San José Mayor Pushes to Use Homelessness Dollars to Build More Temporary Shelters Instead of Permanent Housing

San José’s city council is weighing a controversial plan to dramatically reshape how the city spends money to reduce homelessness.

The proposal, spearheaded by Mayor Matt Mahan, would shift dedicated homelessness dollars away from building affordable apartments to, instead, constructing temporary shelters. The budget plan is the manifestation of an argument Mahan made repeatedly during his mayoral campaign: that local governments have placed too much focus on permanent supportive housing instead of what the mayor describes as low-barrier solutions to quickly provide more shelter for unhoused residents.

“We do not need to put all of the dollars into building brand-new buildings right now when we have thousands of people suffering on our streets,” Mahan said at a press conference on Monday.

The debate centers on a pot of money created by San José voters in 2020, when they approved Measure E to address housing affordability and homelessness by taxing home sales of $2 million or more.

Mahan’s push to reallocate the city’s Measure E funds is the most contentious proposal in this year’s budget process. The council will take a final vote in June on the spending plan for the fiscal year that begins on July 1. On Tuesday, they heard hours of public comment on the homelessness spending plan from residents who crowded City Hall into the evening.

Currently, 75% of Measure E revenue is used to pay for the development of new affordable housing at a variety of income levels, with the rest going to shelter construction and homelessness prevention.

In the 2023–24 fiscal year, Mahan is proposing a dramatic revision: for 80% of Measure E revenue (estimated to be $50 million) to go toward temporary housing, like the six emergency interim housing sites already open across the city.

The plan would set aside 20% of revenue for rental and legal assistance for San José tenants. None of the new Measure E funds would be dedicated to permanent affordable housing. At the end of the 2023–24 budget year, Measure E allocations would return to their current levels.

Supporters of the shift say a change of approach is needed in the face of a problem that seems intractable. San José’s unhoused population grew to 6,650 people last year, and while the ratio of households exiting and entering homelessness has narrowed in Santa Clara County, 1.7 households are still becoming homeless for every one household housed.

“I see homeless that [are] sleeping right in front of our businesses,” said June Tran, owner of Crema Coffee, who spoke at Mahan’s press conference. “I can see that our current strategy right now is not working, so we really need change.”

But to critics, the plan is a short-sighted maneuver designed to mollify concerns about visible street homelessness without providing permanent shelter for the unhoused.

“The only people that call for this kind of an approach has usually been politicians,” said Jennifer Loving, CEO of the housing nonprofit Destination: Home. “But there’s no evidence, there’s no research, there’s no subject matter experts that would tell you diverting money from creating the deepest level of affordable housing in perpetuity and moving it to do shelter is a winning strategy.”

Under the plan, unspent Measure E revenue from the current and previous budget years would continue to fund affordable housing, to the tune of $52.8 million.

That money will largely go to projects already in the city’s pipeline. But affordable housing advocates say the falloff in funding in the next budget could lead to some projects dying on the vine — losing out on not only city money but also the matching funds from other levels of government that could accompany it.

“We would be seriously hindering our city’s ability to secure funding for affordable housing during a time where we are in dire need of more homes for our most vulnerable residents,” said Councilmember Peter Ortiz, who represents District 5, which includes East San José.

Backers of affordable housing funding waved paper fans with pictures of houses and a broken heart during Tuesday’s meeting and used the public comment period to decry the Measure E change as a betrayal of the ballot measure’s promises around building affordable units.

“This comes down to a matter of trust,” said RJ Ramsey, a resident of an affordable housing project in San José, who said he helped campaign for the passage of Measure E. “Honor your promises that you made to the unhoused community.”

Gustavo Gonzalez, a real estate broker, applauded the proposal, arguing that money spent on interim housing would still serve the goal of helping residents exit homelessness.

“There’s been no taking away from Measure E,” he said. “We’re talking about homeless shelters, you guys, we need this for our homeless folks.”

The challenge facing Mahan is that while Santa Clara County has picked up the tab for services at permanent affordable housing sites, the city is on the hook for the operation of interim housing into the future.

Mahan said he is hopeful for an infusion of funds from the state government or a regional housing bond but that, for now, rerouting Measure E dollars is the most realistic avenue to bankroll his vision.

To change Measure E funding, San José’s council is required to hold a second hearing, which is set for June 12. A final vote on the plan, which requires a two-thirds majority, is expected to take place the following day.