THE REAL COMPARISON Between Finland and California

Finland spent less per homeless person and nearly solved the problem.

California spent 12.5x more per person and made it worse.

This isn't about money. It's about:

Building sufficient housing (Finland did, California didn't)
Funding adequate services (Finland did consistently, California did sporadically)
Political commitment (Finland maintained 15 years, California fragmented)
Accountability (Finland tracked results, California didn't)

This per capita analysis makes the comparison much more powerful because it:

Eliminates the scale excuse - Shows California spent dramatically more per person
Highlights the efficiency gap - Finland got better results for less money
Exposes the implementation failure - Not a funding problem, an execution problem
Makes it personal - Every Californian "paid" $615 vs. every Finn paying $54
Shows the paradox - Spending more money produced worse outcomes

Why the Golden State Can't Replicate Finland's Homeless Solution

Despite adopting the same "Housing First" model that virtually eliminated street homelessness in Finland, California's crisis deepens. The difference isn't the policy—it's the foundation of affordable housing beneath it, and the critical support services that make it work.

By Stephen L. Pendergast December 20, 2025

On a frigid January night in Helsinki in 2008, where temperatures regularly plunge below -20°C, tent cities dotted the parks of Finland's capital. Homeless people huddled in makeshift shelters between the trees, exposed to conditions that could kill within hours. Meanwhile, 6,000 miles away in temperate Los Angeles, a similar number of people slept on the streets—but for entirely different reasons.

What happened next in these two places would reveal a fundamental truth about solving homelessness: the intervention matters less than the infrastructure supporting it. Finland adopted "Housing First"—giving homeless people homes immediately, with no preconditions—and virtually eliminated street homelessness. California adopted the same approach in 2016 and spent over $24 billion, yet today has 187,000 homeless people, nearly 50 times Finland's entire count.

The question isn't whether Housing First works. Rigorous studies prove it does. The question is why it succeeds in one place and struggles in another—and the answer challenges common assumptions about homelessness, migration, what it actually takes to get people off the streets, and what happens when housing comes without the support services that make it sustainable.

The Finnish Model: More Than Just Housing First

Between 2008 and 2022, Finland reduced long-term homelessness by 68 percent. The country that once had 18,000 homeless people in 1987 saw that number plummet to approximately 3,800 by 2024—about 0.06% of the population. Helsinki, a city that maintained 2,121 shelter beds in 1985, converted nearly all of them to permanent housing units, retaining just one 50-bed emergency shelter by 2016.

The approach was radically simple: give homeless people homes first, then address their other problems. No sobriety requirements. No mandated treatment. No proving you "deserve" housing.

"In Finland we have this mentality that we feel that homelessness is not an individual's fault, it is the system's fault, and we need to make the systems work for the people and not the other way around," explained Juha Kahila from Y-Säätiö, Finland's fourth-largest landlord and the nonprofit that spearheaded the Housing First movement.

But Housing First was only part of Finland's success. The country built its solution on three critical pillars:

Constitutional commitment. Finland's Constitution mandates that public authorities "promote the right of everyone to housing" and grants citizens "the right to receive indispensable subsistence and care" when needed. This wasn't a political promise subject to changing administrations—it was fundamental law.

Massive housing supply creation. The government guarantees approximately $2.3 billion in loans annually at 1.7% interest rates for affordable housing construction, supplemented by $330 million in direct grants. In 2022 alone, this facilitated over 10,000 new affordable apartments. Finnish law requires that at least 25% of new urban homes built by private developers must be affordable social housing. Affordable housing rent is legally prohibited from generating profit for landlords—rates cover only financial and maintenance costs, resulting in prices 20-40% below market rates.

Integrated support services—the critical third pillar. Residents received permanent rental contracts and paid a portion of rent based on ability. But crucially, Finland invested heavily in on-site support. In supported housing units, residents had access to 24/7 medical and social welfare teams. Social workers maintained maximum caseloads of 20 people to provide intensive, individualized support. Treatment for addiction, mental health issues, and employment assistance was voluntary but readily available and accessible.

The economics proved compelling. Studies found that providing housing and support to one homeless person saved Finnish society at least €15,000 per year through reduced emergency healthcare, police, and justice system costs. Over ten years, Finland spent €270 million on Housing First construction and renovation—roughly €59,000 per unit—far less than the ongoing societal costs of homelessness.

By 2020, the Organisation for Economic Co-operation and Development reported that "practically no-one was sleeping rough on a given night in Finland." The country had become the only European Union member state where homelessness was consistently declining.

