Project HomeKey isn’t enough. California’s homelessness funding needs a Plan B

Gov. Gavin Newsom’s budget includes the largest funding package for combating homelessness in our state’s history — but it isn’t enough. As COVID-19 restrictions ease, Newsom must establish a Plan B for using these critical funds or risk leaving billions of dollars idle during a time when more than 161,500 Californians are experiencing homelessness.

I’m encouraged by the breadth of support the governor included and investments in proven programs like Project Homekey. The success of this initiative — allotted $7 billion in Newsom’s new budget — is conditional on the willingness of motels and hotels to rent or sell available rooms and properties. This formula worked during the pandemic, but may not fare as well in our reopening economy.

Businesses are reopening, people are booking trips, corporate travel is on the rise and, consequentially, hotels and motels are finally seeing a resurgence of customers. According to CoStar, hotel occupancy hit a pandemic high of 58.9% in late-March 2021, with the third largest gains in California. Revenue per available room reached 69% of 2019 levels, moving many state markets from “recession” to “recovery” categories.

Amid this growth, one thing is clear: there’s a strong likelihood that the incentive to participate in Project Homekey will diminish.

I’m not suggesting that Project Homekey is doomed to fail. The project and its Project Roomkey predecessor have seen success. At Project Roomkey’s peak, Sacramento housed 1,356 individuals. As of April 10, 2021, 468 are still sheltered and the project is expected to continue through August.

Thanks to Roomkey’s success, Project Homekey was created to produce long-term living spaces through hotel and motel purchases. In Sacramento, 174 people have been permanently housed. Earlier this year, Alan X. Reay, president of Atlas Hospitality Group said, “without Project Homekey, California would have seen 26% less individual hotel sales and 61% less in total dollar volume.”

However, Project Roomkey never achieved its full potential, housing only 8% of the homeless population. In part, this was due to hotel operators refusing to participate due to a variety of issues. It is imperative to learn from these lessons when planning the use of Project HomeKey funds.

To maximize the budget’s impact, the Legislature should establish a check-in to evaluate Project Homekey’s progress and the ongoing potential of hotel/motel purchasing projections. If the initiative isn’t approaching its target numbers in a timely manner, California leaders should have the option to divert Project Homekey funding to existing programs like Rapid Rehousing, Housing for a Healthy California and CalWorks Housing Support.

Newsom could use idle Project Homekey funding to take bold action on improving overall housing stability. Before the pandemic hit, a recent study found that 48% of households in Central and South Los Angeles paid over 50% of their income on rent. Similarly, a research brief from the Homelessness Policy Research Institute showed that 1.3 million California households met the definition of severe rent-burden. This same report proposes an average subsidy of $6,400 per impacted household to reduce pressure on extremely low-income families so they pay no more than 50% of their income on rent and utilities.

A well-funded budget is only as effective as the strategy attached to it. Project Homekey has the potential to succeed — but in a market where hotel and motel sales could stagnate, we have to have a Plan B.