My understanding is that the region believes that as neighbouring municipalities have effectively prevented the creation of encampments, there has been a significant number of homeless people relocating from those municipalities to the encampment. That's the basis for trying to draw a line between those that were there before a certain date (all of whom have since left the encampment) and those who arrived after. Because it basically forces the region to maintain the encampment until homelessness is solved in Ontario, or maybe all of Canada, and gives other nearby municipalities the ability to "solve" their local issues by buying people a ticket to Kitchener, rather than investing in their own affordable housing and shelter options.
I understand both perspectives here. It makes sense to offer a camping spot as the ultimate fallback, but it's also not fair for the region to have the burden of solving homelessness for surrounding municipalities too. This really should be a provincial responsibility.