If $800 million wasn’t a sufficiently appetizing carrot to get his audience to buy more motels, Gov. Gavin Newsom could dangle a more spiritual enticement: less time burning in the afterlife.
At the California State Association of Counties’ annual conference in mid-November, more than 200 county supervisors and other officials awaited answers via Zoom for how the governor was planning to ward off all manners of local government armageddon — pestilence, wildfires, budget deficits.
By Matt Levin
When asked about Project Homekey, his program for counties to gobble up as many properties as possible for homeless housing in six months, Newsom veered into the theological.
“You can take years off purgatory, anything you’ve damn done wrong in your damn lives,” said the governor, crediting those officials that have jumped at the program. “Thank you for having the decency, the courage to do the right thing.”
The brimstone-tinted shade was in part directed at Marin County, the affluent Bay Area suburbs Newsom used to call home. The day before his Zoom remarks, the Marin County Board of Supervisors nixed a plan to buy the 70-unit Inn Marin in Novato and convert it to permanent supportive housing. After an outcry from neighbors and a dispute with the hotel’s owner over sales price (a $3.5 million gap between asking price and the appraisal), county supervisors in a closed door meeting decided to return the $11.9 million Newsom’s housing department awarded them for the purchase.
“Father Coz taught me in different verses in the bible, in terms of helping thy neighbor,” said Newsom, referencing his Jesuit economics professor at Santa Clara University. “And so when people push back and people say it’s not my responsibility and push it off to someone else, I’m going to keep pushing back against that.”
It’s not the first time Newsom has harangued local governments to shed a “not in my backyard” mentality and help house the more than 150,000 Californians without a stable place to call home. But in Newsom’s tone, or perhaps in the 11 times he said the word “damn” in his Zoom remarks, one can sense a more desperate exasperation. While the pandemic has laid waste to other parts of Newsom’s ambitious agenda, it has presented his administration with a time-limited silver lining: a perfect storm for getting people housed.
Newsom has some key factors working in his favor: Depressed land prices mean properties can be had at a relative bargain; most of the cost is on the outgoing Trump administration’s tab; and the coronavirus presents a public health justification to act quickly and skip the approval process that often derails housing projects.
Preliminary estimates also put the program’s acquisition price at $146,000 per unit. While that figure doesn’t include future construction costs, it’s a relative bargain compared to building homeless housing from scratch.
As part of “Homekey,”, California is set to acquire more than 90 properties it hopes to convert to homeless housing. If successful, the program could add 6,100 housing units, all of which will be ready for occupancy within three months.
Homelessness advocates say the pace and scope of the program are truly unprecedented.
“Seeing things get set up right away, while it’s been taxing and hard on all of us trying to keep up with everything, it feels kind of like a new day,” said Tescia Uribe, chief program officer at PATH, a Southern California-based homelessness services provider with eyes on two Homekey properties. “Let’s cut the red tape, let’s stop talking about why we can’t do things.”
Despite the optimism, Homekey faces significant questions: What will happen to the thousands of homeless Californians living temporarily in motels as part of Project Roomkey, Homekey’s predecessor? Will cities that object to new permanent homeless housing in their borders be able to derail motel sales? And will California voters see less of their neighbors sleeping on the streets as a result of Project Homekey?
Here’s what we know so far.
What Happens to All Those Homeless People Staying in Motel Rooms Now?
Ruth Moore is 64, a breast cancer survivor, and unsure whether she’ll have to sleep in a shelter again come January.
She’s also one of nearly 14,000 formerly unsheltered Californians still living in a hotel funded by Project Roomkey, the emergency housing program Newsom created in April, according to state estimates. Since September, Moore has lived in the Hampton Inn in Roseville, a suburb of Sacramento. She and the 70 or so other formerly homeless occupants of the hotel have been told by Placer County caseworkers that they’ll need to find alternative housing by January, when the lease is set to expire.
Moore is skeptical. Earlier warnings that the hotel lease would expire turned out to be false alarms, as the county always seemed to find more funds at the last minute.