California's Crisis: Same Policy, Different Foundation

Nearly 6,000 miles away, California couldn't replicate these results despite adopting the same approach. By January 2024, at least 187,084 Californians were experiencing homelessness—24% of the nation's total homeless population. Two-thirds slept outside, accounting for 45% of all unsheltered homeless people in the United States.

California had adopted Housing First as state policy through Senate Bill 1380 in 2016, requiring all state-funded homeless programs to follow the model. The state invested more than $24 billion to address homelessness over five years. Yet homelessness continued to grow.

The visible scale was staggering. In Los Angeles, tent encampments sprawled along sidewalks and under freeway overpasses. San Francisco's streets became synonymous with homelessness in national media coverage. Voters consistently rated homelessness as one of their top concerns, with 88% of San Francisco residents saying the problem had worsened.

When Housing First Works—Proving the Model

The research on Housing First effectiveness in California revealed a crucial paradox: the intervention worked remarkably well when properly implemented, yet overall homelessness continued to grow.

A randomized control trial conducted by the Benioff Homelessness and Housing Initiative (BHHI) at UC San Francisco examined a permanent supportive housing intervention in Santa Clara County. The results were striking: 86% of participants were successfully housed and remained housed over an average three-year follow-up period. When researchers revisited the data, they found retention rates exceeding 90% long-term. Emergency psychiatric service utilization dropped sharply among participants, while scheduled mental health visits increased.

"There is no medicine as powerful as housing," said Dr. Margot Kushel, BHHI Director.

The study focused on the highest-need population experiencing homelessness—those with serious mental illness, chronic health conditions, and substance use disorders. If Housing First could achieve 90% success rates with this population, the model's effectiveness was unambiguous.

A UCLA evaluation of California's "Housing for a Healthy California" program, which provided supportive housing to Medi-Cal beneficiaries experiencing chronic homelessness, found similar success. The program moved over 200 people into housing and reduced their medical costs.

Veterans Administration programs showed comparable results. A demonstration project found that veterans utilizing Housing First had reduced time to housing placement (from 223 days to 35 days) and higher housing retention rates (98% versus 86%) compared to treatment-as-usual approaches.

So if Housing First worked, why was California's crisis deepening?

When Housing First Fails: The "Housing Only" Problem

During the COVID-19 pandemic, California launched Project Roomkey, moving approximately 62,000 homeless people into hotel rooms to prevent viral spread. The program later morphed into Project Homekey, purchasing hotels to convert into permanent housing with billions in state funding.

What happened at some of these sites revealed the critical difference between Housing First as designed and "Housing Only" as implemented.

In San Francisco, public records showed 911 calls to homeless housing hotels tripled after unhoused individuals moved in—going from one or two calls a month to up to 14 calls per month at peak. At multiple hotels, emergency calls tripled, going from 22 calls over six months to 60. Neighbors complained of "open air drug use," overdoses, and "sexual acts being performed during the day."

When Los Angeles relocated homeless people from Penmar Golf Course to Mar Vista motels, LAPD and Culver City PD logs showed emergency calls more than doubling in a matter of weeks, with reports of break-ins, gunshots, and property damage. One longtime resident described it as "living in a war zone."

At one South Los Angeles Homekey site under Councilmember Bonin's district, crime in the surrounding neighborhood rose by nearly 80 percent according to LAPD data. Neighbors said the city promised safeguards that never materialized—including 24/7 security.

San Francisco agreed to pay $19.6 million in settlements to three hotels—$2.9 million to the Tilden Hotel, $5.3 million to Hotel Union Square, and additional millions to Hotel Whitcomb—for damages incurred when they housed homeless people during the pandemic.

Residents at these troubled sites described them as having "no structure and no services—just people with histories of trauma and addiction relocated into motels with no support." One resident said bluntly: "They just dumped them here with no plan. And it showed. We were the ones calling the cops."

A woman at a South Los Angeles Homekey site who had recently fled abuse said she rarely leaves her room. "There are fights. People yell in the halls. I don't go out at night. I waited a long time for housing. I didn't think I'd still feel this scared."

The Critical Distinction: Services Make the Difference

Yet the picture wasn't uniformly negative. In San Jose, analysis of five interim housing sites found that calls to police about drug possession, property crimes, assault, and graffiti decreased at four out of the five sites. Total calls about open fires and illegal dumping also decreased.

