Case study LA: Widespread vacant new homeless housing reveals systemic mismanagement by non profits, city
Image by Eric Magnuson
An exclusive investigation by the Westside Current has uncovered that more than 1,200 vacant City-owned apartments and motel rooms—meant to be providing interim or permanent supportive housing to homeless people in LA—have never been occupied. N.E.V.E.R.
It’s an odd location for the City of Los Angeles to have spent nearly $50 million to purchase a brand new, five story luxury apartment building for the homeless. The neighborhood around 1654 West Florence Avenue in South LA consists of empty, dilapidated storefronts and abandoned, crumbling apartments. The few local businesses consist of liquor stores, marijuana dispensaries, fast food franchises and auto body shops. The building itself is located less than half a mile from the liquor store where the Rodney King riots broke out in 1992. The boulevard never recovered. The area median income is 35% below the City as a whole.
It was by far the highest sale price in the neighborhood's history. The location and price are the first of many questions about the property.
The Housing Authority of the City of Los Angeles (HACLA) purchased the building in March 2022. More than two years later not a single homeless person has moved in. It is completely vacant.
The purchase was made possible through Project Homekey, part of the 2020 federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Los Angeles used Homekey funds to accelerate its purchase of existing properties to convert to homeless housing. According to analyses of publicly available documents, over the past four years HACLA spent more than $810 million to acquire approximately 2,750 apartments and motel and hotel rooms in 38 new and existing multifamily residential buildings. Assisted by three rounds of Project Homekey funding, HACLA’s goal was to get as many people housed as possible, in as short a period of time as possible. Funding also included money from Measure HHH and other sources. HACLA purchased the properties, while responsibility for filling them lies with the Los Angeles Housing Department.
An exclusive investigation by the Westside Current has uncovered more than 1,200 vacant City-owned high end apartments and motel and hotel rooms in two dozen Homekey buildings that are supposed to be providing interim or permanent supportive housing to homeless people in LA. At least five buildings have never been occupied. The properties range from low-end motels to luxury apartments HACLA acquired from for-profit developers, in many cases for record-breaking prices.
Our investigation included site visits to all 38 Homekey properties, most of which we visited more than once, as well as interviews with residents, neighbors, and service provider employees, public records research, discussions with subject matter experts, and emailed questions to responsible officials and agencies, including HACLA, the Housing Department, and Mayor Karen Bass’s Office.
HACLA often paid or offered record-setting prices for buildings that remain vacant
According to public records, a development company purchased a lot at 1654 West Florence Boulevard on June 16, 2017 for $337,000. It was vacant except for a small shack in which a marijuana dispensary operated. Experts we consulted said construction costs for similar buildings in similar neighborhoods average $250/sq.ft. One expert who has worked on similar projects applied a lower cost estimate of $150/sq.ft.
Even if the developer spent $400/sq.ft., which experts told us is the rough average for similar properties in higher end communities like Santa Monica, the company still would have cleared a comfortable profit, in taxpayer money. However, that higher cost is unlikely given the property’s location, de minimis land costs, absence of subterranean parking, and exemption from expensive, time-consuming environmental reviews. In comparison, the City of Santa Monica recently paid $430/sq.ft., absent land costs, for a brand new building in a desirable location on Pico Boulevard across the street from Santa Monica College and less than a mile and a half from the beach. The building includes parking.
There are other examples in HACLA’s Homekey portfolio. In late 2015, a real estate investment and development firm started work on a 101-unit luxury apartment building at 21121 Vanowen Street. On September 15, 2015 the company paid $720,000 for what was then an empty lot. The building is in a more sought after neighborhood than 1654 West Florence. Applying the higher end estimated construction costs of $400/sq.ft. the total cost of development for the 97,479 square foot building was just under $39 million. On October 17, 2022 HACLA purchased it for $55.2 million for a profit of $16.2 million, or 42%, for the firm.
Read the whole thing here.
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