szabo pushed back against the $139 rate cited in the study, saying the number includes some services the city already pays for in other ways. That increase, if approved, would add at least $186 million to the city budget in 2025-2026, Szabo said.

Bass, asked about the warnings from the nonprofit coalition, said the city welcomed the passage of Measure A, which doubles the existing quarter-percent sales tax for homeless services.

“I will tell you one thing: We have no intention of closing facilities and putting people out on the street,” said Bass at a news conference in the San Fernando Valley on Thursday. “Fortunately, with Measure A, we are not going to have to put people out on the street.”

Some council members sounded more frustrated with the situation, which comes amid a major financial crunch for the city. Council members are already planning a new round of cutbacks to balance the budget and replenish the city’s reserve fund.

If the council doesn’t provide nonprofits with the increases they’ve been demanding, those organizations could end up running “unsustainable deficits” — and closing interim housing sites, said Councilmember Bob Blumenfield, who sits on the homelessness committee.

But if the council agrees to pay the higher rates, there might not be enough money in the budget to keep all of the city’s interim housing sites open, Blumenfield said.

Under that scenario, he said, the city would be the one to decide which facilities would close.

Complicating matters further, the city is paying a different, higher rate to the nonprofits hired under the mayor’s Inside Safe homelessness initiative, which has moved unhoused residents into dozens of hotels and motels and is currently paying service providers $110 per bed per night.

Councilmember Monica Rodriguez, who sits on the homelessness committee, voiced frustration that the city is paying one rate for one set of interim housing facilities and another, higher rate, at the ones supervised by the mayor.

It will be difficult to hold the line on costs, Rodriguez said, when one city program is already paying a higher rate.

“We’re negotiating against ourselves,” she said.

Clara Karger, a spokesperson for Bass, said rates are higher for Inside Safe because “more is expected” in that program. The higher rate has ensured that homeless service groups have the capacity to help “more people get off the streets and stay housed than ever before,” she said.

“We wanted to raise the standard of service and we saw the results,” Karger said in an email.

The council must make a decision by the end of the month for the increases to go into effect by Jan. 1. City officials are looking to hike the rates in coordination with L.A. County, which also pays for interim housing services.

State of play

— NO SURPRISES: The ballots are still being counted, but so far there haven’t been any surprises in the city’s three council races. Councilmember Heather Hutt handily defeated attorney Grace Yoo in a district stretching from Koreatown to the Crenshaw Corridor. Former State Assemblymember Adrin Nazarian was well ahead of small-business owner Jillian Burgos in the San Fernando Valley. And on the Eastside, tenant rights attorney Ysabel Jurado defeated Councilmember Kevin de León, who had been politically wounded by the two-year-old audio leak scandal.

— FINALLY, A CONCESSION: De León conceded the race late Friday afternoon, congratulating Jurado on a “well-fought campaign” and wishing her success leading the district. “The future of our district is bright, and I remain committed to continuing the fight for equity, opportunity, and dignity for all Angelenos,” he said on Instagram.

— GOING, GOING, GASCÓN: Former federal prosecutor Nathan Hochman soundly defeated Los Angeles County Dist. Atty. George Gascón on Tuesday. Gascón, who was swept into office in 2020 on a promise of criminal justice reform, chalked up the defeat to “the rightward shift across America.”

— KNIFE’S EDGE: Measure G, the L.A. County ballot measure to expand the size of the Board of Supervisors and create a new countywide elected executive, had slightly more than 50% of the vote on Friday. Supervisor Lindsey Horvath, who spearheaded the measure, said the latest tally “proves what’s possible with a new generation of leadership.”

— AVOIDING PRISON: He was a crucial witness for the federal government’s corruption probe into City Hall. Now, George Esparza, who served as former Councilmember Jose Huizar’s special assistant, has been sentenced to three years’ probation. Two other figures in the racketeering case, onetime lobbyist Morrie Goldman and real estate consultant George Chiang, also received probation this week.

— CHIEF IN CHARGE: The City Council signed off on Mayor Karen Bass’ pick for a new police chief, voting 11-2 to confirm former County Sheriff Jim McDonnell. Councilmembers cast their votes after grilling McDonnell on strategies for protecting undocumented immigrants during the upcoming Trump administration. Councilmembers Eunisses Hernandez and Hugo Soto-Martínez voted no.

— GET THE MOVING VAN: The county Board of Supervisors voted to acquire one of downtown L.A.’s most prominent skyscrapers for $200 million. Supervisor Janice Hahn cast the sole vote against the purchase, saying that moving county agencies out of the Kenneth Hahn Hall of Administration would devastate downtown’s Civic Center.

QUICK HITS

• Where is Inside Safe? The mayor’s program to combat homelessness went to an encampment outside the Silver Lake Hotel, which has been used as an Inside Safe facility for more than a year. That site and several others visited by Inside Safe this week are in Soto-Martínez’s district. Inside Safe also went to the area around Shatto Recreation Center in Koreatown, which is represented by Hutt.

• On the docket for next week: The City Council has canceled meetings for next week to allow members to attend the National League of Cities conference.