So you pack housing developments with addicts, crazy people and criminals. Next step is they start attracting their friends, and all of the sudden the development turns into a crime-ridden shithole. The families living in these development get screwed.
It also causes other disruption. NYC is adopting this type of policy, so people on waiting lists or in housing they don't like are flocking there from all across the region, and are receiving enhanced benefits. (It's pretty difficult to prove that someone is bona-fide homeless.) Meanwhile, the chronic homeless people who can't hold it together are still addicted, still in need of mental healthcare and are still living under an overpass.