But if she is forced to leave, she’s unsure where she’ll go. She says she’s on a waiting list for a Section 8 voucher, and has applied to several subsidized senior housing complexes with no success yet. She’s resisted county staff efforts to steer her towards shared housing, where she had a bad experience before.
“What are they going to do, just throw us all out?” asked Moore. “I see people that are using their walkers, wheelchairs, they can barely get around. All of us are older, it’s not like we got 18-year olds in here.”
With an assist from the feds — the Federal Emergency Management Agency picks up 75% of the cost — California counties scrambled to lease as many hotel rooms as they could to get homeless seniors and those with serious pre-existing health conditions out of congregate shelters and encampments, where the virus could spread quickly. Neither FEMA nor the state could provide a comprehensive figure for how much the program has cost so far.
By some metrics, Project Roomkey was a runaway success. The state met Newsom’s ambitious goal of securing 15,000 rooms in just three months, providing tens of thousands of Californians their own bed and bathroom, some for the first time in years. And by relocating residents of overcrowded shelters to hotels, the state largely avoided the nightmare scenario public health experts feared: a major, deadly outbreak at a shelter or encampment (although homeless deaths unrelated to the virus are increasing).
“(Roomkey) really grabbed those who were at the highest risk of doing poorly and got them to safety,” said Dr. Margot Kushel, director for the UCSF Center for Vulnerable Populations. “At least in this first part of the pandemic, we didn’t see in the homeless population what we saw in, for instance, prisons and jails, where were these massive, massive outbreaks.”
But Roomkey is winding down, as hotel leases expire and counties run out of their own funds to make up for what FEMA doesn’t cover. Roughly 269 hotels are still in use, down from a peak of 329 in August. FEMA estimates that it’s already reimbursed about $30.6 million for hotels in five counties and one city, but that the final price is likely to be significantly higher once more jurisdictions submit their expenses.
As the virus surges across the state, the timing is alarming, especially with the prospect of a vaccine and more resources from the Biden administration mere months away.
More than 23,000 homeless Californians have at one point or another stayed in a Roomkey hotel room. But no state agency keeps a detailed accounting of where those homeless Californians have ended up, be it in permanent housing, in another shelter, or back on the streets. A data analysis from the Palm Springs Desert Sun, culled from more than 40 separate counties, found that only 5% of those who slept in a hotel room were transitioned to a permanent housing solution. Sixteen percent returned to homelessness.
The Newsom administration is desperately trying to ensure those currently in a hotel don’t end up homeless again. Earlier this month the state freed up $62 million for counties to extend hotel leases and provide more rental subsidies for those transitioning out of Roomkey.
So How Is the Motel Shopping Spree for Project Homekey Going?
Newsom first floated Project Homekey, Project Roomkey’s successor, as part of May negotiations with state lawmakers over the pandemic-ravaged state budget.
Homekey would provide $600 million in funding (ultimately increased to $800 million) for counties, cities and local housing agencies to buy property that could be used for homeless housing.
But the money and flexibility came with a catch: It had to be spent by the end of 2020, or it would be returned to the feds. Since Homekey was approved as part of the state budget in July, that meant property transactions that often take years would have to complete in mere months.
In order to expedite the process — and avoid the politically horrifying prospect of returning free money to the Trump administration — Newsom and state lawmakers allowed Homekey projects to skip the zoning, permitting and environmental review steps local governments typically require.
Counties, cities, local housing agencies and affordable housing developers would have to guarantee projects could provide at least temporary housing within 90 days, and would have to match any state funding above $100,000 per unit.
The result: grants to buy 97 properties all over the state for more than 6,100 housing units, at last count. The appetite was so overwhelming that the state coughed up another $200 million to clear the project list, with philanthropic partners Blue Shield and Kaiser Permante pitching in additional funding.
“What Homekey did was really decrease the amount of time it would take,” said Jennifer Hark-Dietz, PATH executive director. “It really did help with being able to get these units online a lot faster than any other method we’ve seen before.”
