Federal charges that millions of dollars were siphoned from Los Angeles homelessness programs are exposing a deeper failure in how Washington funds and measures such programs, according to a lawmaker who has been scrutinizing the issue. Rep. Michael Cloud, R-Texas, said the fraud cases are only one symptom of a system that rewards spending and activity without adequately tracking whether people are actually being helped off the streets.
«The only people really getting upward mobility in these programs, it would seem, is the people running the programs,» Cloud said after a House Oversight hearing examining federally funded homelessness programs in Los Angeles, Seattle and elsewhere. «And that's not really what the program's supposed to be about.»
Federal prosecutors charged three defendants Wednesday in separate homelessness-fraud cases involving alleged misuse of taxpayer funds. The allegations include money spent on a nightclub and an adjacent bingo hall, as well as bribes tied to fake housing referrals. Los Angeles' homelessness agency paid one of the suspect nonprofits more than $75 million, according to federal prosecutors.
Cloud said the fraud itself is only one piece of a broader problem. In his view, the system appears to reward spending and program activity without adequately measuring lasting outcomes. Government too often judges success by «how much money we send out the door» instead of whether the spending is «actually helping people» or whether safeguards are in place to ensure taxpayer dollars are used properly. He described the system as having been «incentivized for fraud.»
«We've got to take those incentives out and get back to making sure that all these programs have incentives for oversight and that the dollars are managed well,» Cloud said.
He also argued that some programs can keep a person «kind of in a cycle of dependency so that the program manager has job security, in a sense, and gets to live off the government dime.» Cloud pointed to Los Angeles Mayor Karen Bass' decision to step down from the LAHSA commission as an example of resistance to controls, asking why «these Democrat-led states are saying, no, we don't want the controls in place.»
Los Angeles is not alone, Cloud said, citing what has been called the federal «Housing First» philosophy, which generally prioritizes placing homeless people in housing with less immediate regard for sobriety, mental-health treatment or overall stabilizing services. Cloud did not use the term «Housing First» during the interview, but he described the concern behind that critique, arguing that some homelessness programs define success in ways that leave people dependent on government rather than moving toward independence.
Housing First is distinct from the Department of Housing and Urban Development's «Continuum of Care» framework, the local funding and coordination structure through which nonprofit providers, state and local governments and other organizations receive federal homelessness money. In Los Angeles, LAHSA leads the local Continuum of Care, which HUD says received nearly $1 billion in taxpayer dollars over the previous five years.
Under Secretary Scott Turner, HUD moved to suspend LAHSA this year, citing alleged failures involving financial management, internal controls and safeguards against conflicts of interest. LAHSA has challenged the federal action in court.
«The 'housing first' experiment failed Americans by warehousing the vulnerable without results,» Turner said in June when HUD announced a $4.04 billion Continuum of Care funding opportunity. «This ideology promised to end homelessness. Instead, billions of taxpayer dollars were spent while homelessness increased to record levels.»
That funding will focus on organizations aiding treatment and recovery, while setting aside $1.3 billion for new projects prioritizing transitional housing and supportive services and adding measures intended to prevent fraud, waste and abuse.
The charges in Los Angeles and the broader oversight push reflect a growing debate over whether federal homelessness dollars are being managed effectively and whether the programs designed to help people off the streets are actually achieving that goal.