An exhaustive study by The Frisc of San Francisco's Navigation Centers found "no pattern of rising crime, whether immediately close by or slightly farther afield" when shelters opened.

What explained the difference?

The Benioff Homelessness and Housing Initiative explicitly titled a report "Housing First is Not Housing Only," emphasizing that the intervention requires intensive wraparound services to succeed.

The successful sites provided on-site case management, mental health services, addiction treatment, employment assistance, and adequate security. The troubled sites often lacked these critical supports.

Project Homekey relies on a low-barrier model—housing people without requiring sobriety, mental health evaluations or background checks. Advocates say it removes barriers to entry, but critics argue it sets people up to fail when services aren't available on-site.

This mirrors Finland's approach to eligibility—no preconditions for housing—but diverges sharply on what happens after. Finland invested heavily in the support infrastructure alongside the housing. Social workers were available 24/7 in supported housing units. Treatment was voluntary but immediately accessible. Residents had permanent lease agreements with responsibilities, not temporary emergency placements.

California often bought expensive hotels but then underfunded the ongoing support staff, security, and services needed to make them work. As one assessment noted, only 22% of people leaving Roomkey programs throughout the state went to permanent housing, while 40% remained homeless—with 25% going to other emergency shelters and 15% returning to the street.

The researcher evaluating the program called 22% moving to permanent housing "actually pretty good"—revealing just how low the bar had fallen for California's homelessness programs.

The Migration Myth and the Real Pattern

A persistent narrative suggests that California's temperate climate and supposedly generous services attract homeless people from across the country—that no matter how much housing California provides, more people will simply arrive to claim it.

The comprehensive data tells a different story.

A UCSF survey found that 90% of homeless people in California were last housed in California, while 75% live in the same county where they lost their housing. Data from local agencies managing homeless services shows that between 2021 and 2023, 96% of people who accessed homeless services did so in a single jurisdiction.

Even in Los Angeles County, 75% of people on the street had a home in that same county before they lost it, and 65% of the unsheltered homeless had lived in that county for at least 20 years. Only 13% were from out of state. In San Francisco, 71% of homeless people previously had a home in the city.

More tellingly, 66% of California's homeless population was actually born in California, while 87% were born in the United States.

The Dust Bowl Pattern: Coming for Work, Not Welfare

But this data reveals something more nuanced than simply debunking the migration myth. California does attract migrants—just not the way most people assume.

The pattern resembles the Dust Bowl migration of the 1930s more than contemporary "welfare tourism." During the Great Depression, people migrated to California seeking economic opportunity. Many found work but struggled with California's cost of living. The Okies who came for agricultural jobs often ended up in labor camps because there wasn't enough affordable housing for workers at the wages those jobs paid.

Today's pattern follows the same sequence, just stretched over longer timeframes:

People migrate to California for jobs in tech, entertainment, agriculture, construction, and service industries
They get those jobs and live in California for years, often decades
Then they become homeless in California when they hit an economic crisis and discover there's no affordable housing safety net to catch them

In Los Angeles County, 65% of the unsheltered homeless had lived in that county for at least 20 years. These aren't recent arrivals gaming the system—they're long-term residents who got priced out.

In the six months before they became homeless, participants in the UCSF survey were making a median income of just $960 a month. Seventy percent said a monthly rental subsidy of $300 to $500 could have prevented them from losing their housing.

California attracts people with jobs and opportunities, but hasn't built enough housing to accommodate them at wages those jobs actually pay. When people hit economic hard times—job loss, medical crisis, divorce—there's nowhere affordable to fall back to.

"So why is homelessness so much worse in California?" Dr. Kushel explained. "Exorbitant housing costs force many low-income people into overcrowded and precarious living situations, leaving them just one job loss or health scare away from ending up on the street."

This dynamic doesn't exist in Finland. The country doesn't have comparable in-migration of economic opportunity seekers. People don't move to Finland for better weather or booming job markets. Finland addresses a relatively stable population's housing needs. California faces continuous in-migration of people seeking opportunity—then fails to build housing for the population it attracts.

The Missing Foundation: Housing Supply

The answer to California's paradox lay in a fundamental difference between the two places: housing supply.

Finland didn't just give homeless people priority for existing housing—it built massive amounts of new affordable housing specifically for this purpose. The government converted shelters into permanent apartments, purchased existing properties, and constructed new buildings.

The result: housing costs in Finland averaged about 20% of income, and approximately 11% of all Finnish homes were state-subsidized affordable housing as of 2023. "One of the big things about the housing policy in Helsinki is that they want to have a social mix," Kahila explained. "It doesn't matter what the area is like and how expensive it is, there has to be people from different backgrounds and different income levels because it's the best way to avoid segregation."

