“Do we want to end homelessness or not?”
The idea of converting hotels and motels to housing isn’t new. But the pandemic – which sent hotel occupancy rates plunging to 37 percent and interest rates to rock-bottom lows – proved an opportunity.
“The price points were really high when we looked at this four or five years ago for previously homeless veterans,” said Douglas Guthrie, president and CEO of the Housing Authority of the City of Los Angeles. “When Covid-19 struck, a lot of these mom-and-pop ownership places had serious financial problems, so the price points came down and became much more reasonable.”
Plenty of hotels were already struggling before the pandemic struck, thanks to the rise of AirBnb. And the American Hotel and Lodging Association doesn’t expect the industry to recover from the pandemic until 2024.
So the hotel conversion trend is taking off. And it’s not just high-cost cities eyeing vacant hotels as a potential solution to housing shortages: A community land trust converted a Baymont Inn and Suites in Essex Junction, Vermont, into housing using federal coronavirus relief funds, and hotels in cities as far flung as Branson, Missouri, and Kissimmee, Florida, have been redeveloped into workforce housing using private funding.
“The economic drivers are there for this trend to continue — the unaffordability of housing, which is pushing up demand for rental housing, and the lack of housing in general,” said Gay Cororaton, senior economist and director of housing and commercial research at NAR, which published a report on the conversion of vacant hotels into multifamily housing earlier this year.
Those factors are also continuing to drive up homelessness, including in California. The annual government count to gauge how many people are homeless on a given night was canceled this year because of the pandemic, so it’s hard to know precisely how the crisis affected homelessness rates.
But encampments have grown in major cities around California and the country, although it’s hard to know how much of that comes down to new visibility in the wake of CDC guidance urging officials not to clear encampments during the pandemic.
Homekey’s boosters readily admit the program was never going to solve the state’s homelessness issue: The program is an “arrow in the quiver of arrows that are necessary to tackle homelessness,” Grunwald said, calling it “one of the most intractable problems of our times.”
Washington was impressed enough with the approach to establish a new $5 billion homelessness program at HUD in the March relief package that includes money for the “purchase and development of non-congregate shelter.”
Ross, who oversaw the Homekey project before he was named to his current post overseeing California’s use of funding under the new HUD program, conceded that the economics of conversions may change in the future — interest rates are already rising, many hotels will return to regular occupancy, the political focus on homelessness may fade — but said “we really can deploy these tools in a wide variety of ways and still have very meaningful outcomes.”
“Just because we’re not in the same level of pandemic and lockdown we were in last year does not mean we can’t still be successful,” Ross added.