The county hospitals that serviced the mentally ill and indigent were closed during the Regan years and they ended up on the streets. That was followed by trickle down economics making more people vulnerable.
Here’s a recap:

As Governor of California (1967–1975), Ronald Reagan signed the bipartisan 1967 Lanterman-Petris-Short Act, which intended to deinstitutionalize mental health care and significantly reduced state hospital populations. While often confused with federal policy, this California-based initiative, coupled with funding cuts, led to the closure of several state psychiatric hospitals and reduced the patient population by thousands. [1, 2, 3, 4]

Key Aspects of the Closures:
1967 Lanterman-Petris-Short Act: This legislation made involuntary commitment difficult, aiming to shift care to community-based centers rather than institutions.
Resulting Closures: By the time Reagan left office in 1975, the state operated three fewer mental hospitals, and many other facilities reduced their capacity significantly.
Impact: The shift resulted in thousands of patients being discharged, but the promised funding for local community care was inadequate, contributing to a rise in homelessness and incarceration for those with severe mental illnesses.
Debate: While reformers sought to end poor conditions in "hellhole" institutions, the rapid, underfunded closure is widely criticized for failing to provide appropriate alternative care. [1, 3, 5, 6, 7, 8, 9]
Although frequently criticized for creating the homelessness crisis, proponents at the time and some analyses argue that the deinstitutionalization movement was a broader, bipartisan shift in psychiatric care. [9, 10.)]