You have it backwards. The city has followed your prescription for eight years by approving ever more homeless services and shanties in the Whiteaker while simultaneously providing zero police services. That huge increase in the concentration of homeless people, now estimated to be fully 20% of the people in the Whiteaker on any given day, has created this disaster. 

Federal housing law requires that low income housing be dispersed throughout a region. This is required because high concentrations of very poor people is known to lead to even more poverty. The shanties and illegal camping are simply ultra-low income "housing" and need to be dispersed. The overall impact would likely be much, much lower with dispersal.

Dispersal would also alter the drug landscape. Right now, dealers have hundreds of customers in one place, so delivery is easy and convenient. Spread out the customer base and it will cut into the profits and volume.