If there is good quality safety net in place may be it wouldn't matter why people may become homeless because they wouldn't as they would always have a roof over their head. May be providing good quality safety net is much more efficient [and humane] way to solve homelessness than trying to address original causes ? Notes : 1. Not that i'm against addressing the original causes, it is just that all the history so far hasn't provided for much hopes of success here. 2. In no way though i think 250 units is a good quality safety net by itself, at best it is just a humble beginning, though a beginning in the right direction. I think more along the lines of good no-questions asked welfare with guaranteed minimal, yet fully compliant/acceptable housing.
The case where they do turn into slums, perhaps in the longrun not all that different than the favelas of Brazil, is obviously undesirable. But it goes further than that. This is going to lead to a desire to segregate these areas from the rest of the city. At the most extreme you add an employment office to help people get back on their feet, fence the region off to keep things a bit more 'controlled' and you have created Sanctuary Cities in all but name.
The second alternative is that the areas don't become slums. They become decent places to live. Plenty of people are actually able to use these places, and the implicit facilities (mental counseling, job programs, substance abuse programs, etc) to get back on their feet again. This sounds incredible, but what about how the rest of society will view them? For the homeless and otherwise disenfranchised these cities would be a small lifeboat in an otherwise endless sea. The desire to get in is not going to bring out the best in people. And even for people who are getting by in 'normal' society. Many people today struggle to make ends meet paying $xxxx a month to live in glorified closets. Many are not going to be happy to see that their tax dollars are going to let these people live comfortably completely for free. Somebody in this very thread has already pondered if he would be allowed to live there with a well paying job.
I think ultimately the goal should be to focus on fair programs. Means testing is what I think is causing the fundamental breakdown of support for a social safety net. When ever more people in the US are not living especially well, unfair treatment condemns social programs to being contentious and divisive. So in this case, what of having large scale coffin type 'hotels.' They would be free of charge and the square of the hotel would offer various facilities including a clinic, mental health facilities, job facilities, etc. But they would be open to all. The question is how big would these things need to be before an equilibrium is reached -- though I suspect this is what you were alluding to, in rather fewer words!
More cities should follow this model. Wealth balancing should be a local action.