Hotels for Housing in the Pacific Northwest…
Introduction: Housing is a complex and pressing issue
Compounded by the pandemic, the complex pre-existing homelessness and affordable housing crisis have become an important topic of discussion for state and local governments. A widespread misconception is that the Homelessness issue affects only those we see on the streets. One solution to this crisis has been acquiring and converting hotels and motels to temporary and permanent affordable housing by governments and nonprofits throughout the Pacific Northwest and California. To fully understand the hotel to housing initiative, it is important to understand the model, the cost, and the results.
The Model: Permanent acquisition of hotels for housing
The idea of hotels housing those experiencing homelessness is not new. Housing and social service have previously used hotels as temporary housing, such as during frigid weather, natural disasters, and recession. By now moving into an ownership role, these housing and social service agencies will offer counseling, domestic violence recovery, job training, health care, and addiction treatment, among many other things on site. This allows these agencies to execute their mission more efficiently from an operations and cost standpoint.
Two significant projects using this model have been Project Homekey out of California and Project Turnkey in Oregon. With a mix of Federal and State funds, both of these projects have been immensely successful in acquiring properties and quickly converting them to housing.
Awarded $835.6 million to 48 jurisdictions for 93 projects, Project Homekey will convert 6,055 hotel units to housing. Project Turnkey was split into two parts: $30 million for communities where wildfires destroyed 4,000 homes this summer and $35 million for housing needs in other parts of the state. As of early July 2021, 19 properties have been approved for Project Turnkey, representing 867 units and $71.7 million in grant funds. Two-thirds of the fund will be used to convert the properties to transitional or permanent supportive housing within the next 2-5 years.
The Cost: Hotels to housing is a cost-effective solution
A continuing issue with temporary housing in hotels has always been the cost associated with renting rooms. At one point this year, Oregon’s Multnomah County spent $64 a room per night across six different motels in addition to paying its nonprofit partners to run and staff these properties. The total bill for these properties was $1.4 million dollars a month. At the Chestnut Tree Inn where 58 women were housed, the bill was $111,000 a month for the rooms alone.
What quickly becomes apparent is that this model is not sustainable without reoccurring government relief funding.
An alternative that is far more cost-effective is buying these properties. The average acquisition cost was $87,700 a room for Project Turnkey properties. This is less than half of what it costs for a new affordable housing build. However, buying real estate is easier said than done. Finding qualified properties at the right price takes time and money. With much of the relief needed for the homeless not afforded time to wait, many of these temporary rentals have played an important role in bridging the gap.
The result: Successful acquisitions of hotels across the Pacific Northwest and California
The ability of local governments, nonprofits, and private groups to acquire large quantities of rooms has been extremely successful. In Oregon, Project Turnkey acquired 865 new housing units in 7 months, leading to a 20% increase in the state supply of shelter beds. In Washington, using bonded money from a new sales tax, King County has bought five hotels for more than
$102 million and is in contract to purchase two more plus an apartment building. At more than 800 rooms in all, it will be more than the entire supportive housing for homeless people built in 2019 and 2020. California’s aggressive approach has already helped create about 6,000 new units of housing.
One example of the success of these projects is the Oregon-based Peace at Home Advocacy Center, which provides Emergency safe shelter for survivors of family violence, sexual assault, stalking, and human trafficking, among many other resources. Peace at Home applied last December to run one of the Project Turnkey projects. They had a new shelter up and running by April of this year. These new private rooms will provide shelter and safety from past perpetrators and the violence and conflict that can arise when people are pressed together in congregate shelters. Peace at Home is just one of many organizations working hard for those who need it most.
The other aspect of this crisis has been for-profit private real estate groups specializing in converting hotels into housing. Notably, Beaverton-based Fortify Holdings has been highly active in Oregon, Washington, and Idaho, converting hotels to largely affordable housing.
While the acquisition of hotels for housing has been successful, it has yet to be determined if this model will prove to be a viable long-term solution. The operational and cost logistics of operating converted housing for the homeless present a unique set of challenges. In the short term, however, it has become clear that these conversions are making a real impact up and down the west coast for thousands of at-risk individuals and families. Because of this, It will be interesting to monitor the effectiveness and quality of the hotel to housing conversions in the coming years. In addition, it will be intriguing to see how non-profit vs. for-profit organizations make an impact using the hotel-to-housing model.