State Looking To Continue Buying Hotels For Homeless Housing

California’s program to buy hotels for use as housing for unhoused people could get a big second round of funding via Gov. Gavin Newsom’s budget.

The 2021-2022 budget proposes $1.75B for buying and renovating motels, hotels and other housing to shelter those who are without housing, CoStar reported. 

Last year, the state used roughly $850M in mostly federal dollars to purchase motels and hotels for this purpose. Through the program, called Project Homekey, 95 projects with 6,000 units were purchased or were in the process of being purchased by local governments or housing authorities as of January 2021, the Los Angeles Times reported.

Some of those sites would be used as permanent supportive housing with services available for people making the transition to being housed. Others would function initially as interim housing and then ultimately be converted into permanent housing, the Times said.

Before this new wave of funding was proposed, LA alone expected to add over 1,000 new units through Project Homekey. These new units would be generated for a lower per-unit price tag than these projects usually cost. State officials told CoStar the program would convert hotel rooms into small apartments at an average cost of about $138K per unit, instead of the more than $530K it might cost to build them from the ground up.

Project Homekey boosted hotels sales in the state at a time when hospitality property sales fell dramatically. Total national hotel sales fell 52.6% year-over-year in 2020, but California’s sales saw a slight increase over 2019’s numbers, according to the Sacramento Business Journal, citing a survey by Atlas Hospitality.

California was the only state to see an increase in sales, the survey noted, and the program accounted for nearly a third of the total dollar volume of sales, Atlas found.