LA County Restructuring Its Homeless Response as a Result of Reported Fraud
- Richard Sykes
- 4 hours ago
- 3 min read
Los Angeles County is undergoing a major restructuring of its homelessness response system, shifting away from the joint Los Angeles Homeless Services Authority (LAHSA) model toward a new, direct county-managed department following audit findings of mismanagement and a $23 million fraud case. Despite spending over $1 billion annually, the county is facing a crisis of accountability, with reports of unverified services, misused funds, and a growing homeless population that reached 75,000 in 2023. 1, 2, 3, 4, 5, 6
Funding and Restructuring the "System"
The Shift in Governance: Following audits, the LA County Board of Supervisors voted in April 2025 to pull over $300 million in annual funding from LAHSA, and in February 2026, approved an $843 million budget for their new, direct Department of Homeless Services and Housing (HSH) for fiscal year 2026-27.
Funding Sources: The new system is funded by the voter-approved Measure A sales tax (generating ~$1 billion annually) and state grants.
Program Reductions: Despite the new funding, the 2026 budget included roughly $200 million in cuts to existing programs—including $92 million from the "Pathway Home" program—due to rising operating costs and the expiration of COVID-era, one-time funding.
Allocation: The 2026 plan prioritizes $277 million for interim housing and $239 million for permanent housing, with $16 million explicitly set aside for oversight and transparency. 1, 2, 7, 8, 9, 10, 11, 12
Fraud Allegations and Financial Scandals (2025–2026)
The "homeless industrial complex"—a term used to describe the web of nonprofits and government entities receiving public funds—has been rocked by several high-profile scandal allegations:
$23 Million Fraud Arrest: In January 2026, the executive director of a South L.A. charity, Abundant Blessings, was arrested on federal fraud charges for allegedly siphoning $23 million in LAHSA-contracted funds for personal luxury items, including a $7 million home, while providing substandard care to unhoused individuals.
Weingart Center Probe: A federal investigation is probing a $27.3 million property flip in Cheviot Hills involving the Weingart Center Association, which allegedly used taxpayer-funded Homekey funds for a suspect, "pay-to-play" transaction.
Shangri-La Industries Disaster: Developers were accused of misusing $26 million in state funds to purchase hotels, with funds allegedly used to pay for luxury items rather than housing.
Misuse of Funds: A November 2024 audit found LAHSA paid service providers late, failed to monitor contract compliance, and transferred money between funders without proper authorization.
Whistleblower Claims: Former LAHSA employees alleged that the former head of the agency hired unqualified friends and tried to hide data, with allegations that the agency paid to settle claims before they became public. 3, 5, 13, 14, 15, 16, 17
The Accountability Crisis
Unverified Services: Audits indicated that LAHSA often paid for services without verifying they were provided, including paying for empty, unverified beds.
Dangerous Conditions: Reports highlighted filthy conditions, violent fights, and drug/alcohol issues within "tiny home" villages, which were not properly addressed by operators or officials.
Incomplete Data: The 2025 audits revealed that LAHSA’s documentation was so poor that tracking spending was nearly impossible, with a judge describing the system as a "train wreck".
Systemic Failure: Despite billions spent, the population increased by 9% in 2023, and the county had to cut $200 million in services in 2026, threatening to push more people onto the streets. 1, 6, 12, 18, 19, 20, 21
The new, direct county department is tasked with correcting these issues by focusing on proven, high-impact programs, such as interim housing and permanent supportive housing, while implementing stricter contract oversight. 9, 11
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