California’s $33 Million Tiny Home Bet Restarts in L.A. as Homelessness Funding Faces Steep Cuts

California is finally making progress on a stalled program to build tiny homes to address the state's homelessness crisis.

Los Angeles Mayor Karen Bass and City Council member Hugo Soto-Martínez attended a groundbreaking of a development in East Hollywood earlier this week. It will house 50 people, with 10 beds for transitional youth.

"At a time when funding is being cut at every level of government, the determination and creativity it took from my team and our trusted service providers to break ground on these 51 beds is truly extraordinary," said Soto-Martínez.

Los Angeles intervened at a homeless encampment just around the corner from the project, on Sierra Vista Avenue, and brought 20 people indoors.

Gov. Gavin Newsom put aside $33 million in 2023 for a project to build about 1,200 tiny homes statewide. That included plans for 500 units in Los Angeles, 350 in Sacramento, 200 in San Jose, and 150 in San Diego. The homes would be placed by those jurisdictions, which would own the units and provide recruiting and other services.

It came at the same time that the state said it would release $1 billion in homeless prevention funding. Newsom aimed for a 15% reduction in homelessness statewide by 2025.

The Realtor.com® state-by-state housing affordability report card gives California an F. Newsom championed building more housing in the state, especially more dense housing in reluctant cities.

How the promise to build tiny homes stalled

Tiny homes, already popular with homeowners, looked like an attractive way to address homelessness. California is already one of the pioneers of the market-rate small home, and the market is expanding as more states allow them, and more financing comes to the table. The state is already trying out new housing types including modular-home building and "straw homes."

But the program stalled and California changed its strategy, instead giving communities cash grants to order the tiny homes themselves. And it picked up criticism along the way, for slow development pipelines, design limitations, and inflating costs per unit.

Los Angeles and some other cities have made progress in addressing homelessness. Street homelessness has dropped by 18% over the last two years in L.A., Bass said.

Still, state and federal support for homeless programs declined. Net funding to L.A. dropped from $6.9 billion in 2022 and 2023 amid the COVID-19 surge, to $1.5 billion in 2025-2026. The city has been pushing for an amendment to the state's affordable housing bond program in a bid for more interim housing.

California Department of Housing and Community Development, Hope the Mission, Built On Site Systems, Lehrer Architects, and the Zegar Family Foundation are the development team for the East Hollywood project.