LA Poured Over $1 Billion into Homeless Housing—But Thousands of Units Sit Empty

(Editor’s note: This story first appeared in the Westside Current on May 29 and was updated on May 30. It is reprinted with permission.)

By JAMIE PAIGE

Night falls over Sierra Highway in Lancaster as a police cruiser speeds past two women standing outside a shuttered motel. Behind them, the building—once slated for transformation into housing for the homeless—sits lifeless, fenced off and dormant. Adjacent to a liquor store, it’s become just another stalled construction site in Los Angeles County overwhelmed by homelessness.

A short drive away, another hotel property has become something else entirely: an unregulated encampment. More than a dozen tents crowd the lot. Fire pits smolder. Vehicles packed with personal belongings line the perimeter. Just beyond, a third motel also sits vacant and silent.

These three properties, totaling more than 200 rooms, were funded through California’s multibillion-dollar Project Homekey initiative, which was launched during the pandemic and intended to provide fast, permanent shelter to unhoused individuals and families. Not a single person lives in them.

These are not isolated cases. Westside Current spent months visiting project sites and poring through documents, only to find a litany of unrealized, high-budget projects. Although the City of Los Angeles has spent about $820 million in Project Homekey funds to acquire approximately 1,237 units, 44 percent remain vacant.

The conversion rate is even worse among the 32 Project Homekey properties the county paid $550 million to acquire. Of the 2,157 rooms purchased, 1,538—or 71 percent—remain vacant.

The empty buildings pock the landscape. In Compton, the 41-room Travel Plaza Inn was acquired in 2020 for $6.5 million under Homekey. It was supposed to be rapidly converted into supportive housing. Today, it remains vacant, a victim of delays in permits, funding and inter-agency coordination.

Near Los Angeles International Airport, the 133-room former Extended Stay America hotel sits behind locked gates and fencing. A recent visit by Westside Current found no signs of active renovation or occupancy, only a lone worker patching a strip near the building’s front entrance.

Thousands of Vacant Rooms, Billions Committed

Launched by Gov. Gavin Newsom in 2020, Project Homekey was envisioned as an urgent response to California’s homelessness crisis, especially the threat to vulnerable people posed by COVID-19. The goal was straightforward: rapidly acquire hotels, motels and apartment buildings and convert them into housing. But in Los Angeles, urgency was soon followed by bureaucracy, delays and ballooning costs. The Homekey program originated from Project Roomkey, an emergency initiative that rented hotel rooms as a short-term solution to get unhoused individuals off the streets during the pandemic.

Among the Homekey acquisitions were new projects purchased from private developers, many at prices that exceeded market value. In Sunland, the city paid $17.7 million for a 62-unit building on Hillhaven Avenue, a deal described by the listing broker as “the most expensive building ever sold” in that ZIP code. In Canoga Park, a developer who built a 101-unit complex on Vanowen Street for $39 million sold it to the city for $55.2 million. It remains empty.

In Mid-City, the city purchased a luxury apartment building on Pico Boulevard for $36.5 million, despite 18 recorded liens totaling $2.1 million from unpaid contractors.

In Cheviot Hills, meanwhile, the nonprofit Weingart Center acquired a 76-unit assisted living facility on Shelby Drive in 2024 with Homekey Funds for $27.3 million. Records show that just 12 days earlier, a private firm had purchased the same property for $11.2 million. This means it was flipped and resold to Weingart with city approval for more than twice the price. Asked to explain the discrepancy, city officials pointed only to an appraisal submitted by Weingart.

The Nest, a 49-room co-living facility near Exposition Park was bought for $7.2 million in Homekey funds 2020, remains empty nearly five years later.

There are several Project Homekey success stories across the city. Hope of the Valley Rescue Mission is fully operational, and people we spoke with described it as a well-run facility. Other functioning sites include the 11-room Martel Apartments and the 41-room Parthenia Place in North Hills.

Additionally, the 104-room Willow Tree opened on schedule in late April. Operated by The People Concern, staff at the site told us they are eager to serve the community. The county also pointed out that when it does open a facility they are able to successfully fill it with residents and staff.

Still, the more than 600 empty residences remains troubling, especially when the city has more than 45,000 unhoused individuals, according to the 2024 Greater Los Angeles Homeless Count. The Housing Authority of the City of Los Angeles (HACLA) attributes many of these vacancies to delays stemming from retrofits required to meet Americans with Disabilities Act (ADA) standards and rising material costs.

Contrary to what Mayor Karen Bass and the Los Angeles Housing Authority misleadingly claim, homelessness is not down,” said Sam Yebri, President of Thrive LA, a political organization focused on enhancing quality of life, governance, and public safety in Los Angeles. “Facts matter. The “10% reduction in street homelessness” Mayor Bass points to is simply the 2,508 homeless Angelenos who died on our streets last year. And while these souls withered away and died, Mayor Bass and LAHSA inexplicably kept 2,000 rooms empty.”

