But I do agree that the current situation is not good, and that reflexively defending the current system is stupid.
Even if the conditions are pleasant. (Prisons aren't supposed to be cruel, though apparently we've decided to tolerate that.)
It does sound compassionate to force them into a place with a bathroom and a door, but if they can't go see their families, look for a job, or go for a walk, maybe it isn't as compassionate as it appears at first glance.
(And that is on the assumption that the facilities are less unpleasant than our prisons. I strongly doubt that.)
What you envision would require that we now have an excess of mental health capacity. There isn't. Now repeat that for thousands of municipalities.
There is an extreme shortage of available long term care.
There is never a shortage of space in prisons, not even when there is. It is where we have always put our MI - because anything else is inconvenient.
All of these things were known when this EO was drafted.