An Unprecedented Golden Opportunity

2021 Homeless Hotels and the Pandemic

Hotel Acquisition for Long Term Success

Introduction

As San Francisco moves cautiously into a “post-pandemic” reality, it’s crucial that we act on the lessons our City has learned, at such great cost, during this time of COVID. The pandemic exposed long-standing inequalities — racial, economic, and even between zip codes — that have been corrosive to San Francisco’s community health, its sustainable economy, and our shared life.

The impact of inequality during COVID was strikingly illustrated by the struggles of San Francisco’s unhoused residents. Some emergency interventions, like the shelter-in-place (SIP) hotels, showed that even in a pandemic, as UCSF’s Dr. Margot Kushel says, “There is no medicine as powerful as housing.” The SIP hotels, although serving only a fraction of people needing shelter, demonstrated what a difference decent housing can make, even in the short-term. But political battles during the epidemic also revealed how profoundly broken the “revolving door” approach the city takes to homelessness is, and the lack of structural investments in long term solutions has increased systemic inequalities.

There are currently at least 8,000 unhoused San Franciscans; and thousands more low-income families and individuals are at risk of losing their homes. In addition, studies demonstrate that we spend far more on emergency room, hospital and other social service costs by forcing someone to remain tethered to a state of homelessness than it would cost to house that same individual. We cannot afford to go back to the failed policies that led to this crisis. Our people need real solutions — and the good news is that the pandemic has opened up a golden opportunity to make major changes that will permanently address homelessness and the lack of truly affordable housing in our City.

With unprecedented amounts of Federal, State and local (Prop C) funding available, and rare amounts of real estate for sale at lower prices than usual, we need to seize the moment and acquire at least 1,000 units of housing now. San Francisco cannot afford to go back to business as usual: let’s honor the losses of the pandemic by acting so that all our residents equitably share in the stability, dignity and safety provided by decent housing.

Background

The pandemic, while wreaking havoc on the lives of people across the globe, had some bright spots locally: in particular, the possibility of using tourist hotels, a previously unthinkable solution, as housing for unhoused San Franciscans. The state of California released funding to purchase hotels in a program called Project Homekey, asking local municipalities to match the cost of acquisition and providing operating funding for the first two years. In San Francisco, this led to the purchase of two hotels, the Granada and the Diva. San Francisco also utilized FEMA funds to lease, staff and move over 2,500 unhoused San Franciscans into tourist hotel rooms that served as temporary Shelter In Place (SIP) hotels to protect the “most vulnerable” during the pandemic. Most of those in the SIP hotels are seniors, and a disproportionate number are African American: both populations, due to structural inequities, are at increased risk of fatality due to COVID. The SIP hotels have proven to be a wonderful opportunity to do medical care and housing navigation work, as folks are stabilized and easy to find.

Description of Need

More than four decades into the second episode of mass homelessness in the United States, many San Franciscans have become immune to seeing suffering in the faces of their neighbors who are forced to sleep rough on our streets. But the loss of housing is always devastating for human bodies and minds and for our communities.

While research varies on the specific numbers according to location, it is clear from findings across numerous studies that it is cheaper to house people than to have them homeless. One study found that $600 a month would keep a person in supportive housing, while it costs $2900 a month to care for someone on the street. Sadly, many of the extreme expenses of homelessness are health and hospital costs associated with the greater use of emergency rooms by unhoused people, and hospital stays three times longer than those of housed patients.

There is an economic cost, but for unhoused people, the cost of homelessness is paid for with their health. People who are homeless have higher rates of illness and die on average 12 years sooner than the general US population. People living in shelters are more than twice as likely to have a disability compared to the general population, and community survey data indicate that over one-quarter of people experiencing homelessness have severe mental illness and nearly 35% have a chronic substance-use disorder, many co-occurring. Chronic diseases such as diabetes, heart disease, respiratory tract conditions, dental disease, and HIV/AIDS are found at high rates among the homeless population, placing people experiencing homelessness at higher risk of serious illness from COVID-19. Additionally, people experiencing homelessness who contract COVID-19 are two to four times more likely to require critical care and two to three times as likely to die compared to the general population.

Here in the Bay Area, unhoused people, from a medical perspective, present as more than two decades older than their calendar age. Today, a local homeless woman in her 50s typically has the health profile of a housed adult in her late 70s or 80s. During the pandemic, this health hellscape was amplified by a tripling of homeless deaths since the year before the pandemic. This was largely attributed to a sharp rise in overdoses — something seen across the country but most acutely here in San Francisco.

