Firefighters on and around a fire truck. A dome is visible in the distance
Crews respond to a fire at a city-run shelter in March. The costs of the shelter and emergency response factor into the $120 million the city says it spends annually on homelessness. Credit: Amir Aziz

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The city of Oakland spends more than $120 million a year on its homelessness crisis, according to new estimates from city officials, but that’s a fraction of the nearly $4.5 billion it could cost to build and operate permanent supportive housing for all 5,000 homeless residents. 

That staggering figure—which is more than double the city’s entire $2 billion annual budget—comes from a new city report attempting to calculate the cost to the city of the homelessness crisis and what it would take to end it. 

City Councilmember Carroll Fife requested the analysis in the spring, saying her goal was to “ascertain the cost of homelessness” in Oakland so she and other policymakers could better understand the city’s financial capacity and determine what to spend on temporary shelters versus permanent housing.

“We’re constantly being told we don’t have the resources to house people,” she said at a meeting in May. “I feel like if we did things a little differently, we might be able to.”

In the new report, Director of Finance Erin Roseman and other staff estimate how much money each department spends on the crisis annually. The detailed, 45-page document covers “direct costs” allocated specifically to homeless services, such as staffing the city’s relatively new homelessness division, which coordinates outreach work at encampments, oversees the organizations running shelter programs, and more.

It also calculates “opportunity costs”—expenditures in Oakland’s budget that are generally meant to pay for programs and goods unrelated to homelessness but redirected to address the crisis, such as the fire department responding to fires or medical emergencies at camps rather than other incidents. This is money the city would still spend elsewhere if the homeless crisis didn’t exist, as it would be used for other departmental purposes. 

Staff found that Oakland spends close to $73 million in direct costs and $49 million in opportunity costs annually. However, Roseman notes these estimates are very rough, as it’s often impossible to precisely calculate how much of a given city job or program is dedicated to homelessness.

The report also says Oakland has close to $47 million in flexible grant funding for homelessness that could theoretically be directed away from current uses, like emergency shelters, and spent on permanent housing instead, as Fife had asked about. But “this would mean that community-based organizations would not receive grant funds that they may rely on for important place-based services and resources,” Roseman wrote, and the shift could leave Oakland vulnerable to lawsuits over its neglect of health and safety conditions. 

“Clearly, this option, while seemingly straightforward, is not an adequate or legally sound solution,” staff wrote.

Could Oakland afford to house more people?

The report estimates that it would cost $2.46 billion to build permanent supportive housing for all 5,055 homeless people in Oakland, and up to another $2 billion to operate those buildings. The cost of building one apartment is a “dramatic” increase over the cost of creating one shelter unit, it says.

“It is not possible in the short term for the city to shift significant…resources to permanent supportive housing because of its cost per unit, ineligibility for federal funds, the time to construct such units, and the need for resources to support the city’s other mandates and interventions,” Roseman wrote.

However, the calculation is based on the assumption that each of the 5,055 unhoused individuals would need their own new housing unit, not taking into account that many may live with partners or children or otherwise not need a unit to themselves. Many activists and officials have also pushed Oakland to acquire and convert existing buildings into supportive housing, a cheaper and quicker alternative to new construction. 

The report is the latest exhibit of ongoing tensions between city staff and some elected officials around how to effectively and urgently respond to the homelessness and housing crises. Fife belongs to a group of councilmembers who believe the city could be acting more aggressively and creatively to move people off the streets. The city administration often responds that Oakland doesn’t have the resources to carry out such large-scale solutions.

While the administration has tried innovative approaches to the crisis, it also must stay in compliance with grant requirements and the law, Roseman explained. “This puts City staff in a difficult position, but their efforts are to provide the best interventions possible,” she wrote.

Fife told The Oaklandside that after reading the report she still believes the city should do more to house people, and that investing in permanent housing will ultimately save more funds than “pouring money into ‘managing’ the existing system and practice of leaving people to languish on Oakland streets.”

“Our stubborn commitment to engaging in business as usual stilts the creative solutions needed to tackle this extremely critical issue,” she said in an email.

Solving local crisis depends on state, feds

The money Oakland uses on homelessness comes from many places. Some of the sources are local, like the large infrastructure bond measure voters approved this month, which will dedicate $350 million towards affordable housing. Some advocates want to see a similar region-wide bond measure on the 2024 ballot. 

But most large sources of homelessness funding comes from the state and federal governments.

“Solving the homelessness crisis must be a regional, state, and federal joint effort, and cannot be addressed at the city level alone,” the report says.

State and federal support for cities increased during the pandemic, when programs like Homekey and FEMA reimbursement allowed Oakland to open new shelters at an unprecedented pace.

But millions Oakland has been counting on from the state were imperiled recently when Gov. Gavin Newsom announced in early November that he was withholding a $1 billion grant for homelessness—including $24 million Oakland was expecting—until cities created more effective plans for using the money. The decision caused alarm among city officials and put a number of local programs in jeopardy. Then last week Newsom reversed course, announcing he’d release the funds after all—so long as cities made better plans for the next round.

While it’s clear Oakland would need significantly more funding to house most or all of the people living on the streets in the city, there is also concern that the millions it’s already spending are not being spent effectively. A recent audit of Oakland’s homeless shelters and similar facilities found that the city gave non-profit contractors $69 million to run these programs over three years but did little to track their success. 

Most, it turns out, have failed to meet their goals for moving residents into housing. 

“We allocate funds towards various homelessness services at almost every council meeting but the homelessness crisis is not improving, in fact it is getting worse,” Fife said. “While I believe that we need more federal, state, and county funds to match the level of need, I think we also need to improve how we do things as a city.”

Natalie Orenstein covers housing and homelessness for The Oaklandside. She was previously on staff at Berkeleyside, where her extensive reporting on the legacy of school desegregation received recognition from the Society of Professional Journalists NorCal and the Education Writers Association. Natalie’s reporting has also appeared in The J Weekly, The San Francisco Chronicle and elsewhere, and she’s written about public policy for a number of research institutes and think tanks. Natalie lives in Oakland, grew up in Berkeley, and has only left her beloved East Bay once, to attend Pomona College.