Despite these setbacks, a HACLA spokesperson told the Current the agency was “proud of the progress” and emphasized the broader benefit of increasing “the inventory of permanent supportive housing in the City of Los Angeles,” highlighting the positive impact of providing households transitioning out of homelessness with essential wraparound services and stable housing.

In some cases, getting to that permanent supportive housing model is part of the challenge. The Extended Stay America near LAX was acquired by the city for $52.5 million and housed some residents until 2023. They were relocated, and although the city intends to convert the 133 rooms into 120 apartments, the building remains vacant.

In a move to keep some of the troubled Homekey properties afloat, the Los Angeles City Council voted to back a revised plan from the City Administrative Officer. It gives several hotel-turned-homeless housing sites more time—extending interim operations through at least December 2028, with the option to stretch that to 2031 if needed.

Eight properties are part of the extension, including Hotel Solaire downtown, the Super 8 near LAX, and the Econo Motor Inn in the San Fernando Valley. These will continue to operate as temporary housing while the city searches for more funding or vouchers to make permanent housing possible.

County Delays and Explanations

The County’s Homekey portfolio includes motels scattered across multiple jurisdictions. Most acquisitions were led by the Department of Health Services and the County’s Homeless Initiative, in coordination with local governments and nonprofit housing providers.

“Construction takes time,” a spokesperson for the County CEO’s office told Westside Current. “We are proud to have completed nearly half of our funded projects and remain committed to housing people as quickly as possible.”

But major gaps remain. In Exposition Park, officials held a groundbreaking in early 2024 for a 25-unit co-living development for transitional-age youth. Months later, the site remains an empty lot.

During the initial round of Homekey funding in 2020, the County purchased 10 motels across Long Beach, Compton, Baldwin Park, and Lancaster, totaling 847 rooms. Many of these sites were converted into emergency shelters at the height of the pandemic, and officials were praised at the time for rapidly filling the rooms.

But similar to the city, as the program transitioned from emergency to permanent housing, the pace shifted. Move-outs began to outnumber move-ins.

County and Nonprofits Struggle with Delays and Overspending

Adding to the trouble is the sometimes staggering cost. Under pressure from the state’s aggressive spending deadlines, Los Angeles officials moved quickly to close Homekey deals, often on terms dictated by private sellers and brokers. A review of six recent acquisitions, including five Extended Stay America properties and one boutique hotel, shows the city paid an average of $378,763 per unit—despite each site requiring extensive renovations.

The priciest was 21121 Vanowen St. in Canoga Park, acquired for $546,931 per room. The lowest was the Gardena Extended Stay, at $278,000 per unit. Altogether, the six properties cost the city more than $263 million.

The initial price tags are only part of the burden. Delays in converting these buildings into livable units have triggered a cascade of additional expenses: interim housing placements, long-term security contracts, tenant relocation, and rising property management fees are straining local budgets.

One example: a $60 million redevelopment at 8209 N. Sepulveda Blvd. is transforming an aging motel into a 91-unit permanent housing complex. As work continues, the former encampment residents it will house have been diverted to temporary motels and shelters. Those stays regularly stretch into months. At more than $100 per night per person.

The price of delays doesn’t stop with shelter. Moving individuals from the streets to temporary housing, or between sites, requires trucks, staff, storage units and transportation logistics. Some sites offer stipends to support resettlement, with costs climbing into the thousands per person.

Then there are service contracts and security expenses. Even when buildings remain vacant, nonprofit partners and property management firms must maintain them. In Salinas, officials reported paying more than $25,000 per month just to secure an empty Homekey site.

Scandal and Mismanagement

The Homekey program has also seen scandal. Developer Shangri-La Industries and nonprofit partner Step Up on Second received over $114 million for seven projects in the area. All are now in foreclosure. Lawsuits allege financial mismanagement and embezzlement.

In one case, Step Up allegedly sold its stake in future revenue for $2.7 million—funds that Shangri-La claims should have gone toward construction. A former CFO is accused of running a “real estate Ponzi scheme” by misusing project funds.

The California Attorney General has filed suit to recover the $114 million, and lenders are pursuing repayment of $170 million in public and private loans.

Newsom’s Balancing Act

Newsom has praised Homekey as a cost-effective solution to homelessness. But he has also announced an accountability task force and vowed consequences for misused funds. In April 2024, he unveiled $200 million in new grants alongside stricter oversight.

Lawmakers have pushed for reforms, including new reporting requirements, performance benchmarks, and claw-back mechanisms. Meanwhile, new U.S. Attorney Bill Essayli recently announced the formation of a task force to investigate fraud and corruption in homelessness efforts involving federal dollars. In short, while Project Homekey created a new model for addressing homelessness, its challenges have become just as visible as its early successes.

Back on Sierra Highway, with shuttered motels and encampments side by side, the distance between policy and progress is unmistakable. For many, the promise of housing remains just out of reach.