California faced the inverse situation. The state suffered from a historic housing shortage driven by decades of restrictive zoning that prohibited multi-family construction in most cities. Rental vacancy rates were among the lowest in the nation. A 2002 study found that "the incidence of homelessness varies inversely with housing vacancy rates and positively with the market rent for just-standard housing," concluding that "moderate increases in housing vacancy rates and moderate decreases in market rents are sufficient to generate substantial declines in homelessness."

By 2024, the average market-rate rent in California required income over twice the state's minimum wage. Waitlists for housing vouchers stretched for years. Even voucher-holders faced widespread discrimination from landlords despite such practices being outlawed in many jurisdictions.

Stanford researchers analyzing California's homelessness crisis in 2024 calculated the shelter shortage: "If we add up all the interim housing beds available—emergency shelter (61,387), transitional housing (14,078), and safe haven (473)—and assume all beds are being utilized at 100% capacity (a strong and almost implausible assumption), an estimated 111,146 homeless people—close to 60% of the homeless population—lack a shelter bed."

For comparison, New York City had roughly one shelter bed per homeless individual in 2024, while Los Angeles had a ratio of 1 to 2.5.

The Cost Conundrum

The cost differential between Finland and California revealed another critical challenge. Finnish Housing First units averaged roughly €59,000 each (€270 million for 4,600 homes over ten years). California's units, according to investigations by Pacific Research Institute and The New York Times, cost between $750,000 and over $1 million each.

This tenfold cost difference stemmed from multiple factors: California's construction costs, inflated land prices, extensive regulatory requirements, prevailing wage laws, and environmental review processes. An April 2024 investigation by The Guardian and Type Investigations found that California had paid $100 million to private companies to clear homeless encampments—money that critics argued could have housed people instead.

The financing mechanisms also differed dramatically. Finland's government provided 40-year loans at 1.7% interest to nonprofit housing developers. California relied on a fragmented mix of federal tax credits, state bonds, local funding, and market-rate financing at much higher interest rates. The complexity added delays, administrative costs, and uncertainty.

A federal investigation into Project Homekey uncovered allegations of fraud. In one case, prosecutors alleged that the former CFO of developer Shangri-La Industries falsified bank records to obtain $26 million in Homekey funds, then siphoned off more than $2 million to pay his own credit card bill.

California voters approved Proposition 1 in March 2024, authorizing $6.38 billion in bonds to fund housing for veterans and the homeless, along with mental health and drug treatment facilities. Yet even this substantial investment paled compared to the scale of need when building units cost nearly $1 million each and oversight remained inadequate.

The Political Battlefield

Housing First had become politically contentious in California in ways it never did in Finland, where the approach enjoyed cross-party support from 2008 to 2023.

Conservative critics attacked Housing First as enabling addiction rather than addressing it. Carl DeMaio, chairman of Reform California, characterized it as "socialized housing" driven by a liberal political agenda. Critics cited research claiming Housing First had no effect on treating substance abuse and mental health issues, noting that 75% of chronically homeless individuals had such problems according to the American Journal of Community Psychology.

"Simply handing over keys to an expensive housing unit or a hotel room will not change the dysfunction and disease inside a person that made them homeless in the first place," DeMaio argued, pointing to the damaged hotels and increased crime as evidence.

Housing advocates countered that these critiques confused poorly implemented "Housing Only" with properly funded Housing First. The approach provided intensive wraparound services—mental health treatment, addiction counseling, case management, employment assistance—but made these voluntary rather than mandatory. The philosophy held that stable housing created the foundation for addressing other challenges.

"In the Housing First model, a dwelling is not a reward that a homeless person receives once their life is back on track," explained Finnish experts. "Instead, a dwelling is the foundation on which the rest of life is put back together."

But when California bought hotels without funding adequate services, the result validated critics' fears: damaged properties, unsafe conditions for residents and neighbors, and minimal progress toward permanent housing or recovery.

The debate intensified after the U.S. Supreme Court's June 2024 ruling in City of Grants Pass v. Johnson, which held that cities could enforce camping bans against homeless people even when shelter beds weren't available.

Governor Newsom responded in August 2024 with an executive order urging local governments to clear encampments, though he emphasized a "humane approach." But critics worried the emphasis on clearance overshadowed housing creation and the service infrastructure needed to make housing work.

