Policy Expert Reveals the Funding Time Bomb in California's Oldest Supportive Housing

Written by:

Steve Marcinuk

Date:

26 Dec 2025

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Dozens of permanent supportive housing buildings in California are constrained by outdated subsidy programs, with rental income levels well below the level needed to cover actual operating costs. As these buildings age, the financial mismatch is threatening the stability of the entire sector.

The 2022 collapse of Skid Row Housing Trust exposed deep vulnerabilities in California’s supportive housing system. But according to Brad West, Policy Specialist at the Supportive Housing Alliance, this high-profile failure is a symptom of a larger, system-wide funding problem that could soon affect dozens of other providers.

The issue isn’t with the permanent supportive housing (PSH) model itself, West says. Instead, the problem is that many older buildings are funded through mechanisms created decades ago, which now leave them unable to keep up with rising costs.

“You can’t run any kind of housing unit in Los Angeles on $650 a month per unit,” West says, referring to the rental income generated by some of the oldest PSH units. “Whether you’re providing supportive housing, affordable housing, or just regular apartments, that amount isn’t enough to pay back loans, keep the lights on, pay insurance, or cover security.”

The Legacy Subsidy Trap

West identifies the root of the problem as the way older supportive housing buildings receive their operating subsidies. Many rely on legacy programs—called initially Shelter Plus Care, now known as the Continuum of Care program—that cap annual rent increases at 3 percent, regardless of actual inflation or cost increases.

Yet, West explains, the situation is even more difficult than it appears. These annual rent increases are not automatic. Providers must apply for them each year, and housing authorities must approve the requests. In practice, this means many buildings miss out on even the limited increases allowed.

“Someone forgets to apply. The Housing Authority doesn’t process the application. Whatever the reason, there are large gaps between what should have been paid out and what actually was paid, year after year,” West explains.

The result is that older PSH providers are forced to inject tens of millions of dollars each year from their own reserves to keep buildings operational.

“You have certain housing providers pouring tens of millions of dollars every year into some of these projects just to keep them afloat,” West says. “That jeopardizes the financial position of the parent nonprofit, and eventually we’re not going to be able to keep doing this.”

The Skid Row Housing Trust Lesson

West joined the Supportive Housing Alliance in November 2022, after the Skid Row Housing Trust’s collapse. While he didn’t work directly with the Trust, he collaborated with researcher Claire Knowlton on a report examining what went wrong.

“Had the government done its job and given them the resources they needed to succeed, I fully think there would be no Skid Row Housing Trust collapse,” West says.

Skid Row Housing Trust was a pioneer of the supportive housing model in Los Angeles in the late 1980s and early 1990s. But over time, its buildings became trapped in subsidy programs that did not keep pace with escalating operating costs.

West says this created a structural deficit: operating expenses “wildly outpaced” the funding provided by outdated subsidies. As a result, buildings could not service their debt, maintain the property, or adequately staff their operations.

Misreading the Crisis

West says policymakers and community leaders often draw the wrong lesson from the Skid Row Housing Trust collapse.

“A lot of people conclude that PSH just doesn’t make financial sense, and that the model itself is flawed,” West says. “That’s totally the wrong conclusion.”

To counter this view, West cites newer buildings as evidence that supportive housing is adequate when properly funded. “I can show you the financial audits of buildings built in the last five years that are getting $2,100 a month per unit,” he says. “These buildings are well-run, provide high-quality housing, and residents get the services they need. The difference is they have the resources to do their jobs.”

The contrast between units funded at $650 per month and those at $2,100 per month, West argues, demonstrates that the problem lies not in supportive housing itself but in outdated funding mechanisms that fail to reflect current costs.

A Ticking Time Bomb

West warns that California faces a mounting crisis as more supportive housing buildings age and more providers deplete their reserves. Without intervention, the state could lose thousands of supportive housing units at a time when demand is highest.

“Los Angeles has a serious issue with aging permanent supportive housing stock,” West says. The severity of the problem depends on when the majority of a provider’s portfolio was built; however, the trend is clear: older buildings are at the most significant risk.

The Supportive Housing Alliance, where West has worked for three years, focuses on these operational challenges. A coalition of 12 Los Angeles supportive housing developers has spent recent years advocating for policy changes that address the needs of existing buildings, not just new development.

According to West, the lesson from the Skid Row Housing Trust collapse is clear: government funding mechanisms must be updated to reflect actual operating costs. Without automatic, inflation-adjusted increases in rental subsidies, West argues, the sector will continue to see buildings fail—potentially leading to the loss of thousands of supportive housing units built over decades.

Whether policymakers act on this warning will determine if California faces isolated failures or a wave of collapses across its supportive housing sector.