SACRAMENTO — California Gov. Gavin Newsom is pushing to parlay short-term federal pandemic relief into a long-term remedy for the state’s homelessness crisis by buying vacant hotels and turning them into permanent housing.
His proposal would send counties $600 million in federal funding starting next month — before the emergency aid dries up and thousands of people temporarily sheltered in hotel rooms are pushed back to the streets.
The idea is eliciting some optimism in a high-cost state with some 150,000 people experiencing homelessness — but it faces a host of political, financial and logistical challenges and will likely set up a clash with cities opposed to the idea.
And it’s drawing national interest. Newsom housing aide Jason Elliott said he had heard from a half-dozen governor’s and big-city mayor’s offices, which he declined to name, who also are grappling with homelessness amid the pandemic.
“This is a historic opportunity,” said Matt Schwartz, president and CEO of the California Housing Partnership nonprofit. “The question is, can we marry two urgent public needs — how to repurpose hotel/motel properties that are clearly going to be surplus now and how do we find a way to house the formerly homeless so they don’t go back out on the streets?”
Lower-cost motels have long served as low-income housing in cities nationwide, and their conversion to long-term apartments with support services has been embraced more recently as an important strategy for curbing homelessness. Even before the pandemic swept the state, Newsom in his State of the State address called for legislation to speed up such projects by cutting local red tape.
California was the first state to secure FEMA reimbursement to shelter people individually in hotel rooms as a way to limit the spread of Covid-19. As of Friday, the state’s counties had leased roughly 15,700 rooms through an initiative called Project Roomkey and had filled nearly 9,400 of them, the governor reported at a news conference. FEMA has agreed to foot 75 percent of the bill on a rolling basis, this week extending the agreement through June 30, according to the governor’s office.
Now, the pressure is on for California to continue helping those using free lodging amid the pandemic once the hotel contracts end.
“You can expect a big push by the Legislature to make sure these folks remained housed. There has been a lot of discussion about how terrible it would be for the state to suddenly just push them back onto the streets,” said Assemblymember Jesse Gabriel (D-Encino). “That would be so terrible and so cruel.”
The proposal comes as California’s hotel industry reels from the pandemic and tourism and work travel have all but ceased. Data for May 17-23 released last week by STR Inc., which analyzes the global hotel market, found that occupancy was down 51.5 percent statewide compared to the same week last year, while average daily rates were $80.92, a 39.7 percent decrease.
“There’s a legitimate point of view in the governor’s office that you could likely get these assets for a good price,” said Carol Galante, a former Obama administration housing official who is now a professor of affordable housing at UC Berkeley. She added, “It’s certainly a lot cheaper than building permanent supportive housing from the ground up.”
Hotelier Nupen Patel, who owns two properties by the Oakland airport, in March was one of the first to sign up for the program. Reached last week, he said he would consider a sale.
Patel said he acquired the second hotel in December, just before the pandemic struck. Suddenly there were no concerts at the Oakland Arena, no business travelers catching flights out of the airport, no overseas tour groups, no airline crews.
Then he heard the state was looking for hotels to lease.
“If it was going to sit empty,” he remembers thinking, “might as well make something out of it.”
Project Roomkey contracts for the two Oakland airport hotels show monthly costs of about $817,000 for meals, security guards and social services — nearly $2,100 per unit per month. That’s on top of the monthly room costs of roughly $2.2 million, a rate that includes other services such as facility operations and maintenance, housekeeping and laundry.
Hotel/motel conversions typically take years to carry out and often run into roadblocks from cities or neighbors opposing the plans. Even the current temporary program has drawn challenges from a number of Southern California cities that objected to the emergency shelters.
Covina residents protested outside the Vanllee Hotel in April to reject a Project Roomkey plan there. The hotel owner later pulled out of the project, which Covina Mayor Victor Linares called “a great victory for residents” in an interview with the San Gabriel Valley Tribune.
The city of Laguna Hills also attempted to halt a Project Roomkey plan, arguing that placing Covid-19 positive individuals at a hotel created a “public nuisance” and violated homeowner associations regulations.
The Los Angeles-area city of Lawndale “would certainly consider its legal options” if the county acquired its hotels, said City Manager Kevin Chun. Such conversions, he said, would deprive the city of future occupancy tax revenue generated by hotels and “would dramatically change the character of the City’s main business district.”
The governor has tucked a proposal to circumvent local hurdles into a budget bill. The changes he’s seeking would exempt hotel conversions from environmental review or other local approvals when the rooms are reserved for people experiencing or at risk of homelessness.
But local resistance aside, some wonder how counties would manage to pay for ongoing operations and services at a time when the social safety net is stretched thin.
“I’ll say this — I think Project Roomkey is a good concept, but the devil’s in the details,” said Assemblymember David Chiu (D-San Francisco), who chairs the Assembly housing committee and has championed affordable housing legislation for years. “We need to be realistic about what it’s going to take to turn hotels and motels into supportive housing for homeless individuals, many of whom need significant services.”
The governor’s office says federal guidance allows the money to be used to buy motels and trailers to mitigate the effects of Covid-19. But questions linger about the big picture: How many people would this actually help?
“[Project Roomkey] is an important piece of the strategy,” said Tomiquia Moss, founder of All Home, an advocacy group in the Bay Area, “but I wouldn’t want to inflate it as a wholesale solution to address homelessness across the state because it does have limited utility relative to the number of people who are homeless.”
Newsom has yet to say how many rooms he hopes to convert under his plan. Housing experts say the proposal’s reach would depend on how much money local governments dedicate to the effort from other sources.
“I think that if the state’s able to leverage that $600 million to acquire 5,000 hotel rooms, that will be a job incredibly well done,” Schwartz said. “If you consider the time constraints and staffing and resource constraints, they’re going to be operating at warp speed to pull this off.”
And there’s a question about whether the money could be more useful supporting other forms of housing aid. The leaders of three associations representing California counties applauded the governor’s desire to maximize federal resources in a recent letter to select lawmakers, but also pointed to practical concerns with the plan and asked for greater leeway in spending the money, such as on rental subsidies.
“If the state were designing an ongoing program to address homelessness with robust resources,” they wrote, “the proposal outlined in the Governor’s May Revision would not be the county preference.”