HOMELESSNESS - Los Angeles’s homelessness program is in complete disarray, undermined by systemic gridlock, structural instability, and the diversion of life-saving funds to consultants.
Frankly, this in fact is a twofold civic failure, a humanitarian crisis worsening in plain sight and a leadership failure that lets resources intended to ease suffering be consumed by mismanagement.
I repeatedly warned, and did so many times, that without oversight and direction, homelessness would become bleak and unmanageable, and the program would fall prey to what I first named the “Homeless-Industrial-Complex.” Those warnings went unheeded, and the predicted outcome followed: the entrenched system became a revolving door that continuously absorbed money while producing few, if any, results.
I saw the abuse and called for corrections, but the systematic exploitation was allowed to continue. I called for a forensic audit, an in-depth examination of an organization's financial records and transactions to identify potential fraud and misconduct. These calls were ignored.
In 1993, the City and County jointly created the Los Angeles Homeless Services Authority (LAHSA) to coordinate services across most of Los Angeles County. As the lead agency for the federally funded Los Angeles Continuum of Care, LAHSA managed and distributed federal, state, county, and city funds to about one hundred nonprofit providers.
LAHSA was to function as the central hub for outreach, interim housing, permanent housing placements, and data coordination across the region.
LAHSA failed because of several compounding problems, most especially its inability to manage funds, oversee providers, and operate a coherent homelessness system. Federal investigations, county audits, and congressional oversight letters have extensively documented these failures, revealing an agency that was structurally unprepared, operationally disorganized, and fiscally reckless.
LAHSA was not the only institution to fail, but it became the most visible fault line in a homelessness system collapsing on all fronts, while a growing consultant class built a “Homeless-Industrial-Complex” that profited from the crisis rather than solving it.
For example, private and nonprofit developers using public subsidies often spent more than $600,000 to $800,000 per supportive housing unit, claiming regulatory delays, prevailing-wage requirements, and bureaucratic overhead. These costs match or exceed the cost of private-market luxury apartments.
Rather than serving solely as a public oversight body, LAHSA was heavily exploited by private contractors, nonprofit executives, and housing developers through weak compliance controls, shell-company billing, costly developer subsidies, and outright fraud.
Because LAHSA relied almost entirely on third-party nonprofits, some exploited the agency for illicit income. Federal and local prosecutors charged contractor Alexander Soofer with diverting more than $10 million in public homelessness funds, including millions routed through LAHSA, into personal accounts. Federal prosecutors also charged executive Michael Young with embezzling more than $7.5 million from public contracts, including LAHSA grants, through fake vendors that overbilled the government.
Investigations also found that service workers accepted kickbacks to approve nonprofit bills for people who were neither unhoused nor enrolled in shelter programs, turning LAHSA pass-through grants into guaranteed corporate revenue.
The Homeless-Industrial-Complex was not to be denied. Although LAHSA primarily managed services, it worked alongside housing developers using Measure H and Proposition HHH funds. Developers benefited from the region’s complex bureaucracy by inflating costs or through consulting and permitting fees. Before construction began, soft costs—including architectural and legal fees, environmental reviews, and administrative overhead—consumed a substantial share of development budgets.
Then there were the guaranteed rental subsidies. After construction, developers received long-term federal and local rental subsidies administered by LAHSA and local housing authorities, creating lucrative, low-risk revenue streams.
Contractors took advantage of LAHSA’s dysfunctional internal accounting, as per an independent audit by Alvarez & Marsal, showing that millions in unmonitored cash advances were issued to contractors without verifying if services were delivered, while simultaneously delaying legitimate reimbursements to smaller frontline providers.
There was a lack in performance verification, in other words LAHSA failed to properly maintain its data system, so providers repeatedly claimed high success and placement numbers with little to no physical audit of whether clients remained housed.
After numerous investigations, audit-driven funding suspensions, and criminal indictments by the US Department of Justice, the City and County have stripped LAHSA of its authority. The dismantling of its contracting structure has begun.
Los Angeles is now attempting to rebuild its deeply troubled homelessness system. LAHSA is gone, but the path forward remains unclear as agencies compete for control. The County is moving to consolidate authority within its new Department of Homeless Services and Housing, the City is building a separate bureaucracy, and regional bodies are dividing the federal responsibilities LAHSA once held.
I am concerned, however, that hidden in the institutional reshuffling is a dark side: the persistent Homeless-Industrial-Complex. And the members are very smart and insistent.
A fitting Greek saying holds that “the fox loves the chaos.” Though the system is being redesigned, it is fragmented and its familiar incentives persist, open to opportunists. Consultants, intermediaries, and “capacity‑builders” have learned to thrive on dysfunction.
The County and City may redraw the blueprint, but they cannot summon a new system from the ashes if they rebuild atop the same old sins — the incentives that reward delay, the fragmentation that dissolves duty, the profiteering that blooms in the fog, and the quiet, enduring betrayal of the very people the system was meant to shelter.--
(Nick Patsaouras is an electrical engineer, civic leader, and a longtime public advocate. He ran for Mayor in 1993 with a focus on rebuilding L.A. through transportation after the 1992 civil unrest. He has served on major public boards, including the Los Angeles Department of Water and Power, Metro, and the Board of Zoning Appeals, helping guide infrastructure and planning policy in Los Angeles. He is the author of the book "The Making of Modern Los Angeles.")