The City’s failure to move quickly and decisively to acquire permanent housing is unconscionable, in a time when thousands of people are living on the streets and unprecedented amounts of Federal and State funds are available to house them.

Intersection of Unprecedented Opportunities

There are upwards of 70 tourist hotel owners now willing to sell or long-term lease their buildings to the City. Many of these could be converted to studios easily, require little rehabilitation, have elevators, and would be available at half the cost of new construction.

During the pandemic it became very clear that tourist hotels and student housing were perfect places to set up temporary shelter, and that many of those buildings would make fantastic permanent housing. As the city attempted to ensure all unhoused community members could shelter in place, they also set up temporary tent sites (Safe Sleeping Villages), but these have untenably high costs because of infrastructure needs. The annual cost of one spot in one tent site is $61,000 a year, or 2½ times the median market rent for a one-bedroom apartment in San Francisco. These costs are not reimbursable by FEMA, as the SIP hotel costs are.

Early in the pandemic, the state released Project Homekey funds, and the City sent out requests of interest to hotel owners; 70 of them responded with interest to sell their buildings to the City. The City applied for Project Homekey funding, and was able to quickly purchase two buildings with 362 units of permanent housing. This program was successful for several reasons: The acquisition and rehab cost averaged $400,000 a unit to convert to permanent housing, and individuals were able to take advantage of this housing almost immediately. In contrast, building new affordable housing can cost at least $700,000 a unit, and takes approximately 5–7 years to build. We need to acquire more hotels as permanent housing: it is the most cost-effective, efficient, and timely intervention we can make to overcome homelessness.

Comparison Cost of Hotel Acquisition vs. New Affordable Housing Construction

Description of Available Funding Sources:

Prop C, passed by voters in 2018, but held up in court until September 9, 2020 provides substantial ongoing revenue to pay for housing, treatment, homeless prevention and shelter to the unhoused community. However, depending only on Prop C funds would be a mistake and miss this once-in-a-lifetime opportunity to profoundly solve homelessness in San Francisco.

Project Homekey from the state of California is facing a major expansion in this year’s legislative process. And this is just one more source of funding available right now for San Francisco — in fact, there is more money to truly address homelessness than ever before. Federal housing money and new state initiatives give us the golden opportunity to acquire large numbers of units at low cost and house people permanently.

Over 50 San Francisco organizations signed onto a letter in February 2021 asking the Mayor to utilize the windfall of FEMA reimbursements to do acquisitions, such as purchasing additional hotels, that would help to permanently address the homelessness crisis.

Since then the news on the federal and state level has only gotten better. Governor Newsom announced his plans, which include $3.5 billion for hotel and motel acquisition, renovations and operations, as well as $3.5 billion for building acquisition and renovation costs to provide board and care, residential care for the elderly and people with disabilities. In addition, his budget includes $1.6 billion for two-year housing subsidies for homeless families on public assistance to help offset rental costs in the private housing market. Lastly, it includes $150 million to stabilize and rehouse individuals now living in Shelter in Place hotels.

At the federal level, San Francisco learned last week that it is receiving 887 emergency housing choice vouchers, which draw down the rents paid by poor households to 30% of their income. The city is also receiving $636 million from the American Rescue Plan, and many municipalities are using a portion of those funds to address homelessness. Lastly, San Francisco’s share of the cost for Shelter in Place hotels, originally at 25% , was paid for by the federal government. This frees up city general funds originally set aside for homeless people, which can then be reconfigured for acquisition costs of hotels.

Funding Sources to Reach 1,000 additional units on top of Prop C funds

Conclusion

Mayor Breed has a generational opportunity to deeply leverage Prop C (Our City Our Home) Funds, use the windfall of Federal and State funds, and save countless lives by moving the dial on homelessness. By taking these steps, Mayor Breed could significantly, permanently and visibly reduce homelessness, something that has been out of the reach of every Mayor over the past four decades since the federal government disinvested from housing poor people, an issue Mayor Willie Brown called intractable.

The 1,590 unit acquisitions, added to the Prop C investment plan of 1,695 permanent private market rental subsidies and 540 two-year private market rental subsidies, would result in a total of 3,825 unhoused households leaving homelessness behind them, while preventing homelessness for at least another 7,000 households each year, and adding hundreds of beds to our mental health and substance use treatment system. For comparison, in a typical year pre-pandemic, San Francisco was bringing about 780 unhoused households into housing each year. With this investment, Mayor Breed would house almost 50% of the current Point in Time Count, 5 times the number of unhoused individuals housed by her predecessors.

We are calling on Mayor Breed to take big, bold action today, and use state and federal funding to acquire 1,000 additional units on top of the Prop C investment plan.