The CalMatters investigation, distributed by the Associated Press, draws on more than 100 public records requests, dozens of site visits, and interviews with developers, residents and local officials to build the first detailed public accounting of the Homekey program.
Launched by Gov. Gavin Newsom in the summer of 2020, Homekey awarded $3.8 billion to local governments to quickly turn motels and other buildings into permanent homeless housing. The urgency was real: thousands of unhoused people had been moved into temporary motel rooms under an earlier program, and officials feared a mass return to the streets once those rooms expired. The new funding was meant to buy buildings and convert them, skipping some standard approval steps for the sake of speed.
“What we’re doing here today is multiples of what any state in American history has committed to address this crisis of homelessness,” Newsom said at a 2021 press conference.
But the CalMatters analysis found that the rush created a boom‑or‑bust dynamic. Some projects, like the 29‑unit El Portal complex in Ventura, succeeded by layering local dollars and intensive social services on top of the state grant. “Homekey works because of all the stuff added on top of it,” said Jeffrey Lambert, CEO of Ventura Housing. In Mendocino County, the Live Oak Apartments — a former Best Western — kept residents housed by employing a therapist on retainer and a dog trainer to head off problems that could lead to eviction. Sherry Collins, 66, moved in three years ago after her husband died and she couldn’t afford her cabin. “They have been awesome to me,” Collins said. “They’re more like family.”
But other projects stalled, ballooned in cost or never opened. Jennifer Hark Dietz, whose nonprofit People Assisting The Homeless ran multiple Homekey sites, described the Gardena Travelodge as a cautionary tale. The city of Los Angeles bought the motel for $9 million and estimated repairs would cost around $50,000. More than five years and nearly $3 million later, it remained vacant earlier this year, with plywood over some windows. Hark Dietz said her team had no chance to vet the building before taking it over in December 2020. “Of course, we know now that’s not the case,” she said.
The investigation also uncovered a fraud scandal. Shangri-La Industries received nearly $115 million in Homekey contracts to develop 500 units in seven cities. Federal prosecutors allege that the company’s former CFO, Cody Holmes, submitted fake bank records to the state and then spent the money on personal luxuries — $46,000 a month for a Beverly Hills house, a $127,000 diamond necklace for a girlfriend, and a $5,000‑a‑month Ferrari lease, among other purchases listed in the indictment. Holmes has pleaded not guilty. In a separate civil fraud case, state prosecutors say Shangri-La took out undisclosed loans on the Homekey properties, then defaulted, triggering foreclosures. Because crucial paperwork restricting the buildings to affordable housing was never filed, some properties were scooped up by companies with no commitment to homeless housing. “My CFO had a lot of wrongdoing,” said former Shangri-La CEO Andy Meyers. “But it was a confluence of events that caused each project to go bad.”
Colleen Robinson, 62, lived at the All Star Lodge in San Bernardino, one of the few Shangri-La projects that did open. But after a foreclosure, the new owner planned to quadruple the rent. Robinson left on a Greyhound bus for Iowa in February. “This would give hell a run for its money,” she said.
The program was designed to be faster and cheaper by cutting out the usual layers of lenders and investors who normally scrutinize budgets. That removal of oversight had predictable consequences, according to Robert Ratner, director of Santa Cruz County’s Housing for Health division. His county has three delayed Homekey projects, one of them more than four years late. When asked whether the county had done proper due diligence on the cost estimates, Ratner answered: “I would say no. I can’t say yes with a straight face at this juncture.”
Taryn Sandulyak, a Bay Area developer, saw her nonprofit Firm Foundation Community Housing collapse under a $12 million Homekey project in Vallejo that came in two‑and‑a‑half years late and 70% over budget. She said the program’s triple demand — high quality, high speed and low budgets — was impossible. “You can only have two of those. You really can’t ever have three. That’s the issue with Homekey, is they give you not quite enough money to do it, and they want you to do it really, really fast and really, really well.”
Despite the setbacks, 52 people now live in the Vallejo building, including 62‑year‑old former refinery worker Terrence White. “It feels wonderful,” he said.
The state has not conducted a comprehensive public audit of Homekey. A bill to require one, proposed by Republican Assemblymember Leticia Castillo, died in committee in January. The state’s Housing Department said it monitors projects closely and that “Homekey has helped build more and faster.” Newsom called the program a “phenomenal success.”
For the new Homekey+ phase, funded with up to $2 billion from a voter‑approved mental health bond, the state says it has doubled construction timelines and is scrutinizing budgets more carefully. But local administrators like Megan Van Sant in Mendocino County worry about ongoing costs. “The state asked communities to do these projects, and they cost more to do well than what you can earn in rent,” she said. “I think the state’s going to have to find a way to find some ongoing funding for it.”