"It was in the early days of Reagan that the homeless began to appear in growing numbers on the streets of American cities, an early sign of the slow process of turning over the functions of the federal government to companies through such ideas as privatization. Reagan practically initiated the concept of turning social welfare over to charitable foundations."

That's certainly one way to look at it, but an educated way might be:

October 1983
Housing: Examining a Media Myth

"[M]ore needy people have been left to wander the streets as a result of the "deinstitutionalization" of patients in state mental hospitals than for any other single reason. In 1955, 569,000 patients were cared for in state-run mental hospitals nationwide. By 1979, the total had fallen to 146,000. Since 1963, the Veterans Administration has cut back on its housing of mental patients by 59 percent, to 24,000 patients as of 1980.

Needless to say, the conditions in most state mental hospitals have long been dismal. It was in reaction to their bleakness that liberal politicians and legal foundations began to demand, via legislation and lawsuits, that the "warehousing" of indigent mental patients end and that the nonviolent mentally ill be released. In this demand, liberals found conservative allies, who favored the emptying of state hospitals as a way of reducing government expenses. But while "freedom" has been won for the mentally ill, it is often only the freedom to shiver on the street.

"It is generally accepted that at least a third of the people now in city shelters have extensive histories of psychiatric hospitalization," Kim Hopper, a researcher for the National Coalition for the Homeless, told the congressional subcommittee. The chronically mentally ill have little hope of employment; many have slight awareness of what is going on around them, or even the capacity to take their medication, assuming some agency has managed to keep track of them to supply it.

Finally, many of the homeless are victims [...] of prosperity. They are outcasts of the urban rebirths of the 1970s, the former residents of rooming houses, or, as they are called by social workers, "single-room-occupancy" (SRO) hotels. When cities began to seek ways to attract the booming travel and convention industries, they needed space for large new hotels and convention centers. The developers naturally looked for whatever low-value property was obtainable, and that was often an SRO. As a result, in the past decade San Francisco has lost 10,000 residential hotel units to urban renewal; New York has lost 31,000; the number of SRO hotels in Denver dropped from forty-five in 1976 to seventeen today. When SROs are demolished, their residents--who can barely afford to live in them as it is- have no place to go. As an economic proposition, urban redevelopment makes sense, but, like many sensible economic propositions, it exacts a social cost."

From: http://www.theatlantic.com/politics/poverty/eastwelf.htm