The Implementation Gap

Beyond supply and cost challenges, California's Housing First implementation suffered from fragmentation and accountability problems.

The state divided into 44 Continuum of Care regions for HUD funding distribution, each with its own approach, capacity, and effectiveness. Coordination among state agencies, counties, cities, and nonprofits was inconsistent. A 2023 state audit found California couldn't track whether its $24 billion in homelessness spending had worked because outcome data wasn't systematically collected or analyzed.

Governor Newsom's January 2025 budget proposed creating the California Housing and Homelessness Agency to better integrate the state's response and enhance accountability. But this came after years of uncoordinated spending—and after the damage to California's hotel programs had already undermined public confidence.

Models of Progress Within California

Despite systemic challenges, some California communities demonstrated what was possible with adequate resources, coordination, and proper services.

San Diego's declining homelessness reflected sustained commitment from both city and county governments, increased shelter capacity, and collaboration among service providers. The city's total homelessness decreased 13.5%, with unsheltered homelessness down 3.9%. Riverside County reported a 19% decrease in unsheltered homelessness.

Non-congregate shelter models like tiny homes and converted hotels achieved significantly higher occupancy rates (86%) compared to traditional congregate shelters (65%) in Los Angeles, making them more effective for encampment clearance programs.

Programs that combined housing with intensive case management—limiting caseloads to 8-20 participants per case manager—showed the highest success rates, recognizing that complex needs required substantial ongoing support.

The Navigation Centers in San Francisco that showed no crime increases were precisely those with adequate staffing, services, and structure—proving the model could work even in challenging urban environments when implemented properly.

While homelessness increased 18% nationwide in 2024, California's growth was just 3%—lower than 40 other states. Unsheltered homelessness grew only 0.45% in California compared to nearly 7% nationally. Governor Newsom pointed to these figures as evidence that California's approach was showing results, even if the overall numbers remained dire.

Finland's Warning

Ironically, as California struggled to implement Housing First, Finland was watching its own progress reverse. After 11 consecutive years of declining homelessness, 2024 brought the first increase in over a decade. The homeless population rose by 377 people to 3,806, with street homelessness jumping 50% to 694 people.

"The reversal of this trend is a worrying signal that decision-makers need to take seriously," said Teija Ojankoski, CEO of Y-Säätiö. "Behind the figures lies a huge amount of human suffering and unacceptable inequalities."

The causes were familiar: rising rents, cuts to social security and housing support, and reduced funding for housing advice services. Most significantly, the right-wing coalition government that took power in 2023 slashed construction and financing of social housing—the very foundation of Finland's success.

Budgets for housing advice were halved even as demand increased 80% in Helsinki. More tenants were forced to resign leases due to unaffordable rent.

"Helsinki undoubtedly has the best homelessness work in the world. Now it seems that so many people end up homeless that services simply cannot keep up," Ojankoski explained.

The lesson was stark: Housing First succeeded not through the intervention alone but through sustained political commitment, continuous investment in affordable housing supply, and adequate funding for support services. When any of these elements wavered, even Finland's vaunted system began to fail.

The Climate Factor: Visibility vs. Causation

California's climate does affect its homelessness crisis—just not in the way commonly assumed. The weather doesn't attract homeless migrants from other states. Instead, it determines what kind of homelessness is visible.

Two-thirds of California's homeless population sleeps outside (unsheltered), accounting for 45% of all unsheltered homeless people in the United States. In contrast, New York has comparable or higher homelessness rates per capita, but only 5% are unsheltered—the rest are in shelters.

You literally cannot survive sleeping outside in a New York winter, so cities must provide shelter. California's climate means people can survive outside (though it's still dangerous and miserable), so there's less pressure to build adequate shelter capacity.

This makes California's homelessness crisis far more visible than other states, which creates political pressure but also enables false narratives about migration that distract from the real problems: insufficient housing supply and inadequate support services.

The Path Forward

California's homelessness crisis illuminates fundamental truths about Housing First: the model works, but only when housing actually exists at scale and when that housing comes with the support services that make stability possible.

Researchers point to several essential elements that Finland implemented but California has struggled to replicate:

Constitutional commitment. Finland's Constitution explicitly guarantees housing rights. California has no equivalent constitutional mandate, making funding vulnerable to political shifts.

Massive supply creation. Finland built or acquired thousands of affordable housing units annually through subsidized financing and private sector mandates. California's production remains far below need.

