Aren't there cheaper ways to house homeless people?

May 13, 2023

How much should taxpayers spend to house a homeless person? The San Diego Housing Commission and San Diego County Board of Supervisors are proposing to convert four former hotels into permanent homes — at a cost of $371,000 to $469,000 per room.

Aren't there cheaper ways to get people off the street?

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The push to buy the hotels is driven in large part by the state's Project Homekey program, which has hundreds of millions of dollars available to fund eligible projects such as the ones being proposed by San Diego. But there are alternatives that are also permitted under the program. Here's a look at some potentially cheaper projects that would qualify for the state funding, and others that advocates say should be considered.

Pallet shelters, homes, tiny homes

Individual homes could qualify for Project Homekey money, but with the median price for a home in San Diego now around $790,000, it also would be the most expensive and least practical option.

"Can you imagine going out and asking 412 people if they want to sell their homes?" said Buddy Bohrer, vice president of real estate finance and acquisitions for the Housing Commission.

At the other end of the spectrum, one of the most affordable housing options could be structures made by the company Pallet. Chula Vista recently created a shelter village on city-owned land with 65 of the 64-square-foot cabins. The city invested $6.6 million in the project, meaning the overall cost was about $101,000 a unit.

Similar structures are coming to San Diego. Gov. Gavin Newsom earlier this year announced the state would spend about $30 million to provide 1,200 "small homes," or 120-square-foot structures that resemble the Pallet shelter in Chula Vista. San Diego County will receive 150. The state says they are working with the county on potential locations and service delivery.

In Chula Vista, people living in the shelters have access to bathrooms, food and showers on site. Their cabins have electricity, but do not have plumbing or kitchens.

Similar shelter villages exist in Los Angeles, Redondo Beach, San Francisco, San Jose and Sacramento, but only as shelters rather than permanent homes.

As for the "small homes" the governor announced are coming to communities throughout California, a state official said the structures should not be confused with actual homes.

"Small homes or tiny homes have a specific meaning in the California Residential Code, and it is more accurate to call what we are deploying emergency sleeping cabins," said Monica Hassan, deputy director in the office of public affairs in the California Department of General Services. "As such, they wouldn't be classified as permanent housing."

For the Housing Commission, the idea of using the cabins as permanent homes was a nonstarter.

"It would be hard to argue that no indoor plumbing constitutes housing," said Lisa Jones, executive vice president of strategic initiatives at the Housing Commission. "I’d say, at most, that constitutes an interim or temporary environment for someone."

Jennifer Hanson, assistant deputy director of external affairs for state Housing and Community Development, said Project Homekey does not have specific requirements for full kitchens. Pallet shelters and similar structures, however, are not eligible for Project Homekey funds because they are temporary structures, she said.

Bohrer noted that the U.S. Department of Housing and Urban Development also would not grant housing vouchers for the cabins.

While the terms sometimes are confused, there are significant differences between cabins like the Pallet shelters and actual tiny homes, which have plumbing, kitchens and other features found in permanent homes.

With average prices between $30,000 and $60,000, according to Rocket Mortgage and other sites, tiny homes are more affordable than most other options and would qualify for state funds to create housing.

Still, Bohrer said tiny homes are not a better solution than extended stay hotels partly because of density. The number of tiny homes that could be placed on one site is far less than the number of units that could fit on a similar sized property with a hotel. Land also may have to be purchased for the tiny homes, which could significantly increase their cost, Jones added.

Gregg Colburn, co-author of "Homelessness is a Housing Problem," does not see emergency cabins or Pallet shelters as a housing solution.

"It's not housing," he said. "It's a shelter."

Like Bohrer, he also sees creating a tiny home or cabin village as an inefficient use of land when compared with multiunit buildings.

If a dozen or so people were to live on a piece of property for three or five years, he said, that time could have been used to build a permanent structure on the lot to house many times more people.

Normal Heights resident and tiny homes advocate Ellen Stone, however, said the Housing Commission should consider them as potential housing for homeless people, and she is proposing a more cost-effective idea.

