California has expanded its permanent supportive housing stock in recent years. Still, Brad West, Policy Specialist at the Supportive Housing Alliance, warns that the sector now faces a crisis most policymakers overlook: the lack of operating subsidies. While public discussion often focuses on construction financing and land, West says the real bottleneck is the ongoing funding needed to operate supportive housing buildings, and Los Angeles has run out of that funding.
“The Los Angeles region has essentially hit its cap on how many vouchers they can allocate as project-based vouchers,” West says. “We’re having to get really creative in figuring out where we get our operating subsidies from.”
Los Angeles, the state’s largest supportive housing market, can no longer guarantee the funding streams needed to operate new supportive housing projects. This shortfall threatens not only Los Angeles but the stability and expansion of supportive housing statewide.
Three Funding Streams – One Bottleneck
Permanent supportive housing relies on three distinct funding streams: capital for construction, on-site services funding, and operating subsidies to cover day-to-day costs. “You need money to build a building, the service dollars, then your operating income,” West explains. “This is how we pay admin staff, electricity, water, trash – just the stuff to run the building. This is how we do upkeep.”
Historically, Los Angeles developers have depended on project-based Section 8 vouchers to fund building operations. Now, with the region’s allocation exhausted, developers must patch together support from a mix of city, county, and state programs. Each alternative comes with inconsistent timelines, complex requirements, and unpredictable funding cycles.
“We will inevitably see a slowdown in the supportive housing that this region is constructing because we’re not investing in that critical third piece of the supportive housing model, which is operating subsidies,” West says.
Why Operating Subsidies Matter Now
The shortage of operating subsidies is already slowing the pace of new supportive housing projects. Without a clear path to cover ongoing costs, developers hesitate to break ground, even when capital and service funding are available. This creates a growing backlog of projects stuck in limbo.
The problem is urgent because Los Angeles and California face rising homelessness and a growing need for permanent supportive housing solutions. As West notes, “If you can’t fund the ongoing operations, you can’t open new buildings, no matter how much construction money is available.”
Policy Priorities and the Ribbon-Cutting Trap
West argues that a policy bias toward new construction has left long-term operational needs underfunded. “There tends to typically be a prioritization of new projects rather than existing projects,” he says. “Lawmakers and decision makers love going to ribbon cuttings. Everyone wants to focus on the new project that’s opening up, because it’s exciting, and that’s great. Still, there’s a lot less focus paid to how we can invest in assets that have been around for 30 plus years and make sure they’re still operating effectively.”
This approach, West explains, creates a cycle in which new buildings open with fanfare but lack the resources to remain viable over time. Without guaranteed operating subsidies, new supportive housing developments risk becoming financial burdens instead of stable community assets.
The $8 Billion Solution
West points to research from the Corporation for Supportive Housing (CSH) showing the gap could be closed with a fraction of the state budget. “If California invested $8 billion on an annual basis, we could have homelessness in California in 12 years,” West says, referencing CSH’s analysis. “Sounds like a lot of money, but it’s less than 3% of the state’s budget.”
With California’s state budget around $300 billion, West argues the issue is not about available resources but about political will. “It’s more about the political priority of where you put the money,” he says.
Some states are already taking steps to secure ongoing funding. Nevada, for example, amended its constitution to dedicate a portion of its state budget to housing and homelessness. “If Nevada can do it, California’s got to start catching up,” West says.
A Daily Challenge for Developers
For West and the Supportive Housing Alliance, finding operating subsidies is a constant, high-stakes challenge. “That’s my number one goal every year: where are we going to get our reliable source of operating subsidies from?” West says.
The Supportive Housing Alliance is a coalition of 12 Los Angeles developers, 90 percent of whose projects are entirely permanent supportive housing. Their work depends on coordinating with city and county officials to uncover potential funding sources, a process West describes as “getting really creative.” This means relying on ad hoc solutions rather than stable, established funding.
Despite efforts to streamline development and advocate for better operations policy, West says the lack of dedicated operating subsidies remains the sector’s most critical obstacle. Without a policy shift to ensure reliable funding for building operations, the supportive housing pipeline will remain stalled, unable to meet the region’s urgent need for solutions to homelessness.
As the need for supportive housing continues to grow, West’s warning is clear: unless California prioritizes and funds the operating costs of supportive housing, the state’s ability to respond to homelessness will remain fundamentally limited, no matter how many new buildings are constructed.