Adequate services infrastructure. Finland invested €15,000 per person annually in support services—costs they recouped through reduced emergency expenses. California often bought expensive hotels but underfunded the staff, case management, mental health services, addiction treatment, and security needed to make residents and neighbors safe.

Nonprofit delivery system. Finland partnered with large nonprofit housing providers that could operate at scale with government support. California's fragmented nonprofit sector lacks comparable capacity and stable funding.

Integrated healthcare. Finland's universal healthcare and social services infrastructure provided seamless support. California's services remain fragmented across multiple agencies.

Political consensus. Finland maintained bipartisan support for Housing First for 15 years. California's approach faces constant political challenges, exacerbated by high-profile failures at poorly managed sites.

Cost efficiency. Finnish units cost a fraction of California's due to streamlined processes and government-subsidized financing. California must address construction costs and regulatory complexity.

Accountability. Finland tracked outcomes and adjusted programs accordingly. California spent $24 billion without adequate systems to measure effectiveness or prevent fraud.

Housing advocates argue California needs a complete housing strategy that goes beyond homelessness programs. "California has a historically low rental vacancy rate, the result of decades-long prohibitions on the construction of multi-family apartments and condos in most of its cities," noted California YIMBY researchers. "Cities with lower vacancy rates tend to have higher rates of homelessness, because a low vacancy rate typically results from a housing shortage."

The solution requires zoning reform to allow multi-family construction, permanent funding streams for subsidized housing, consolidated authority to direct Housing First programs, and—critically—adequate funding for the support services that prevent hotel conversions from becoming unsafe warehouses for people in crisis.

Some progress is occurring. Several California cities have streamlined approval processes for affordable housing. The state has strengthened laws requiring cities to plan for housing growth. Transit-oriented development is expanding. But the scale remains insufficient, and the failure to fund adequate services has created a backlash that threatens even these modest gains.

Conclusion

Finland proved that Housing First can virtually eliminate homelessness when combined with abundant affordable housing, integrated services, and sustained political will. The country's recent setback demonstrates these elements must be maintained, not just established.

California's experience shows that adopting Housing First as policy without creating both the housing supply and the service infrastructure to support it produces limited results and can create new problems. The intervention works—participants in properly resourced programs with adequate services achieve 90% housing retention. But when only a fraction of homeless people can access such programs due to housing scarcity, and when hotels are purchased without funding for adequate staff and services, the overall crisis continues to grow while damaged properties and increased neighborhood crime undermine public support.

The contrast between California's successful programs and its failures reveals what matters: it's not just about giving people housing—it's about giving them housing with the support that makes stability possible and safe for everyone.

As Dr. Kushel observed, "There is no medicine as powerful as housing." But medicine only works when patients can access it, when it's administered properly with appropriate supportive care, and when the treatment is sustained long enough to work.

California has the prescription; it lacks the pharmacy to fill it at scale and the clinical support to make the treatment effective. The state's challenge isn't ideological but infrastructural: building enough affordable housing to make Housing First viable for its entire homeless population, and funding the intensive services that transform "housing only" into genuine "housing first."

Finland managed this for 3,800 people over 16 years with €270 million in construction costs and ongoing service investments that paid for themselves through reduced emergency expenses. California faces the same challenge for 187,000 people—and the state has been actively recruiting many of these future homeless residents by offering jobs without building the housing needed for workers at the wages those jobs pay, then placing some into hotels without the services needed to help them succeed.

The Dust Bowl migrants came to California seeking opportunity. Many found work in the fields and factories. But without adequate housing at wages they could afford, some ended up in labor camps. Today's pattern is the same, just stretched over decades rather than months. People come for tech jobs, service jobs, construction jobs—they work for years or even decades—then hit a crisis and discover California has no housing safety net to catch them.

When California does provide housing through programs like Project Roomkey and Homekey, inadequate investment in support services can turn hotels into troubled sites that validate every critic's fear while failing the very people the programs were meant to help.

Until California matches Finland's commitment to housing supply creation and adequate service funding, its Housing First programs will remain islands of success in an ocean of need, helping tens of thousands in well-managed programs while poorly implemented sites create backlash, overall homelessness continues to swell, and the political consensus needed for real solutions erodes further.

The model works. Finland proved it. California's best programs prove it. The question is whether California will build the complete foundation needed to implement it—abundant housing, intensive services, adequate staffing, proper accountability—or continue with half-measures that produce half-results and validate the critics who say the whole approach should be abandoned.

