San Jose frames 'functional zero' model and a 3,000‑unit shelter gap as city doubles interim capacity

City housing staff told the San Jose City Council that a data review and modeling effort estimates roughly 5,477 unsheltered people in San Jose and that, under the model presented, the city faces an approximate gap of 3,000 shelter beds/spaces to reach a community target the presentation described as “functional zero.”

Eric (housing director) and deputy director Cupid Alexander said functional zero in this context means the system is sized so that exits from homelessness consistently outpace entries; they emphasized it does not mean the city will have literally zero people experiencing homelessness. Staff described a three‑part framework: (1) prevention and diversion to stop inflow; (2) shelter and low‑barrier interim housing to meet urgent unsheltered need; and (3) long‑term permanent housing production and preservation.

Staff reported a current system supply of roughly 2,968 beds and spaces managed across city and county programs and described about 1,723 additional interim units and sites under development that will increase capacity in the near term. Even after adding those projects and the city’s existing inventory, staff said an additional roughly 3,000 spaces would be needed to cover the modeled unsheltered count of 5,477.

On costs, staff presented order‑of‑magnitude figures: they estimated a one‑time capital requirement in the low‑hundreds of millions to build out enough interim/shelter spaces (staff presented an illustrative $255 million example), and ongoing operating costs (staff gave an illustrative figure in the low‑hundreds of millions per year for a fully scaled interim portfolio, with potential reductions as more permanent housing comes online). Staff said standardizing operations (security, food, property management and maintenance) and using bulk procurement for services are two areas where they expect to reduce per‑unit operating costs materially.

Deputy director Cupid Alexander and housing director Eric stressed that a portion of the unsheltered population is “program resistant” — people who decline or are slow to accept shelter offers, often because of untreated behavioral health conditions, past trauma, distrust of institutions, or practical barriers (for example pets or household composition). Staff said the city will continue harm‑reduction, low‑barrier and outreach approaches and reiterated that certain people with acute behavioral‑health needs will require county‑run treatment and higher‑level clinical placements.

Staff said the city cannot responsibly shoulder the entire solution alone and urged continued coordination with Santa Clara County, regional partners, and philanthropic and private partners. They listed sources that would be needed for capital and operating support: state/federal grants (for example Homekey and other HCD programs), tax credit equity for long‑term housing production, Measure E and other local revenues where council policy allows, and philanthropic/partner funding. Staff highlighted one particularly time‑sensitive lever: county actions on treatment and Medi‑Cal/CalAIM reimbursement that could reduce operating costs per unit if the county obtains and directs those funds.

Councilmembers pressed staff on: program‑resistant populations and treatment capacity; how many people are local versus new to San Jose (staff presented prior PIT and HMIS indicators showing most recorded last addresses within San Jose); performance metrics for site transitions (staff cited rough estimates that 30–40% of people who flow through parts of the shelter system had moved into permanent housing, with variation across site types); and lessons learned from earlier hotel conversions. Councilmembers repeatedly asked staff to prioritize prevention measures and to look for operating efficiencies that could reduce long‑term cost per unit.

Staff emphasized the model is a planning tool, not a budget ask to be approved immediately; the analysis is intended to support council policy decisions about priorities and to guide multi‑year resource planning. Council and staff agreed to continue working on clearer cost‑benefit comparisons and to return with more detailed operating‑cost estimates, pilot performance data and opportunities for tighter county collaboration on treatment capacity and Medi‑Cal support.

Public commenters and several councilmembers asked for quicker interim solutions for areas with acute encampment problems and for clearer communications about how neighborhood impacts and encampment management will be handled. Councilmembers signaled support for a balanced approach that pairs enforcement of encampment rules with expanded shelter options and stronger prevention services.