When a shortfall of several hundred thousand dollars almost derailed new homeless housing in Bakersfield, the savior that swooped in to salvage the project wasn’t an affordable housing nonprofit, state housing grant or other traditional source.

Instead, it was a health care company that had never before built a single home.

That unorthodox move is part of a broader effort to commingle California’s health care and homeless services agencies, as providers in both areas increasingly acknowledge a glaring truth: It’s nearly impossible to be healthy if you’re living on the street.

Health care company Akido Labs, which runs clinics and street medicine teams in Southern and Central California, covered about 10% of the cost to build that 16-unit project in Bakersfield. Health insurance giant Anthem Blue Cross Blue Shield is funding homeless housing projects in Alameda, Kings and Tulare counties. And Los Angeles County’s biggest health plan is paying to lease properties for its homeless clients.

“For the unhoused, housing is medicine,” said Karthik Murali, head of public health at Akido Labs. “Providing stable housing can alleviate more health conditions than taking them to the ICU and the hospital and providing street medicine…Knowing that fact, we wanted to be part of the solution.”

People who are homeless have higher rates of illness, and die an average of 12 years younger than the general U.S. population, according to the National Health Care for the Homeless Council.

Gov. Gavin Newsom set the marriage between housing and health care in motion in 2022, via his massive overhaul of the state’s Medicaid system. With the launch of CalAIM, the state allows Medi-Cal to fund things not traditionally covered as health care — such as helping homeless clients find housing, paying for security deposits and preventing evictions.

As an incentive for health care plans to ramp up these new services, the state also provided $1.3 billion in additional funding under the Housing and Homelessness Incentive Program. Managed care plans can earn those funds by investing in solutions to homelessness. It’s that money Akido and other health care providers are using to build and lease new homeless housing.

Dr. Rishi Patel from the Akido Street Medicine team checks on an unhoused man living in a vineyard in Arvin on May 28, 2024. Photo by Larry Valenzuela, CalMatters/CatchLight Local

It’s still a relatively rare use of the money — it’s more likely to pay for services for unhoused people, such as case managers or safe RV parking sites. That’s partly because creating housing is so expensive in California, and partly because most health care providers don’t know much about homebuilding.

Even so, Murali said the new funds made a big difference. Recognizing that it could only do so much to help its homeless patients as long as they were living on the street, Akido had long wanted to get into the business of developing housing. The incentive program gave it the funds to do so.

“It could not have been possible before, and it’s possible now,” Murali said.

Housing as medicine

Los Angeles-based Akido Labs got its start as a health tech company out of Y Combinator, the startup incubator that grew big-name companies such as Airbnb and Dropbox. It later launched medical clinics and street medicine teams in Central and Southern California.

When the Kern County Housing Authority found itself over budget on the Bakersfield homeless housing project — in part because the housing authority underestimated the cost of an expensive retaining wall — Aikido jumped in.

Construction workers building an apartment complex site for an affordable housing project in Bakersfield on May 29, 2024. Photos by Larry Valenzuela, CalMatters/CatchLight Local

“We would have been stalled, and who knows where it would have been now if we hadn’t had that money come in,” said Stephen Pelz, executive director of the housing authority, who said Akido funded about 10% of the roughly $3 million project.

The two-story development, where tenants will pay 30% of their income in rent, sits on a formerly vacant lot next to what used to be a large homeless encampment. Each apartment is a small one-bedroom, one-bath — about 500 square feet — and you can see the Sierra Nevada from the upstairs windows on a clear day. It’s a big deal to complete a project in that area, where most of the street doesn’t even have a sidewalk and new construction is rare, Pelz said. You’re more likely to see something here catch fire and then be torn down than you are to see something new get built, he said.

Aikido also took on a second, 40-unit homeless housing project in Bakersfield. That development, now set to open in 2025, would have fallen apart without the health care company’s funding. The county had applied for a state Homekey grant, but that wasn’t enough to buy the property or fund the project.

Aikido paid about 20% of the project’s total $10 million cost, and it’s now working with the county housing authority. Akido is advocating for features it knows will help its clients, such as wheelchair accessible outdoor spaces, suicide prevention designs (such as shelves in closets instead of rails) and semigloss paint that makes cleaning easier. The health care company is learning to navigate the complicated world of housing production as it goes.

“That’s been an interesting process,” Murali said.

Homeless housing from Sacramento to L.A.

Other counties are using the money to secure housing units without putting shovels in the ground. Sacramento County won $3.2 million for its Landlord Engagement and Assistance Program, which gives unhoused clients rental subsidies and places them with private landlords, while also working with landlords to prevent evictions.

That money will allow the county to expand that program by about 30%, said human services program manager Neil Kurtz.

“It’s everything,” Kurtz said. “We’re going to be able to make a significant impact, I think, in reducing homelessness.”

A homeless encampment at W Street and Alhambra Boulevard in Sacramento on April 11, 2023. Photo by Rahul Lal for CalMatters

Los Angeles County’s largest health plan, LA Care, is using the incentive funds to help open 1,700 homes to homeless residents by 2027. Working with the county, the health plan is funding programs to buy and lease those units, or pay for security deposits and other expenses. As of the end of last year, 600 of those homes were available, said Dr. Sameer Amin, chief medical officer for LA Care.

Anthem Blue Cross Blue Shield recently put money into a 42-unit homeless housing project in Tulare County, helped fund two more projects in Kings County, and contributed to a fund in Alameda County that’s building additional units.

“We’re looking at other opportunities,” said Kris Kuntz, program director for housing and homeless strategy at Anthem. ”We’re looking at: Do we go purchase single family homes that are on the market? Things like that.”

Can the housing-health care partnership be sustainable?

Blurring the line between housing and health care has been confusing for many involved, said Carolina Reid, faculty research advisor at the UC Berkeley Terner Center for Housing Innovation.

Health care providers don’t know what organizations to partner with in order to get housing built, or how to enter their clients’ information into the state’s homelessness data system. Housing providers don’t know how to navigate strict patient privacy laws. The Terner Center is researching ways to help both sides adjust.

The state paints this health-care-meets-housing experiment as a success so far. Health care providers using the Housing and Homelessness Incentive Program money reported they now are more frequently screening their patients for homelessness, while also offering them more housing-related services. According to the state Department of Health Care Services, 48,172 patients have received housing – and 81% of them have remained housed.

But the problem with this money is that it’s a one-time grant, and Newsom has given no indication that he’ll replenish the coffers when it runs out. After Newsom and legislators scrambled to close a multibillion-dollar budget deficit this year, there’s little state funding up for grabs.

“One question I have that I can’t answer is: Are these efforts sustained after the HHIP funds run out?” Reid said. “There needs to be a sustained source of funding to help managed care plans do this type of work.”

A sign for a construction site for Golden Empire Affordable Housing in Bakersfield on May 29, 2024. Photo by Larry Valenzuela, CalMatters/CatchLight Local

Murali hopes Akido can drum up private equity to replace the state funding in future projects, but whether investors can be convinced it’s a good business move remains to be seen.

What’s more, when up against the steep cost of building or buying housing in California, the money the state allocated doesn’t amount to that much, Reid said. That’s why, she said, we haven’t seen more health care providers using the money to create new housing.

Kuntz agrees.

“When it comes to housing and homelessness,” he said, “you think it’s a large amount of money, but per county, it’s still…not huge, per say, given the need.”

In Kern County, the housing authority typically receives anywhere from 500 to 1,000 applications for each new project, Pelz said. The project set to finish next month in Bakersfield has room for just 16 households.

That means, if you get chosen, Pelz said, “It’s kind of like winning the lottery.”

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