San José Council Approves Modest Shift Toward Temporary Homeless Housing

San José’s city council approved a budget Tuesday that aims to reduce street homelessness by shifting millions of dollars from permanent to temporary housing — though the council rejected a larger pivot toward shelter funding advocated by Mayor Matt Mahan.

The final vote on the city’s $5.2 billion spending plan for the fiscal year beginning July 1 came after weeks of debate over homelessness spending. Mahan, who campaigned on a promise of reducing encampments, used this budget to argue that more prefabricated housing was needed to move the city’s 4,411 unsheltered residents off the streets.

But many of his colleagues on the council feared that pulling money away from the construction of permanent housing would lead to affordable apartment projects dying on the vine.

At the heart of the debate was how to spend $87 million in dedicated homelessness dollars left over from the current and previous fiscal years. Those funds were created through the passage of Measure E, an initiative passed by voters in 2020 that levies a tax on home sales of $2 million or more.

The compromise reached after hours of negotiation on the council dais will put one-quarter of the unspent homelessness dollars, roughly $22 million, toward developing and operating temporary housing and shelter.

“We still have the full commitment to the low-income affordable housing that I think the voters wanted us to have,” said Councilmember David Cohen, who brokered the final deal, in an interview after the vote. “But it’s clear also that the residents in San José want swift and meaningful action for people who are unsheltered on the streets, and supporting interim housing is going to help us get there.”

In all, the spending approved Tuesday allocates $93.2 million to build permanent affordable housing across a variety of income levels, $29.1 million for temporary housing and $7.4 million on aid and assistance for renters.

Mahan’s plan, which would have put $33 million in unspent Measure E funds toward short-term housing, was voted down by the council. While the mayor was able to find consensus around the idea that unhoused residents need faster, cheaper exit ramps out of encampments and creek beds, he couldn’t build a coalition to support anything more than a modest redirection of funds toward temporary units.

“Certainly disappointed it wasn’t more and I think we’ll be back to this conversation next year,” Mahan said. “But I think it’s certainly a move in the right direction.”

Fierce pushback from the council and housing advocates has forced Mahan to pare back his proposals throughout the spring. Earlier this month, the mayor jettisoned a plan that would have eliminated future Measure E funding for permanent housing. Tuesday’s agreement distributes homelessness dollars in the upcoming 2023–24 fiscal year under the existing formula, putting roughly three-quarters of the $50 million in expected revenue toward constructing affordable housing.

Councilmember Peter Ortiz, who represents East San José, said the mayor’s shelter strategy was being driven by short-term politics.

“We should not be considering quick wins that lack the investment necessary to impact lasting change,” Ortiz said. “It’s not the city council’s job to complete campaign promises or to help officials get reelected.”

Tuesday’s vote doesn’t answer the longer-term question of how to pay for all the homeless housing San José leaders are hoping to build. The city currently operates six interim housing sites with 628 beds, and is planning for many more. An analysis from San José’s budget director found that costs for temporary housing will begin to outpace dedicated funding by the end of the decade.

“Over the long haul, we’re going to have to dip into the general fund, unless we have a good economy and money keeps on coming in or we find alternative sources of funding,” said Councilmember Rosemary Kamei.

Thus far, the slowing economy has had less impact on San José’s budget compared to the Bay Area’s other large cities. San José is entering the new fiscal year with a modest projected surplus of $35 million. Most of that windfall — $18.8 million — will be socked away for the next fiscal year, when city analysts project a deficit of that amount.

Mahan has had no problem getting approval for his other top spending priority: hiring more officers in the San José Police Department, in hopes of lowering response times to 911 calls.

His request has created 31 new positions, including 17 officers, two sergeants and one lieutenant with a projected start date of February 2025. Six new community service officers, who typically respond to lower-priority calls such as petty theft and vandalism, will be assigned to downtown.

Residents who turned out to Tuesday’s meeting largely focused their comments on homelessness spending. That followed more than five hours of public comment on Measure E plans on Monday evening.

Dontae Lartigue, who runs Razing the Bar, a nonprofit providing mentoring for transitional-age youth, told the council that he’s benefited from living in subsidized housing for the last 11 years.

“The problem is we’re not investing in the people that call San José their home, that were born here in this city and they can’t afford to live here,” Lartigue said. “If we stop investing in permanent supportive housing and try to divert funds into interim housing, we’re going to run into big problems.”

San José resident Jenice Condie urged the council to get behind Mahan’s reallocation and give him an opportunity to realize a top campaign promise.

“If it doesn’t work, we can always vote him out next time,” she said.