SIDEBAR: The Bankruptcy Question - Inevitable Write-Downs Create a Municipal Fiscal Crisis

Behind the optimistic talk of office-to-residential conversions lies an uncomfortable economic reality that's already unfolding: these buildings are headed toward bankruptcy anyway. The only question is whether we use the inevitable financial collapse to create housing—or waste the opportunity. But there's a second question that cities can't avoid: when the bankruptcies hit and property values crater, who pays for police, fire departments, and schools?

The Walking Dead

Make no mistake: many of these office buildings are financially doomed already. Office vacancy rates in major cities have hit levels not seen in decades—17.2% for Class A space in downtown Pittsburgh, 25% in San Francisco, 21.7% across the Pittsburgh area. These aren't temporary setbacks waiting for workers to return to offices. The work-from-home shift is structural, not cyclical.

Building owners are already in "extend and pretend" mode—refinancing when possible, negotiating forbearance with lenders, and delaying the inevitable. But the mathematics don't work. When a building that needs 85% occupancy to service its debt is sitting at 40% occupancy with no recovery in sight, bankruptcy isn't a policy choice—it's a certainty.

The 530 B Street building in San Diego perfectly illustrates the trajectory: purchased for $57.7 million in 2017, it sold for $27.5 million in 2024—a 52% loss. That's not a hypothetical scenario or a policy proposal. That's what already happened. The previous owner took a catastrophic loss. The question is what comes next.

The Price Discovery Argument

Here's why bankruptcy might actually be necessary for housing conversions to happen at scale:

Goldman Sachs calculated that office buildings need to lose nearly 50% of their value before conversion becomes financially feasible. That seems drastic—until you realize it's already happening. The buildings aren't worth what owners paid for them. The loans aren't worth face value. The emperor has no clothes; we're just pretending he does.

Bankruptcy forces honest price discovery. It wipes out the overhang of old debt based on fantasy valuations and allows buildings to change hands at prices that reflect reality: what someone will actually pay for a half-empty office tower in a market where nobody wants office space.

At those realistic prices—$110 per square foot instead of $250, $27 million instead of $57 million—the conversion math starts to work. Add $280-350 per square foot for renovation, and you might produce housing at a total cost that's competitive with new construction, without the years of permitting and land acquisition.

The Systemic Risk—Already Baked In

Office building bankruptcies will stress regional banks, Pension funds will take losses. REITs will take write-offs But here's the thing: those losses already exist. They're sitting on balance sheets right now, marked at inflated values that everyone knows are fiction.

The 2008 financial crisis taught us that pretending bad assets are good assets doesn't make them good—it just delays the reckoning and often makes it worse. The commercial real estate losses are already there. The only question is whether we recognize them now and put the buildings to productive use, or recognize them later after years of decay and lost opportunity.

The Federal Reserve has already flagged commercial real estate as a banking system vulnerability. Regulators are watching. The risk is known. Delaying bankruptcies doesn't eliminate the risk—it just ensures the buildings sit vacant longer while we pretend.

The Municipal Fiscal Catastrophe

Cities don't get a tax write-off. They get a budget crisis.

Commercial office buildings, especially downtown high-rises, are typically among a city's largest property taxpayers. They generate enormous revenue relative to the municipal services they consume. Unlike residential properties that need schools, parks, and extensive infrastructure, office buildings are cash cows—high assessed values, minimal service demands.

When a $57 million building becomes a $27 million building, the city doesn't just lose tax revenue on the difference—it loses it permanently, every single year, forever. And if that building converts to affordable housing with tax abatements (which most conversions require to pencil out), the city might lose even more.

The Urban Doom Loop

This creates what economists call the "urban doom loop":

Office values collapse → Property tax revenue plummets
City cuts services → Police, transit, street cleaning, parks deteriorate
Downtown becomes less attractive → More businesses leave, more residents avoid downtown
Remaining property values fall further → Tax revenue drops more
City cuts services deeper → Spiral continues

San Francisco provides a preview. The city faces hundreds of millions in lost property tax revenue from declining office values. This forces cuts to transit, police, street maintenance—the very services that make downtown livable. As downtown deteriorates, the residential conversions that are supposed to revitalize it become harder to fill because nobody wants to live in a declining neighborhood with deteriorating services.

Who Fills the Gap?

When private investors lose money on real estate, they write it off. When cities lose their tax base, someone has to make up the difference:

Option 1: Raise taxes on remaining properties This punishes property owners who haven't failed and accelerates the exodus. Why stay in a city that's raising taxes to cover the losses from collapsed office buildings?

