The CA state audit that blistered San Jose and statewide homelessness programs for ineffectiveness called forth a prickly, self-justifying, and lengthy response from SJ City Manager Jennifer Maguire. Scott Beyer of the Market Urbanism Report gives Maguire’s 15-pager a close read, and finds that it’s evasive and doesn’t face up to the legit financial and strategic failures the audit so clearly revealed. An Opp Now exclusive.

We reported in our previous column on a recent state audit that called out San Jose’s approach to homelessness. The auditors have been studying various homeless provision programs across California, but found that San Jose’s were particularly non-transparent and poorly-focused. While acknowledging the need for more progress, city officials have responded with a defensive tone. City Manager Jennifer Maguire penned a 15-page response that downplayed many of the auditor’s concerns, deflected blame to vague “systemic” problems, and called for more money (of course), ignoring the substantial sums that city and county taxpayers have already spent. 

Maguire lists efforts that the city has already taken, pointing to some successes – San Jose has provided over 13,000 people with permanent housing since 2020; veteran homelessness has reached “functional zero” levels; and the number of formerly homeless “permanently housed” people jumped nearly 30% from 2022 to 2023. 

But the number of first-time homeless households simultaneously increased—causing an overall homelessness increase of 11% in recent years. This is despite gobs of spending from Measure E, a publicly-approved city tax increase that, per the audit, generated over $20 million in homeless spending over three years; Measure A, a $950 million Santa Clara County bond that aimed to finance 5,000 affordable housing units; and millions in federal American Rescue Plan funds the city had directed to homeless services.

Maguire disputes the audit’s claim of rising homelessness, citing 3% drops in the number of “unsheltered homeless individuals living outdoors” and a 4.7% overall decrease in homeless individuals. But in response, the auditor’s office noted that these decreases just happened from 2022 to 2023. Such a slight dip over one year is hardly indicative of things going right overall. 

Maguire also countered the audit’s criticism that the city lacks a coherent plan, pointing to the Community Plan to End Homelessness. This however is a county-wide plan, and has drawn some criticism from activists for being too broad and not meeting its lofty goals.

Imbued heavily in Maguire’s response was the notion that the city is struggling to reduce homelessness because of factors beyond its control. 

“Despite our progress creating a supportive housing system that assists thousands of homeless individuals and families each year,” she wrote, “the crisis continues because the systemic factors driving this crisis from growing income inequality to a severe lack of affordable housing are stronger than ever.”

There’s some truth to this: pandemic-related supply chain disruptions increased the price of construction. Nimbyism towards workforce housing in general and homeless shelters specifically, is, as Maguire notes, a problem. But often her claims are vague—she spends a whole paragraph discussing the city and county’s high income inequality, but never quite says why this is relevant, or what it has to do with why San Jose is mismanaging funds. Blaming “systemic” factors is a way to pass the buck. 

The response also begs the question of why there isn’t enough affordable housing (and just how impactful subsidized housing is for improving overall affordability). Measure A passed in 2016, but from 2018 to 2021, San Jose itself built just 560 affordable units, around 12% of the county-wide goal. That’s largely due to the process and regulation baked into local governments, not anything macroeconomic. 

The auditor, for that matter, listed some external factors itself, noting “that high housing costs and low incomes had left participants vulnerable to homelessness and that the most frequently reported economic reason for entering homelessness was loss of income … [and] factors such as scarcity of housing, high cost of housing, [and] lack of rental subsidies.” 

Similarly, Maguire claimed the audit didn’t adequately account for COVID-19 related disruption. But the auditor’s office noted the report in fact did so on four occasions. 

The auditor also rejected Maguire’s claim that the city had made sufficient progress in meeting its permanent housing goals, and said the city hadn’t announced how many permanent units it would build, nor was it forthcoming about funding plans for seven sites.

Looking forward, Maguire notes that the city is planning an annual report that will go before council and include goal tracking. She also says city officials have undergone training in performance management. These sessions will be a chance for council to demand answers on some of the issues we brought up last article—such as why homeless housing still costs so much, and why alternative models like transitional housing aren’t used more. 

It seems that in penning such a long paper that digs into the minutiae, Maguire and likely other city actors have missed the plot on homelessness. Taxpayers have spent billions to end homelessness in the metro, only to find the homeless count increasing. Some of this is due to bureaucracy at multiple levels of government, which prevents the money from stretching far. Some is due to government waste that the auditors rightly recognize. Some is due to the law of incentives: governments will get more of what they fund, and it appears that in San Jose, housing the current homeless is just causing an increase in new homeless cases. 

That latter issue is one that San Jose city hall ought to discuss but likely won’t, because that would be politically incorrect. But at very least, the city should take the recommendations of the state auditor seriously, and do what it can to speed up the project pipeline. Otherwise the problem will only continue as different bureaucrats argue.

This article featured additional reporting from Market Urbanist content staffer Ethan Finlan.

More on Market Urbanism Report here.