Good, so let's do that first before making an already terribly exploitative system even worse.

This where I think criminalization actually serves to increase exploitation and increase the incentives for exploitation.

I heavily disagree with that. Most legally available drugs are already out of reach for most of the homeless people (even more so in the US). These people are primarily defined by their financial status, if nothing else.

Maybe we are talking about different things. I mean that criminalizing drugs tends to make their use more risky as there are fewer quality controls and no legal recourse for drug users who get low quality or downright poisonous products. Vulnerable populations, like the homeless, who are already easy to exploit, become victims of this culturally and legally defined demarcation.

The only way that I can see that happening is when the price would drop significantly enough so homeless people would prefer it over black-market dealers.

Keep in mind that there are a lot of legal practices, or legally obtainable things, that still have a large black market. Its been historically proven again and again that people will gladly take risks or a loss in quality over affordability.