Federal charges have been brought against individuals accused of misappropriating millions from homelessness programs in Los Angeles, which has raised alarms for some lawmakers about the broader failures in how such programs are funded and evaluated.
Rep. Michael Cloud, a Republican from Texas, expressed concern that not only is taxpayer money being misused by corrupt providers, but the programs themselves are failing to achieve their primary aim: helping people leave the streets.
“It seems the only ones benefiting from these programs are the people running them,” Cloud remarked after a House Oversight hearing focused on homelessness initiatives in Los Angeles, Seattle, and other cities. “That really goes against what these programs are meant to accomplish.”
Federal prosecutors recently charged three defendants in different fraud cases related to homelessness, alleging that taxpayer funds were misused, including expenditures linked to a nightclub and bribery associated with fabricated housing referrals.
According to the prosecution, Los Angeles’ homelessness agency paid one of the involved nonprofits over $75 million, prompting Cloud to look for those truly responsible for the financial misappropriation.
However, Cloud indicated that fraud is just a symptom of a larger issue, noting that the existing system seems to incentivize expenditure and activity without effectively measuring outcomes that matter. “It’s too common for the government to assess success purely based on how much money is distributed, rather than whether that spending actually benefits people,” he commented, suggesting that the current framework is designed in a way that encourages fraud.
“We really need to strip those incentives away and ensure that these programs focus on oversight and proper management of funds,” he added.
Cloud pointed out that some programs can create a sort of dependency, allowing program managers to retain job security at the expense of meaningful assistance. He was critical of the reluctance of Democrat-led states, like California, to implement stricter controls amid scrutiny of waste and fraud in these initiatives.
He mentioned the “Housing First” approach endorsed federally, which predominantly prioritizes placing people in homes with less emphasis on sobriety or mental health support. That’s distinct from HUD’s “Continuum of Care” model, which coordinates funding among various local entities to distribute federal homelessness resources.
In Los Angeles, the local homelessness agency leads the Continuum of Care and has reportedly received nearly $1 billion from taxpayers in the last five years. However, HUD recently moved to suspend the agency due to alleged mismanagement and lack of safeguards, a move that LAHSA is contesting legally.
Under Secretary Scott Turner criticized the “Housing First” experiment for failing to deliver tangible results and emphasized the need for accountability in future funding distributions, specifically mentioning a sizable funding opportunity aimed at tackling fraud and enhancing support services.
Ultimately, the focus of new funding will shift toward organizations that promote recovery and support services, hoping to prevent the recurrence of fraud and misuse of public funds.