Option 2: Cut services Fire fewer police and firefighters, reduce transit service, close libraries, defer street maintenance. This makes the city less livable and accelerates decline.

Option 3: State or federal bailouts Essentially, California or federal taxpayers subsidize cities whose office markets collapsed. This is politically difficult and may not be available.

Option 4: Bond market discipline Cities that can't balance budgets face credit downgrades, higher borrowing costs, and potentially municipal bankruptcy themselves (see Detroit, Stockton, San Bernardino).

The Residential Conversion Doesn't Help Fiscally

Here's the cruel irony: even successful office-to-residential conversions often worsen the city's fiscal position in the short to medium term.

A thriving office building paying taxes on a $57 million valuation generates substantial revenue and requires minimal services. Convert it to affordable housing with tax abatements, and the city gets:

Lower assessed value ($27 million acquisition price)
Property tax exemptions for 10-30 years (standard for affordable housing)
Increased service demands (residential properties need more city services than offices)
No offsetting revenue increase

The residential conversion solves a housing problem but exacerbates the fiscal crisis. The city needs the housing, but it also needs to keep the lights on, police the streets, and run transit.

The Finland Difference—Again

This highlights yet another advantage of Finland's approach: by building new affordable housing rather than relying on converted failed commercial properties, Finland avoided the fiscal doom loop entirely.

Finnish cities didn't depend on taxing commercial office buildings to fund services. Their revenue model is based on broad-based taxation including national VAT and income taxes. When they built affordable housing, it was part of a comprehensive policy with appropriate fiscal support—not a desperate attempt to salvage value from collapsed commercial real estate while simultaneously watching their tax base evaporate.

Two Paths Forward

Path 1: Managed Bankruptcy and Fiscal Transition Recognize that these buildings will fail anyway and their tax revenue is already gone (just being temporarily hidden by inflated assessments). Create clear pathways for:

Accelerated bankruptcy processes for obviously nonviable office buildings
State fiscal support to offset municipal revenue losses during transition
Pre-packaged bankruptcy structures that facilitate conversion
Streamlined permitting for conversions
Realistic tax abatement programs that acknowledge the fiscal cost
Downtown revitalization investments to prevent the doom loop

This path accepts the fiscal pain but tries to manage it and build something useful.

Path 2: Extend, Pretend, and Fiscal Collapse Allow owners and lenders to carry properties at fake valuations. Assess property taxes on inflated values that won't hold up in appeals. Watch buildings sit empty while cities budget based on revenue that's evaporating. Eventually face the same bankruptcies and fiscal crisis anyway, but now the buildings have deteriorated, the conversion opportunity has passed, cities have years of deferred maintenance and service cuts, and the tax base has collapsed even further.

The fiscal pain still happens. This path just makes it worse and produces nothing.

The Missing Piece: State and Federal Support

Private investors can write off losses and move on. Cities can't. They're stuck with geography—they can't declare bankruptcy and start over (well, they can, but it's catastrophic).

This means office building bankruptcies and conversions require state and federal fiscal support to prevent municipal collapse. Cities need:

Revenue replacement during the transition period
Infrastructure investment to support downtown residential conversion
Transit funding to maintain service as tax base shifts
Support for municipal bond markets to prevent credit crisis

Without this support, cities face an impossible choice: allow bankruptcies and face fiscal crisis, or prevent bankruptcies and watch downtown decay while the housing crisis deepens.

The Hard Truth—Fiscal Edition

The bankruptcy question isn't "should we allow it?"—market forces have already answered that. The fiscal question is: will states and the federal government provide the fiscal bridge to help cities survive the transition from office-based downtown tax revenue to residential-based neighborhoods, or will we let cities collapse into a doom loop while we wait?

Every month of delay is:

Another month of people sleeping on the streets
Another month of buildings deteriorating
Another month of cities pretending their tax base isn't evaporating
Another month of deferred reckoning that makes the eventual crisis worse

These buildings are already on the road to bankruptcy. The tragedy isn't just that we're not ready to convert them into housing—it's that we're not ready to help cities survive the fiscal impact when the fantasy valuations finally collapse and the tax revenue disappears.

Cities are about to learn and expensive lesson, but they can't just take a tax write-off and move on. They have to keep paying for police, fire departments, and schools, as well as guaranteed pensions with a tax base that just lost 30-50% of its value.

The losses are coming—to investors and to cities. The only question is whether we plan for both, or pretend neither is happening until it's too late.

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California's Housing First Paradox