Details Remain Scant On Gov. Gavin Newsom’s Plan To Spend $750 Million On Hotels For Homeless Residents

Gov. Gavin Newsom wants to spend over half a billion dollars in federal money to purchase hotels and convert them into permanent housing for people experiencing homelessness. 

But the new plan faces critics, who say it's a far cry from Newsom's earlier vision for addressing the homelessness crisis. And a roadmap for accomplishing the ambitious, fast-tracked strategy remains elusive. CapRadio has made multiple requests to the Department of Finance for detailed information on the proposal, to no avail. 

“For this to be your plan to address a major housing crisis — yeah, it’s mind boggling,” said Jennifer Friedenbach, executive director of the San Francisco-based Coalition on Homelessness.

Newsom announced this new homelessness strategy in his “May Revise” budget last week. The effort to convert hotels and motels, which are currently being leased to isolate vulnerable residents during the coronavirus pandemic, marks a significant departure from the governor’s previous strategy. 

That $1.4 billion plan from January was part of an effort to put homelessness at the forefront of his office’s priorities. It took a long-term view on addressing underlying causes, and would have funded rental assistance programs, increased affordable housing options and revamped the state’s Medi-Cal system to improve services for homeless residents. But it was scrapped in light of the state’s $54 billion budget deficit. 

The new plan would use $750 million in one-time federal funding that expires at the end of the year, meaning the state would have to execute hundreds of millions of dollars worth of property transactions in six months. Roughly $600 million would go toward purchasing the hotels, and $150 million would backfill money already spent on coronavirus response for unsheltered residents.

The governor’s maintains it’s the best strategy in light of the ongoing pandemic.

“The conditions of COVID19 accelerated the administration’s proposal of converting motels into homeless housing solutions,” Jesse Melgar, spokesperson for Newsom, wrote in an email. “This approach creates more exits out of homelessness and now protects those who are most vulnerable to COVID19.” 

Meanwhile, lawmakers are seeking more details on the new strategy. A Senate budget subcommittee set to meet Thursday observed that using one-time federal funds “limits the ability to provide ongoing support to local housing and homelessness programs” and the plan offers “minimal oversight or accountability from the Legislature.”

The plan to purchase and convert hotels and motels into permanent housing solutions grew out of the coronavirus pandemic. Newsom launched Project Roomkey in early April, which aimed to lease 15,000 rooms to isolate vulnerable individuals — although the original goal was much higher at the start of the pandemic. A few weeks later, the state and several counties largely reached that goal, after forming a partnership with Motel 6. 

“We should take advantage of this effort and look at the prospect of potentially procuring these sites into the future,” Newsom said at an April 18 press conference, standing before a Motel 6 in the city of Campbell. 

He said the state and the hotel chain had “organized ... some language” that would make it easier for the state to purchase the hotels and house people “beyond this pandemic.”

The administration did not provide any documents that reflect this “language” in response to multiple Public Records Act requests.

“We remain in active discussions with Motel 6 about the opportunity to purchase corporate-owned hotels – and we’re making progress,” Melgar wrote in an email. “We continue to work with hotel owners on transaction options.”

The governor’s spokesperson added that the administration plans to provide technical assistance to counties to purchase the properties.

The $750 million in federal funding that Newsom wants to use comes from the Coronavirus Relief Fund established by Congress, which set aside $150 billion for state and local governments to respond to the pandemic. 

Samantha Batko, senior research associate at the nonprofit Urban Institute, says she’s not surprised that Newsom turned to federal emergency funding in his budget, considering the state’s sizable deficit. 

She says converting hotels into permanent housing solutions can be an effective way to get people into stable housing. But it would only make a small dent on its own without being part of a bigger strategy.  

“If California turned around and purchased those [15,000] rooms, would it be a sufficient response to address homelessness? Certainly not,” she said. 

A recent count had California’s homeless population at over 150,000, with more than 100,000 people unsheltered, according to the federal government.

Friedenbach, with the Coalition on Homelessness, says hotel rooms are a step up from warehousing people in shelters. But argues the effort to purchase these properties should not replace the ambitious plan laid out in the governor’s proposed budget in January.

“This is the exact opposite of what has to happen right now,” she said. “The state of California needs to ramp up all of its efforts to address homelessness.”

Newsom’s revised budget proposal encourages cities and counties to use a combined $1.75 billion in local aid, allocated by the federal government for coronavirus, to fund homelessness solutions.

The Senate budget subcommittee overseeing housing and homelessness, however, warns that “these funds are not limited to combating homelessness,” and must also cover a variety of issues related to public safety and public health during the pandemic.