San Francisco used to spend generously on direct payments to homeless individuals, until Proposition N was passed in 2002, redirecting the money to services for the homeless. This measure was championed by Supervisor Gavin Newsom who, as we know, was elected as Mayor the next year.

The arguments summarized here on Wikipedia are a good introduction to some of the issues in play here.

http://en.wikipedia.org/wiki/Care_Not_Cash