San Jose, pressured by the state and regional water authorities to clean up the trash and human waste in the creek that are polluting San Francisco Bay, committed $4 million to move as many Jungle residents as possible into subsidized housing. So far, it has found apartments for 144 people and promised to subsidize their rent for two years. It has subsidy vouchers for 60 more, but it cannot find available apartments.
Read MoreHousing supply surges in northern Virginia
"There is just a lot of competition for every rental unit" in Silicon Valley, said Jennifer Loving, executive director of Destination: Home, which has been helping the city place people. "We have rounded up funding to help people have temporary housing, but the real challenge in this whole region is the cost of housing is so high."
According to Zillow Real Estate Research, the median rent in San Jose as of October was $2,934 a month. For the wider San Jose metropolitan area, it was $3,163 a month — up 16 percent in one year.
On Thursday morning, scores of Jungle residents hauled their belongings out of makeshift homes. Many pushed shopping carts piled high with blankets, clothing and dishes, tugging as the wheels got stuck in the mud. Many had dogs on leashes. When asked where they would go tonight, "I have no idea" was the common refrain.
Read MoreThe halo effect of Cleveland's comeback on housing
Then, three city garbage trucks rolled onto the upper plateau of the encampment, and about 50 workers in hazardous-materials suits and hard hats began lifting garbage into the trucks. Mattresses, tarps, plywood, a microwave, broken umbrellas — all were thrown in along with piles of debris. Later in the day, bulldozers got to work on the lower part of the Jungle.
Veronica Mackenzie, 21, had lived there with her boyfriend, her aunt, her aunt's boyfriend and two dogs. "It's going to be a long night," she said as she maneuvered two carts up an embankment. "They should have provided housing for everyone out here, or shelter or something, instead of just pushing us out on the streets," she said.
Ray Bramson, the city's homeless response manager, said San Jose had procured 70 more shelter beds starting Thursday night, in addition to the 275 beds throughout Santa Clara County that recently became available with the opening of winter homeless shelters.
But Jungle residents who had places to go have been leaving for days. Those who left on Thursday seemed to be those who did not.
Read more from The New York Times:
Companies should reject specific online threats
Uber raises $1.2 billion, valuing the company at $40 billion
Rights Bill sought for Lesbian, Gay, Bisexual & Transgender Americans
"Nobody should be in the streets — that is the problem with this whole thing," said Sandy Perry, a minister and outreach worker with the Affordable Housing Network who has been at the Jungle daily trying to help.
While he agrees that the Jungle, with its piles of garbage, buckets of human waste and now rising creek waters, "is not a nice place to live," Mr. Perry said the city ought to have a better plan for homeless people in general.
More than a few of the encampment residents said they were victims of rent increases. Yvonne Vabiseo grew up in San Jose and had a job and an apartment until recently. "I worked at Dollar Tree," she said. "I had a car and my own place." She lost her job just as her rent was raised, prodding her into homelessness.
Nobody seems to know how many people are still in the Jungle encampment. While the city's homeless response manager guessed 70, some residents say 300.
Read MoreBig investors pull back on housing
"As soon as they've moved people out of here, hundreds more move in," said Robert Aguirre, a Jungle resident.
San Jose is the city in the heart of Silicon Valley, near Apple, Google and dozens of other successful technology companies. An influx of workers has led to soaring housing and rental prices.
"it is one of the paradoxes of our region's economic success, this housing shortage," said the city's communications director, David Vossbrink.
A city memo from this fall estimates a shortage of 16,000 affordable housing units. But resources to deal with that shortage have dwindled as well. In California, redevelopment funds from the state had been a reliable means of developing affordable housing, but when California was facing its severe budget deficits in the midst of the recession, its governor and Legislature did away with redevelopment programs.
Read MoreUS housing starts slip, but permits near 6-1/2-year high
Leslye Corsiglia, the city's housing director, said that in 2010 the city received $40.6 million in redevelopment funds that could be used for low- and moderate-income housing. Now that money is spent. From all sources, federal, state and local, the city's funds for affordable housing have dropped by a third since then, to $61 million.
Just last month, the City Council passed a housing impact fee requiring that developers of market rate rental housing pay $17 per square foot toward development of low-income housing. But revenues from that new fee will not kick in until at least 2019.
Mr. Bramson said that finding stable subsidized housing for 144 people in this atmosphere was an accomplishment.
"Coming out of a recession, the dissolution of redevelopment funds," cities have had a tough time creating affordable housing in an environment when rental prices are skyrocketing, he said.