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Newsom's 'National Model' For Homeless Wracked By Fraud

Friday, Dec 12, 2025 - 02:40 PM

Authored by Ana Kasparian via RealClearInvestigations,

Gov. Gavin Newsom has made reducing the homelessness crisis in California a top priority, saying the scale of the state’s efforts is “unprecedented” and calling for the continued expansion of his signature effort – Project Homekey – that has already cost $3.75 billion.

But in a state with more than 181,000 homeless individuals, or about one-third of the U.S. total, Homekey has been marred by failures and scandals, including a lack of government oversight and accountability as well as a federal investigation into allegations of fraud in Los Angeles.

Newsom, who appears to be preparing for a presidential bid in 2028, could make Homekey, which he calls a “national model,” a talking point in his campaign. The state claims the program has created almost 16,000 permanent housing units that will serve over 175,000 people. But since the state doesn’t track outcomes – whether people placed in housing saw their lives improve or if they returned to the streets – the program’s effectiveness is unclear, according to a critical 2024 state auditor’s report.

“[Our budget] is bloated with homeless spending, a bottomless pit and taxpayer boondoggle that doubles down on failure year after year,” the Republican-turned-Democrat Los Angeles Councilwoman Traci Park said at a meeting in May. “Hundreds of millions of dollars on bridge homes and Homekeys and interim housing sites, and no one can even tell us which ones are operational.”

What is clear is that homelessness in California has skyrocketed in the five years Homekey has been in place, growing by more than 20%, according to the Public Policy Institute of California. That’s an increase of some 36,000 people between 2019 and 2024.

Homekey has been touted by officials as a more cost-effective way to house the homeless. By hiring developers to convert excess motel and hotel rooms and other existing structures into permanent housing, the costs are two to three times lower than building new units, according to the auditor’s report.

But with huge contracts available to developers and very little oversight of their activities, some of that cost savings was lost to fraud, according to federal prosecutors. First Assistant U.S. Attorney Bill Essayli for the Central District of California launched a fraud and corruption task force to find out where the money went, and in October filed criminal charges involving two developers who allegedly defrauded the system.

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