Stone, founder and past president of the local chapter of the American Tiny Home Association, said she is setting an example of how tiny homes could create homes for homeless people by placing one in her backyard.

After acquiring material through a fundraiser and using Urban Corps of San Diego County students for construction, Stone said she and her husband have a tiny home on their property and are prepared to welcome a homeless person to live in it by September.

Stone said she would like the tenant to be a homeless student from Urban Corps, a conservation group that provides career and educational opportunities for people ages 18-26. The model in her backyard cost about $40,000, and Stone said typical installation costs are around $10,000 to $20,000.

A network of like-minded people could create similar permanent homes for homeless people throughout the city, she said.

Land would not have to be purchased under her model, and she said she has had conversations with Housing Commission and state officials, and she has invited representatives of the mayor's office and City Council to an open house on her property.

Apartment buildings, shipping containers

Project Homekey funds also can be used to purchase apartment buildings, where units have kitchens, plumbing and often are larger than hotel rooms.

But they often come with tenants.

"If it's already leased, you’d have to displace all the people in that building," Bohrer said. "I wouldn't like to be in an interview explaining that one to you."

Vacant apartment buildings, however, are considered an option.

The Housing Commission is joining with Wakeland Housing and Development Corp. in submitting a joint application for $5 million in Project Homekey funds for an Ocean Beach apartment building that has been vacant for more than a year.

Wakeland would raise most of the funds toward the $4.5 million purchase of the building, which would provide 13 affordable permanent housing units, with the city and county each providing a $1.5 million loan. The per-unit cost would come to $347,000 a unit.

Buying an old, vacant apartment building can come with some extra costs. Upgrades at the building would increase the price to $6.8 million, in turn increasing the per-unit cost to $525,000.

Looking at prices more broadly, there are few price comparisons for apartment acquisitions in San Diego County because trading of mid-level complexes has been so sluggish recently. In fact, for the first quarter of this year, the county saw the fewest market-rate apartment sales in the past decade, said Joshua Ohl, senior director of analytics for CoStar, a firm that tracks commercial real estate transactions.

Based on five sales since last July of apartment buildings in the Mission Valley and Kearny Mesa areas, the average price per unit was $311,000, Ohl said. The complexes were all built in the 1960s and 1970s, he added.

While shipping container buildings are another possible option, Bohrer isn't particularly keen on them. Although the concept has been lauded for creating housing in a fast and affordable way — conversion of one container can take just weeks at a cost of $32,000 — Bohrer said they haven't been proven to be a viable housing solutions.

"Everyone's tried to make shipping containers work, and no one really can," he said. "You’ve still got to do plumbing, your water, your sewer, all that kind of stuff. This is not something that you just roll out there and it's operational."

People Assisting the Homeless, an L.A.-based homeless service provider that provides outreach, housing and shelters in San Diego County, has been creating affordable housing in California by using shipping containers.

In San Diego, the nonprofit received $11.8 million in Project Homekey funds to create 40 units with shipping containers in the mid-city neighborhood El Cerrito.

Anthony Bahamondes, deputy chief housing officer with the nonprofit's real estate arm PATH Ventures, said the housing units are being built atop a Family Health Centers of San Diego medical clinic under construction on El Cajon Boulevard.

On the surface, shipping container housing does appear affordable, he said. One container takes about $32,000 to convert into a room, and it takes two containers to make a 320-square-foot studio. Three joined containers make a 480-square-foot, one-bedroom apartment and four containers make a 640-square-foot, two-bedroom unit.

Other costs, including delivery, labor and utilities, significantly add to the price. Bahamondes said the final cost was $23.3 million, bringing the per-unit cost to about $568,000 each.

The cost would have been even more if PATH Ventures had to buy the land, he said. The cost is higher in Los Angeles and about 50 percent higher for similar projects in the Bay Area.

"I think there's a misconception that modular housing can be much more efficient in terms of cost, that this can be done for so much less," Bahamondes said. "But that's really not what we’re seeing across the state."

The modular method does have other advantages, however. Bahamondes said PATH Ventures is using shipping containers because they can be constructed in a much shorter time than conventional buildings. The El Cerrito project is expected to be complete in November.