Hark-Dietz says her organization was already close to buying the vacant 40-unit apartment complex in Los Angeles called “The Orchid” at the beginning of the pandemic. What PATH anticipated would be at least a 10-month process — time spent mostly devoted to layering different funding sources together — was hastened to 90 days once the project got Homekey approval and state funds.
Only a handful of the approved Homekey purchases are Project Roomkey motels with current homeless occupants. Many aren’t hotels at all: Alameda County is eyeing a college dormitory, while other sites are commercial properties that can be quickly repurposed for residential uses.
While stressing that the numbers aren’t final yet, a Newsom administration spokesperson estimated that the total cost of acquiring a Homekey housing unit was on average $146,000 per door. For the 25 projects that have closed escrow, the average cost was about $163,000 per unit.
The state did not require Homekey applicants to project future construction costs, but those can be pricey. Typically, the more expensive a property is to buy, the less construction work is needed to convert properties to permanent housing.
The Orchid is a good example. At $400,000 per unit, it’s one of the more expensive properties Homekey has targeted. But with private bathrooms and kitchens it can be used for permanent housing almost immediately, and is still significantly cheaper than building homeless housing from scratch. A Los Angeles City Auditor reporter found that homeless housing cost $500,000 per unit when constructed from the ground up.
What About the “Ish” Part?
While the Newsom administration has trumpeted Project Homekey awards in a series of press conferences, only 25 properties have actually closed escrow as of mid-November, according to the state, and seven projects that the state announced publicly have fallen through.
The state says money awarded to the failed projects has been redistributed to other Homekey applications, and that the units lost in those abandoned projects have been more than made up by the new units brought off the waiting list.
“We do not anticipate needing to return any money to the federal government,” a spokesperson for the state housing department wrote via email, referencing the Dec. 31 deadline for property sales to close before the federal dollars expire. The spokesperson also said the state anticipated about 10% of the deals they authorized would ultimately be scratched.
In six of the derailed projects, local governments have cited a gap between the price property owners were asking for and the property’s appraisal value. The state will only pay up to the appraisal price — locals are on the hook for anything above that.
Marin County Supervisor Damon Connolly says the $3.5 million gap between appraisal and sales price was what doomed the Inn Marin, not the opposition that had erupted in Novato, the city in which the motel was located.
“We felt an obligation to make sure that the deal made sense for taxpayers,” Connolly said. “We felt that what was being asked was significantly over what was appraised.”
A $12.5 million Sacramento motel conversion confronting legal challenges from a neighboring luxury housing developer has also been called off.
The defeat of these Homekey projects highlights the obstacles homeless housing has consistently faced in California. Even after taking away many of the legal avenues available to stop projects, local governments and neighbors are still finding ways to resist. While Project Homekey’s tight timeline has enabled the state to move swiftly, it has also provided ammunition for local elected officials to say their communities have had no chance to shape what those projects look like.
Will You See Fewer Tents After All of This?
If the roughly 70 remaining Homekey projects that have yet to be finalized go through, Newsom will have added more than 6,100 units of homeless housing in less than six months. Homelessness advocates say they can’t remember a time when the state has added so much homeless housing stock so quickly.
But despite the unprecedented scale and pace, the governor may not see meaningful progress on the metric most important to voters: a visible reduction in people sleeping outdoors.
With more than 150,000 Californians living in emergency shelters or on the streets, 6,100 units will make a dent, but it won’t solve the problem.
“Will we see a noticeable difference on the street? No,” said Kushel. “The homelessness problem is so enormous.”
Kushel and other researchers also fear the gains made by Homekey could be easily swamped by a flood of Californians becoming homelessness after the state’s temporary eviction moratorium is set to expire in late January.
That presents a major political problem for Newsom, who staked much of his pre-pandemic governorship on solving the state’s homelessness woes. A recent UC Berkeley poll found that while the governor received high marks for his handling of the coronavirus, more than 50% of voters said his handling of housing and homelessness issues was “poor” or “very poor.”
“The counterfactual is very hard for people to see,” said Kushel. “If we hadn’t done Roomkey, if we hadn’t done Homekey, things would have looked even worse. When things look like they’re the same, what people are not seeing is that the same is a lot better than worse.”