Sacramento County to convert Arden area hotel into workforce and homeless housing

The Sacramento County Board of Supervisors on Tuesday unanimously approved spending $19.4 million of state funding for housing and shelter beds intended to reduce homelessness on the American River Parkway. 

But the county drew criticism, including from a Sacramento City Council member and a developer, over how transparently it changed initial plans to spend the money on a sanctioned encampment site near the parkway. 

The county plans to partner with development firm Sutter Capital Group to convert a Residence Inn located in the Arden area near the parkway into 176 apartments. The county will subsidize 32 units — about one-fifth of the total – for people experiencing homelessness for 10 years. Costs include $5.9 million for the rent subsidies and $8 million to cover about one-fifth of the property purchase. 

Sutter Capital will pay for the rest of the acquisition and rent out the remaining apartments at 80% of the area median income as workforce housing. 

Supervisors also approved $5.5 million for a program providing 50 shelter beds, meals and case management  in single-family houses. Both programs would serve people living on the parkway. 

But during the supervisor’s meeting, Council member Karina Talamantes said the county should have involved the city of Sacramento in the program decisions. 

In the two years since Assembly members Kevin McCarty and Ken Cooley announced the state funding, Talamantes said many people who had camped on the parkway have moved into city neighborhoods north of the river including Del Paso Heights, Northgate and Robla, after authorities removed their camps.

“I had hope that the county receiving these funds would provide relief to the communities impacted most by the encampments being cleared on the parkway,” Talamantes said during the meeting. 

Kathy Chao Rothberg, the CEO of Lao Family Community Development, also criticized the county for making a deal with Sutter Capital for a mixed housing project instead of opening a public application process. Rothberg said the county should give other developers opportunities to partner on hotel conversions.

County spokesperson Janna Haynes said Sutter Capital approached the county with its idea after efforts to open a sanctioned encampment near the parkway fell through. None of the proposals it received through a public application process were viable and a property the county tried to buy was sold, Haynes said. 

“We decided to pivot and do something different,” Haynes said in an interview. “Instead of doing a safe stay community, we started looking into other ways to use the money that would still fulfill the intent, which was to bring people off the parkway and stabilize them.” 

Burke Fathy, a managing partner at Sutter Capital, said the Residence Inn will be its second affordable housing project. It also developed Southgate Terrace in South Sacramento, which has 104 units. 

“We think it’s really a fairly innovative approach in terms of leveraging private debt and private capital alongside a partnership with the county,” Fathy said in an interview. 

The county estimates the mixed housing project at the former Residence Inn can open in early 2026. The 50 shelter beds located inside single-family homes could be available early next year. 

County officials said the programs are designed to complement each other. Someone living in an apartment subsidized by the city could move into a workforce housing unit after getting financially stable, for example. More information about the projects can be found on the county’s website. 

Talamantes requested the city spend the remaining $5.6 million of the state funding on homeless services for people in the neighborhoods north of the river where there’s been an influx of unhoused residents. The county said it plans to present options on how to spend it at a later date.