California buys 556 housing units for $156 million, mostly hotels, for homeless

California governor Gavin Newsom announced another $156 million in state funding towards the acquisition of 556 housing units for the homeless, mostly in the form of hotels. The only non-hotel project received $175,000 in state funding, while the rest of the projects were motel-to-homeless-housing conversion projects costing the state anywhere from $206,513 to $341,196 per unit to help acquire. These figures do not include the cost of operations and providing the residents with social services, healthcare, food and other amenities these facilities offer.

While estimates for projects operating under Project Homekey are not widely available, one site’s estimated cost of $85 per unit day leads to an annual per unit cost of $31,025 on top of several hundred thousand dollars in acquisition costs. With 14,040 housing units for individuals supported by Project Homekey, annual operating costs at the $85 daily rate could reach $436 million. At this cost, housing California’s 171,000 homeless through Project Homekey-style programs would, at an average cost of $281,295 per unit, would cost $48.1 billion in initial housing costs, and another $5.3 billion per year to operate.

“Project Homekey doesn’t even come close to providing real and sustainable solutions,” said State Sen. Brian Dahle, R–Bieber, to The Center Square. “Millions of taxpayer dollars are being allocated to another failed program in California.”

Project Homekey is the governor’s signature homelessness mitigation measure, which has been allocated $3.75 billion since its inception in 2020.

“Homekey continues to demonstrate that we can build quickly, and at a fraction of the usual cost, to deliver much-needed affordable homes for Californians struggling to find a place to live,” Newsom said in a public statement announcing the latest round of grants.

Despite Homekey’s costs, it still is more affordable than other housing options for the homeless across the state. In Los Angeles, voters approved $1.2 billion in funding in 2016 for 10,000 units of supportive housing for homeless individuals, of which less than 2,000 have been built — some of which cost up to $837,000. As of publication, the median home value in California was approximately $747,000, according to Zillow.