California Counties Face New Requirements for Homelessness Funds

State threatens to withhold funds from cities and counties not doing enough to address homelessness

Published on Feb. 7, 2026

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The state of California is adding new strings to its homelessness funding, requiring cities and counties to enact policies regulating homeless encampments and obtain a 'prohousing designation' in order to access crucial state funds. Some counties, like Santa Cruz, have already seen reductions in funding for failing to meet the new requirements. Local officials worry the tightening rules will make it harder to access the money without directly improving conditions on the street.

Why it matters

California's large recent investments in homelessness have failed to curb the growing number of encampments on city streets. The state is now trying to hold local governments more accountable for how they use homelessness funds, but this could create new challenges for cash-strapped cities and counties trying to address the crisis.

The details

To access state Homeless Housing, Assistance and Prevention money, cities and counties must now enact a state-approved policy regulating homeless encampments and obtain a 'prohousing designation' for going above and beyond to build housing. So far, only 60 of California's 541 cities and counties have achieved this designation. Santa Cruz County is working on it, but has not yet received the designation. The state is also requiring local matching funds and demonstrating measurable progress on homelessness outcomes. Counties report increased scrutiny as they apply for funds, with some, like Santa Cruz, seeing reductions in the final round of funding.

  • In 2025, Santa Cruz County received about $24.5 million in Homeless Housing, Assistance and Prevention funding, with nearly $21 million going directly to the county.
  • In 2026, the final round of funding for Santa Cruz County, $5.08 million, was reduced by about $840,000 from the previous year due to the county's failure to reduce homelessness enough.

The players

Gavin Newsom

The governor of California who has threatened to withhold state homelessness funds from cities and counties that aren't doing enough to get people off the streets.

Robert Ratner

The director of Santa Cruz County's Housing for Health program, who says the state's application process for homelessness funds has felt like 'the goal post keeps moving a little bit.'

Megan Van Sant

The senior program manager with the Mendocino County Department of Social Services, who says the state's requirement for counties to pass encampment ordinances puts housing administrators in a difficult position since they have no authority over enforcement policies.

Matt Mahan

The mayor of San Jose, who says the state should focus on more direct measures of success rather than tying funding to factors like prohousing designations.

Carolyn Coleman

The executive director and CEO of the League of California Cities, who worries the new requirements could slow progress and 'leave more cities out' from accessing the funds.

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What they’re saying

“It has felt, at times, like the goal post keeps moving a little bit.”

— Robert Ratner, Director of Santa Cruz County's Housing for Health program

“We're housing providers. We try to figure out how to provide people housing. We don't want to weigh in on enforcement. At all.”

— Megan Van Sant, Senior program manager with the Mendocino County Department of Social Services

“We're making this way too complicated.”

— Matt Mahan, Mayor of San Jose

“I worry that we may leave more cities out, and that we may cause delays in the ability to get more people housed sooner.”

— Carolyn Coleman, Executive director and CEO of the League of California Cities

What’s next

The state of California and local officials will spend the next several months hashing out the final details and conditions for the $500 million in homelessness funding proposed in this year's budget. Until those details are resolved, exactly what standard cities and counties will be held to, and what will happen to those that don't comply, remains unclear.

The takeaway

California's new accountability measures for homelessness funding aim to hold local governments more responsible for how they use state resources, but this could create new challenges for cash-strapped cities and counties already struggling to address the growing homelessness crisis. The debate highlights the tension between the state's desire for measurable progress and local officials' concerns that the new requirements may slow down efforts to get people housed.