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March 25 (Bloomberg) -- California Governor Arnold Schwarzenegger said a make-shift tent city for the homeless that sprang up in the capital city of Sacramento will be shut down and its residents allowed to stay at the state fairgrounds.

Schwarzenegger said he ordered the state facility known as Cal-Expo to be used for three months to serve the 125 tent city residents, some of them displaced by the economic recession. The encampment may be shut down within a month, said Sacramento Mayor Kevin Johnson. The move comes after the Sacramento City Council last night agreed to spend $880,000 to expand homeless programs.

“Together with the local government and volunteers, we are taking a first step to ensure the people living in tent city have a safe place to stay, with fresh water, healthy conditions and access to the services they need,” Schwarzenegger said in a statement. “And I am committed to working with Mayor Johnson to find a permanent solution for those living in tent city.”

California, home to one of every eight Americans, has been particularly hard hit by the housing market collapse after many residents turned to exotic mortgages to afford homes. The tent city, which has long existed along the banks of the America River, gained national attention last month when some of its recently homeless residents were featured on the Oprah Winfrey Show.