To a large extent I agree with your point here, but these cities are well beyond simply not punishing drug users.
Mobile safe injection sites, needle exchange programs, cash handouts, unfettered defecation in streets, naloxone handouts, lack of enforcement of petty crimes like vehicle break-ins and theft. There are plenty of policy decisions being made here that affect the choices people make, and none of that even touches on actually enforcing drug laws.
Moral and financial cases can be made for any of the above, and we can debate that, but to me it's really drinking the Kool-Aid to claim these don't encourage homelessness. They certainly make it easier to make bad decisions that can start or keep you on the track of homelessness.