Housing USA: Hotel California No More?

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6 min read

California is famous for its low-budget lodging. I stayed in some while traveling the state – little hotels and motels on the roadside that, mixed with the palm trees and desert backdrop, had a noirish feel. They’re a part of California lore, even profiled in that infamous Eagles song.

But a recent state policy has ushered them into arguably an even better use: Project Roomkey and Project Homekey, two programs under Governor Gavin Newsom’s Department of Social Services, are converting some of these hotels into homeless housing. The hotels have suffered severe under-capacity during the COVID-19 pandemic; and the state’s 151,000-person homeless population has been disproportionately vulnerable to infection. Project Roomkey is a way to solve both problems, using lodging to provide temporary homeless housing; Project Homekey looks to make the conversions permanent.

Gov. Newsom is using pandemic-related emergency powers to overrule local zoning and other regulations that prevent these hotel-to-housing conversions. And he’s leveraging funds from FEMA, which will reimburse the state for 75 percent of expenses. According to the governor, the Project Roomkey program is being used in 52 of the state’s 58 counties; has gotten 14,200 people off the street; and is procuring 15,679 rooms. Launched near the start of the shutdown, the program was to span over a 90-day period.

Hotels Become Housing
Project Homekey aims to be the long-term solution. Along with some federal money, localities statewide will apply for $550 million in grant money to purchase buildings and contract with low-income housing providers to do the conversions. After that, there will be $50 million in state funding, and an additional $300 million in local funding, to be used for on-site supportive services. These long-term service provisions will be bolstered by $45 million in philanthropic support from Kaiser Permanente and Blue Shield of California.

“We’ve long dreamed about scooping up thousands of motel rooms and converting them into housing for our homeless neighbors,” says Gov. Newsom at a Project Roomkey conversion motel in Pittsburg, CA. “The terrible pandemic we’re facing has given us a once-in-a-lifetime opportunity to buy all these vacant properties, and we’re using federal stimulus money to do it. Hand in hand with our county partners, we are on the precipice of the most meaningful expansion of homeless housing in decades.”

At a time when governments have trouble moving quickly on needed actions, the ability for California to convert thousands of units into homeless housing, and get people into them, is unusual. The Newsom Administration had two things working for it:

The first was declaring a Coronavirus-related state of emergency. Critics have noted that Gov. Newsom might be prolonging the emergency to unilaterally enact measures that would usually go through the legislative or ballot process. One such measure is to overrule local land-use laws that would normally slow hotel conversions down. A CalMatters report details how these conversions normally take between one to two years, as developers must go through various community meetings, a planning board, and a city council just to rezone the lodging property from “commercial” to “residential” use.

“To speed up the regulatory process,” states the report, “the administration is proposing taking away much of the power cities have to shape the look of a converted motel. Tucked into Newsom’s plan is a provision that would allow Project Roomkey acquisitions to be developed without a city adjusting its zoning rules or holding public hearings. Hotel conversions would also be exempt from undergoing state-mandated environmental reviews. There would be little opportunity for local governments to quash projects they don’t like.”

There’s already been a call in California to usurp local zoning powers and streamline home construction permits for market-rate housing, as reflected in bills like SB50 and SB827. Using emergency powers to ram through Projects Roomkey and Homekey reflect that trend.

Using FEMA Funds
The Newsom Administration’s second big advantage is the FEMA money, which is also being allocated under the rubric of a public health emergency. A March 27 letter from the agency to the state promised 75 percent reimbursement for helping individuals who, according to FEMA’s regional administrator, had tested positive for COVID-19, were exposed to it, or fit the definition of at-risk.

“My approval includes the reimbursement of costs incurred for wrap-around services directly necessary for the safe and secure operation of NCS facilities,” writes the administrator.

This led to a sudden rush of hotel owners, developers and local governments who wanted to participate in the conversions. Even San Diego County secured over 1,000 hotel units for the homeless, including a Ramada. In Oakland, an affordable housing developer and operator called Abode Services converted two hotels into shelters for nearly 400 people. There have been some logistical challenges in the process.

“There’s lots of people running around trying to meet the needs of our guests, trying to process clothing from the day before through our bedbug oven and trying to get more people into the shelter and housed,” Kara Carnahan, Abode’s director of Programs, tells MarketPlace.com.

The program also faced resistance from surrounding residents who don’t want homeless people in their neighborhoods, and existing lodging tenants who don’t want COVID-infected patients in their building. By the start of June, a total of 9,400 people have been housed, about 60 percent of the original goal. This has caused some to call the program a slow-rollout failure. Still though, that is 9,400 people who would otherwise live clustered together on the street during a pandemic.

While Projects Roomkey and Homekey are uniquely COVID-related responses, there are plenty of reasons that this housing-to-hotel model could work elsewhere. While chronic homelessness is declining in America, it’s increasing in some states, including California, and is at 74,000 overall. The number of homeless on any given night is 568,000, showing the need for more and cheaper housing. And even before Coronavirus, occupancy rates in the lodging industry were declining slightly, and expected to in the near-future, likely due to home-sharing apps like Airbnb. Conversions of this real estate are a way to address two problems at once. California is one state that’s using a, hopefully, temporary crisis to move forward on the idea.