San Diego to Pursue Buying Three Hotels to House Homeless People — at a Cost of $383,000 Per Room

San Diego Housing Commission would use state funds toward $150 million purchase of extended-stay hotels

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The San Diego Housing Commission will apply for state funds to help purchase three extended-stay hotels with more than 400 rooms that could provide homes for people experiencing or facing homelessness.

In a move contingent on funding from the state, commissioners voted 4-0 at the board’s April 20 meeting to pursue the purchase of the 107-unit Extended Stay America Hotel at 3860 Murphy Canyon Road for $40.7 million, the 140-unit Extended Stay America Hotel at 7440-7450 Mission Valley Road for $52 million and the 165-unit Extended Stay America Hotel at 2085-2095 Hotel Circle South for $65.2 million.

The total cost of the three buildings would equate to about $383,000 a unit, which is greater than the per-unit cost of two hotels the city bought for housing three years ago.

Each unit will have a kitchenette and be near public transportation routes and other services.

As with the purchases from 2020, some funding for the new purchases would come from the third and final round of funding from the state’s Project Homekey, which was created by Gov. Gavin Newsom as a competitive grant program for public agencies to quickly develop housing through the use of hotels, motels, hostels, multifamily apartments, manufactured housing and other means.

The latest round has $736 million throughout the state, and $34 million has been set aside for the San Diego region. On top of the money set aside for San Diego, local agencies also can apply for a share of the statewide funds.

As part of the application process, the Housing Commission will begin due diligence on Thursday, which SDHC Vice President of Real Estate Finance and Acquisitions Buddy Bohrer told commissioners involves zoning conformance, pest control, inspections for potential environmental hazards and peer-review appraisals, among other steps.

Bohrer said the Housing Commission also will have to invest $750,000 to perform due diligence as part of the application process, which it would fund through its federal Moving to Work funds.

Applications for Project Homekey funds will be submitted in May or June, and awards are expected in August or September. If all goes well, the anticipated close of escrow will be in October, Bohrer said.

The per-unit cost of the three properties would be about $380,000 for the Murphy Canyon Road hotel, $371,000 for the Mission Valley Road hotel and $395,000 for the Hotel Circle south hotel for an average price of $383,192.

Commissioners praised their staff for working on the proposal that could house hundreds of homeless people at a time when the area’s median home price is about $750,000.

“This seems like a fantastic value proposition here,” Commissioner Ryan Clumpner said.

“These programs are incredible when you see the cost at the door,” Commissioner Stefanie Benvenuto said, referring to the per-door cost.

“When you can find a way to pick up 412 rooms and begin housing people and close in October, you have to be thrilled about the opportunity,” said Commissioner Eugene “Mitch” Mitchell.

This is the second time the Housing Commission has pursued hotels with Project Homekey funds.

In October 2020, the San Diego City Council approved the Housing Commission’s plan to buy two extended-stay hotels.

A 190-unit hotel on Hotel Circle South cost $67 million, or $353,000 a room, and the 142-room hotel in Kearny Mesa cost $39.5 million, or $278,000 a room.

The $383,000 per-unit cost of the three hotels being pursued by the Housing Commission is greater than the cost of the two hotels purchased in 2020 and other similar projects, but less than some affordable housing projects built from scratch.

Father Joe’s Villages purchased a South Bay hotel that was converted to housing and opened in October 2020 as Benson’s Place. The 82-room hotel and its reconstruction cost $24.5 million, or $299,000 a room.

In February 2022, Father Joe’s Villages opened Saint Teresa of Calcutta Villa, a 407-project that cost $145 million, or $356,000 a room.

Earlier this month, the 95-unit affordable housing Amanecer Apartments in Linda Vista opened at cost of $51.1 million, or $538,000 a room. The project developed by Community HousingWorks required the demolition of existing projects and was supported with Veterans Affairs Supportive Housing vouchers from the Housing Commission and $7 million from the county.

San Diego Union-Tribune article from September 2020 asked several people in a variety of fields if purchasing hotels to house homeless people was a good use of tax dollars. Three said no, citing the cost and suggesting other solutions, while 10 people said yes.

Bob Rauch of R.A. Rauch & Associates, which owns and operates hotels, was among the people who thought the last purchases were bad deals, and he has problems with the proposed cost of the new ones.

“They’re nuts,” he said. “They overpaid last time during a pandemic, and they’d be overpaying again.”

Rauch said extended-stay hotel rooms would fetch more than regular hotel rooms, but still sees the Housing Commission’s proposal as too high.

He also said he has a high-end, 120-room extended-stay hotel in Del Mar, and its value is about $300,000 to $325,000 a room.

Alan Gin, an economic professors with the University of San Diego Knauss School of Business, said homelessness and the housing market are serious and related problems that should be addressed.

When compared to the Amanecer Apartments, Gin said the proposed purchases were a good deal, but he also said he would have to research the market more.

Click here to read the full article at the San Diego Union Tribune

Comments

  1. Newsflash! The more free housing you provide, the more homeless you attract. Far left democrat policies defy both common sense and economic prudence and they know it. They like it the way it is.
    The money that’s already been thrown away on lame brain ideas like this one could have built world class rehabilitation complexes across the state and staffed them. Vagrancy laws still exist. Enforce the law and drag these people off the streets and sentence them to a rehabilitation program that fits their dysfunction.
    A prison provides all the services the homeless beg for (including drugs) on the streets, except freedom.
    Or…continue to fund programs that attract and sustain even more of society’s drop outs. They hurt every economy they invade. They will never change without “tough love”.

  2. It all sounds crooked to me.

  3. Robert C says

    I bet a dollar the “(former) high end hotels” are now run down dumps, in crime infested neighborhoods and needs $,$$$,$$$ to bring them back up to code.

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