Desert residents who’ve cruised down Highway 111 are likely familiar with the former Desert Extended Stay in Cathedral City, tucked against the mountains on the south side of the highway near the Rancho Mirage town line. Soon, it will be transformed into permanent supportive housing for low-income residents, thanks to the latest round of Project Homekey grants from the state of California.
The 96-unit Desert Marigold project from developer Abode Communities was one of nine projects around the state to receive an award during the latest funding round. It received $21 million, with another $5 million kicked in from Riverside County toward construction. Beyond that, the county has committed millions of dollars to keep the residents housed. Residents will receive on-site services from the behavioral health division of Riverside University Health System.
Holly Benson, president and CEO of Abode Communities, said housing people with supportive on-site services is important to solving the California housing crisis, because those services ensure that people are able to stay in their homes.
“Housing people without the right services means they can exist, but don’t necessarily thrive. Support services are crucial for real stability,” she said.
It’ll be a process to get the upgrades under way—and it could require the relocation of some residents. The property already has residents who lived there under the previous owner, she said, most of whom can choose to stay or relocate. Some will be moved to other units during renovations. (Some units don’t have full kitchens, for example, and the renovations will cover those upgrades.) Benson expects nearly all the residents who are there right now to qualify for the subsidized housing, and she said those who don’t qualify would receive stipends to move elsewhere. Any vacancies will be filled based on referrals from the county.
Desert Marigold is an example of the kind of housing that can help the state’s most vulnerable populations: those who are unhoused and in need of mental health or other behavioral support services. And Project Homekey can be an efficient vehicle for making such housing happen. It grew out of Roomkey, a temporary program to give unhoused people shelter in vacant motels during the early days of the COVID-19 pandemic. As of August 2024, Homekey has supported 259 projects across the state, including 15,800 homes. As many as 172,329 households will be served over the life of the project.
But this new housing is a drop in an ever-expanding bucket. California has an estimated 181,000 people who are unhoused, according to the latest point-in-time counts, which is as much as a 7.5% increase from the year prior. Riverside County had a 23.3% increase, according to an analysis by the Public Policy Institute of California.
Looking ahead, there could be similar supportive-service projects to come. In March, California voters passed a $6.4 billion mental health and housing bond. CalMatters reported that around $2.2 billion of those funds will go to Homekey starting in May 2025. The goal is to transform existing buildings into housing for people with mental-health and/or substance-use disorders.
Former extended-stay properties can be a good fit, because the rooms may already have space for kitchens. Desert Marigold will have 72 studio, 12 one-bedroom and 12 two-bedroom rentals that have air conditioning, a full bathroom and a kitchenette.
But getting the projects to fruition requires good location scouting and significant cooperation from local governments. Developers first have to find the right properties that meet the program criteria, Benson said. “We’ve been very, very selective in that program,” she said.
The buildings can’t be so old that they’re beyond renovation or repair. The layout of the property has to make sense for unit-style living. Former extended-stay properties can be a good fit, because the rooms may already have space for kitchens. Desert Marigold will have 72 studio, 12 one-bedroom and 12 two-bedroom rentals that have air conditioning, a full bathroom and a kitchenette. “A typical hotel room often requires additional infrastructure, which can be a challenge,” Benson said.
On the plus side, reworking the right existing building can be more cost-efficient than starting from the ground up, lowering overall project costs.
There’s also a cost-savings that stems from how the program is set up: Homekey money comes to the developer upfront, compared to other programs that require developers to get interest-bearing construction loans and then get reimbursed. Because of the upfront payment process, there are fewer attorney’s fees, Benson said.
“The simplicity of fewer financing sources means less expense, fewer legal fees and a faster development timeline,” she said.
While Homekey makes financing simpler, there’s the question of how the properties continue to stay operational. The Homekey program comes with five years of rental subsidies to help keep tenants’ rent covered. Benson said there’s uncertainty about what happens after those five years—and that’s why some developers are choosy about pursuing Homekey projects.
“We, as an organization, don’t take that risk without a solid takeout plan,” she said. “Without a clear plan beyond the initial subsidy period, we’re left wondering what happens to our residents and the stability of that building.”
In the case of Desert Marigold, Riverside County has committed more than 20-years of subsidy support, totaling more than $23 million in vouchers. Benson praised the housing-authority partners at Riverside County for their willingness to invest in the project and address the issues “head-on.” Without local governments willing to take a stake in the project, developers can’t create the properties needed to help the state’s most vulnerable populations.
“We’re continually pushing for more permanent supportive housing, which is critically needed, but that housing without services and subsidy is not feasible,” Benson said. “We need long-term rental subsidies and ongoing service funding, which are critical to making supportive housing viable after the initial subsidy period ends.”