In Los Angeles, a significant amount of taxpayer money—up to $1.5 million for each room—has been spent to house homeless individuals in newly constructed apartments situated in affluent neighborhoods, according to recent findings from the California Post.
So far, about $2.6 billion has been allocated for acquiring and renovating hotels, motels, and dormitories to address the needs of the extensive unhoused population. Most of these properties were bought from Governor Gavin Newsom for $1.3 billion through the Homekey initiative, which has received an extra $1.3 billion in funding from local government sources for renovations.
Many of these units are located in upscale areas such as West Hollywood, Cheviot Hills, and Venice Beach, featuring amenities like private balconies, in-unit laundry facilities, and gated parking.
Experts have criticized this spending spree, especially as Los Angeles is grappling with a housing crisis, strict zoning laws, and a looming budget deficit.
Rick Caruso, a developer and former mayoral candidate, has sharply criticized city, county, and state officials for what he describes as “financing luxury.” He argues that the city is wasting vast sums on “unsustainable” initiatives, disregarding potentially more effective solutions.
The California Post investigated 83 properties earmarked for converting into homeless housing, based on public records obtained from the California Department of Housing and Community Development.
For instance, in West Hollywood, the Holloway Motel was purchased and renovated for around $22 million, approximately $1.05 million per unit. This hotel is situated across from the exclusive Soho House.
At another location, a development for the Fernandeno Tataviam Band of Mission Indians totaled $40.7 million for just 27 units, translating to about $1.5 million per unit.
The former Ramada Inn on Washington Avenue in Venice Beach was bought for $8 million in 2020, but renovation costs have surged to nearly $20 million.
Due to rising costs associated with constructing 32 units, the price per unit now sits around $625,000. The city stated that some of these properties needed extensive work to comply with disability access laws, thus inflating the expenses.
According to Caruso, who leads one of the largest real estate firms in the country, this spending underscores a recurring issue: the city spends about $1 million for each homeless individual.
“We’re not seeing results at that cost—not sustainable ones, anyway,” he remarked. Caruso believes the city is investing in ineffective programs while overlooking those that actually yield positive outcomes.
He mentioned organizations like the Downtown Women’s Center and People Concern as examples of effective models for the city to follow.
Further examining city documents, it’s noted that the Housing Authority paid $37 million for a property on Oakwood Avenue in East Hollywood, which consists of a newly built five-story complex costing $539,000 per unit. It offers modern amenities like private balconies and in-unit washers and dryers.
Another project at 5050 Pico Blvd involves new construction with high-end features and is positioned close to Beverly Hills. The total cost for this site was $21 million plus an additional $14 million to finish, bringing the price per unit to $450,336.
In a different development situated in Temple and Alvarado, the overall cost reached $67 million for just 68 units, leading to an estimated price of nearly $1 million per unit. Similarly, the Weingart Willows in Gardena totaled $42.7 million for 53 units, about $807,000 each.
Monica Rodriguez, a city councilwoman, has urged Chief Comptroller Kenneth Mejia and the Housing and Homelessness Commission Chair Nitya Raman to examine the funding figures more closely. “Costs per unit are exceeding the sale price of single-family homes in the San Fernando Valley,” she pointed out.
Candidate Zach Sokoloff for Los Angeles governor has expressed concerns about the abrupt halt of regular audits on homeless housing costs since Mejia took office in 2022, deeming the expenses “unsustainable.” He feels Angelenos are being forced into an undesirable choice between high spending and rampant homelessness.
He emphasized the need for a fundamental reevaluation of strategies for developing affordable housing while tackling the deeper issues related to homelessness.
“If we keep throwing good money after bad, we won’t solve the crisis Nor will we have funds for other crucial city services,” he warned.
When asked about the soaring costs linked to the Homekey initiative, Governor Newsom did not directly address the matter. Instead, his office highlighted a 9% decline in the number of unsheltered homeless individuals last year. They noted the $1.3 billion allocated for property acquisition but did not mention the additional $1.33 billion spent on renovation.
Mayor Karen Bass defended the city’s strategy, mentioning a 17.5% decrease in street homelessness and rapid approval for over 30,000 affordable housing units. She acknowledged persisting challenges but maintained a focus on breaking through bureaucratic inertia to achieve tangible results, insisting her administration would not allow any form of corruption.
However, it’s worth noting that half of the Homekey properties currently do not house homeless individuals.
Several locations mentioned in project records remain under construction or have been leased but not yet occupied—including the Venice site, the Shelby Drive project, and various conversions near Hollywood.
