How To Buy A Hotel Room Permanently – Salvador Bradford hosts his studio at Hotel Perry. Bradford has been living in a one bedroom apartment for 8 months and spends most of his time watching movies and tidying his room. Photo by Anne Wernikoff
Governor Gavin Newsom wants to go on a hotel shopping spree to help California’s homeless. Will this work?
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He should. The converted hotel room it calls home has about 250 square feet of space to accommodate a bathroom, stove and mini-fridge.
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But there’s plenty of room for home decor: a closet full of Star Wars and Star Trek DVDs, and what Bradford describes as a small “shrine” to Jesus Christ, to whom he credits the past five years of sobriety.
He’s been living in a room at the Hotel Perry in downtown Sacramento since last year, and says his current twin mattress has managed to sleep on the streets of San Francisco and Sacramento for the past two years.
“It was horrible. I was dying slowly but surely,” Bradford, 64, said. “People were having sex (in the alleys), people were shooting (crystal meth).”
Gov. Gavin Newsom’s ambitious plan to deal a permanent blow to California’s homeless crisis — which includes more than 150,000 homeless and more than 100,000 sleepless — will create hundreds of properties like the 80-year-old Hotel Perry. The motel was previously converted into 104 supportive housing units for the homeless.
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Hotel Perry studios is a 105 unit permanent supportive housing complex in Sacramento for formerly homeless individuals with special needs operated by Jamboree. Photo by Anne Wernikoff
As part of ongoing budget talks with state lawmakers, Newsom wants to spend $600 million in federal emergency funds to expand the Roomkey program, which rents 15,700 hotel rooms specifically for homeless Californians. . The spokesperson of the administration said that there are currently about 9,600 rooms.
In the second phase of the plan, $600 million must be spent or returned to central banks by the end of the year.
California has never attempted to acquire so many properties to house the homeless in such a short period of time. Affordable housing developers generally say they are excited by Newsom’s proposal, which could buy 6,000 new units, according to the administration’s preliminary, rough cost estimates.
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But veterans of such motel conversions warn that the process is more complicated, time-consuming and expensive than the average Californian realizes. What Newsom wants to do in six months will take years — before anyone starts swinging a hammer.
Said Ray Bramson, chief influencer at Destination: Home, a Silicon Valley nonprofit that provides housing for the homeless. “And it’s going to take some creativity.”
Converting hotels to permanent homeless shelters is a difficult process, and the Newsom administration hopes to make the move as quickly and cheaply as possible.
When the owner of the 70-room Econo Lodge Motel in lower-middle-class West Anaheim decided to retire in 2017, Vicky Ramirez sensed an opportunity.
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His team at Irvine-based Jamboree Housing is looking at properties in the area for permanent supportive housing. About 6,900 people are homeless in Orange County, and the cities that make up the nation’s fifth-largest county are battling each other over where they should and shouldn’t house the homeless.
In about three months, Ramirez reached a purchase agreement with the owner: $9.2 million for the 1-acre property, or $130,000 per unit.
Land isn’t cheap in California, especially in the more expensive coastal areas where the state’s homeless population is disproportionately high.
Data from the California Association of Hotels and Lodgings, a hospitality industry advocacy group, shows hotels most likely to be targeted by the state — Motel Six or small, independent motels with 150 or fewer — routinely charge more than $100,000. A subdivision in Los Angeles County. The 40-room Travel Plaza in Compton sold for $4.5 million last year; 21-room budget hotel on Sunset Boulevard, $2.8 million.
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Costs are higher in the Bay Area. Bramson, who helps developers explore motel conversions in Santa Clara County, says some properties cost as much as $17 million an acre.
Low-income housing developers warn that prices can vary significantly from region to region and depending on the quality of the motel. Prefab extended dorms with kitchens tend to be more expensive than dilapidated one-bedroom dorms, which may be cheaper up front but require more restoration or complete demolition to convert to supportive housing.
The Newsom administration is tentatively spending $100,000 to $150,000 per unit, according to an administration official who was not authorized to comment publicly. They hope that the vast majority of hoteliers suffering from the pandemic-induced tourism downturn will be happy to leave the industry. This could lead to a once-in-a-generation deal, along with a recession-inducing slump in commercial real estate prices.
Lynn Morfeldt, president of the California Hotel & Lodging Association, says the state won’t compete with the common bidders for hotel properties — the big hotel chains — because those companies aren’t currently in acquisition mode.
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But he cautions that for the owners of many of the hotels involved in the Rumki Project — the properties the government wants to target first — selling is a very different proposition than short-term leasing.
“These are locked-in, long-term assets, and if the economy is really struggling and they can’t make mortgages and foreclosures are knocking on the door, I don’t think the state is going to come in and buy a hotel for a song,” Morfeldt said.
The cost of selling a motel franchise is typically less than the long escrow period required by homeless housing developers. A moratorium on the sale of real estate usually lasts from one to eighteen months.
Why is it taking so long? The city won’t let you turn it into condos because nobody wants to pay $10 million for a motel.
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Homeless housing developers must navigate projects through a series of regulatory steps that require the signature of city planning departments and sometimes city councils. A uniquely important step for most motel conversions: getting the city to change the zoning of the motel property from “commercial” use to “residential” use.
It took the city nearly six months to approve the necessary zoning change for the Anaheim Econo Lodge conversion. The city planning department then discussed things like relaxing minimum room size requirements (converted hotel rooms are smaller than studio apartments) and cosmetic changes needed to make the property look like a regular apartment complex.
Ramirez praised the Anaheim City Council for the speed with which his project was approved, but said the Jamboree would have to pay the hotel owner an additional $300,000. In total, the Econo Lodge conversion took about 2 years to obtain the necessary permits and approvals to begin construction.
In a relatively small neighborhood, El Pollo Loco and another low-income housing complex were opposed to the suburban project — not in the heart of a thriving commercial corridor or minutes away from a suburban bedroom community.
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The Newsom administration can’t afford an 18-month escrow period while local governments review converted motel projects. You have six months to buy $600 million worth of real estate before the money completely evaporates.
To speed up the adjustment process, the administration proposes to move several energy cities to form the appearance of a converted motel. Newsom’s proposal is a provision that would allow a city to develop the purchase of project rooms without adjusting zoning regulations or holding public hearings. Hotel conversions are exempt from government-mandated environmental studies. Local governments are less likely to cancel projects they don’t like.
Several Southern California cities took or threatened legal action in the early months of the pandemic when hotels rented out emergency homeless shelters. Hotels are often an important source of tax revenue for cities due to occupancy and sales taxes, although those revenues have declined rapidly due to the coronavirus pandemic.
Given the shortened time frame, properties in larger cities with more motel conversion experience and larger homeless populations may be preferred where local resistance is greater.
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How you convert a motel into homeless housing—and how much money and time it will take—depends on what kind of homeless housing you want to create.
Research shows that permanent supportive housing is the gold standard for preventing chronic homelessness from returning to the streets. However, a good construction job is required.
Individual rooms should be remodeled to accommodate stoves, sinks, mini-fridges, and microwaves; Electrical and plumbing systems
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