Inside LA’s opaque program to house homeless in hotels

Los Angeles /
Oct.October 30, 2020 03:00 PM
Gov. Gavin Newsom, Shenzhen New World Group chairman Huang Wei and former L.A. City Council member Jose Huizar (Getty, the L.A. Grand Hotel Downtown)

Gov. Gavin Newsom, Shenzhen New World Group chairman Huang Wei and former L.A. City Council member Jose Huizar (Getty, the L.A. Grand Hotel Downtown)

Less than a year ago, black SUVs and international tourists crowded the L.A. Grand Hotel Downtown, a prime property near Walt Disney Concert Hall and the Broad Museum.

Today, Salvation Army tents surround the hotel on South Figueroa Street, and a flow of homeless men and women stream in and out. Chad is one of them. He said he’s been staying at the L.A. Grand since March, after spending nights next to the Harbor Freeway. Rhonda is another. She said the hotel took her in because she has Hepatitis C.

For over seven months, the 469-key glass complex has been one of several Los Angeles hotels paid to house the homeless through Project Roomkey. Gov. Gavin Newsom introduced the program to shelter and isolate those most vulnerable to contracting and spreading the coronavirus.

L.A. Grand’s inclusion in Project Roomkey raises questions given that its owner, Shenzhen New World Group, has been implicated in an elaborate pay-to-play scandal involving former L.A. City Council member Jose Huizar.

L.A. County officials would not discuss their choice to partner with China-based Shenzhen New World; the county attorney cited public health and safety concerns as the reasons for not disclosing details.

Shenzhen New World is facing allegations it funneled hundreds of thousands of dollars to Huizar in exchange for help getting its massive mixed-use project approved. The firm’s involvement in Project Roomkey also highlights the opaque nature of the emergency assistance program. While Project Roomkey has sheltered thousands of vulnerable residents, it has also been a source of frustration for hotel operators and homeless advocates.

“Project Roomkey was a program that moved fast and furious,” said Pilar Buelna, director of development at the Salvation Army’s California South Division. “But now we are phasing it out.” The program will end in December.

Complex rollout

As the pandemic was taking hold in mid-March, Newsom unveiled the state’s plan to house homeless in hotels. “Homeless Californians are incredibly vulnerable to Covid-19 and often have no option to self-isolate or social distance,” he said at the time.

By early April, Project Roomkey was born. The federally-funded program would address the Covid outbreak and in the process, pump $150 million into California’s hobbled hotel industry.

“We saw Project Roomkey as a viable option to help with the hospitality industry’s economic recovery,” said Pete Hillan of the California Hotel and Lodging Association.

The rollout, however, grew complex.

Dealing with myriad other pandemic-related problems, Newsom let counties figure out how to implement Project Roomkey — and banked on the Trump administration to backstop the cost.

The Federal Emergency Management Agency responded with a March 27 letter saying the government would reimburse California for hotel housing costs “for individuals who test positive for coronavirus but do not require hospitalization, but need isolation or quarantine; asymptomatic individuals at high risk, people over 65 who have certain underlying health conditions including respiratory, compromised immunities, and chronic disease.”

The three-page letter does not mention the word “homeless.”

After the FEMA letter, it became the job of local government agencies like the Los Angeles Homeless Services Authority to specifically find homeless people who also qualified under the reimbursement rules.

Rhonda — who is 62 and like Chad would not give her last name for fear of reprisal — said she struggled to find a room. Eventually, she was let into the hotel when a caseworker noted her Hepatitis C.

Given its prescribed limitations, L.A. County “mobilized pretty quickly” to find qualified program participants, said Gary Painter, a professor at the USC Sol Price School of Public Policy.

But demand for beds far outweighed those available. “They couldn’t find enough hotels to participate,” Painter said.

Project Roomkey has housed 22,000 people statewide at various points during the pandemic, according to the governor’s office. A 2019 U.S. Department of Housing and Urban Development study put the number of California homeless at 152,000. L.A. County has about 67,000 homeless, according to its latest count released in June.

Alan Reay, president of hotel brokerage Atlas Hospitality Group, said some hotels didn’t participate in the program because “owners were concerned that it would hurt their future business. They were worried about the possible stigma and how they would be perceived,” he said.

Reay added that many other hotel owners who may have taken part were not contacted about Project Roomkey, and had no knowledge of the selection process.

Taking in millions

Last year, the FBI identified Shenzhen New World as a player in the widening city hall bribery probe centered around Huizar. In May, the developer’s alleged role grew clearer when a former Huizar staffer, George Esparza, reached a plea deal with federal prosecutors.

According to the plea, Shenzhen New World chairman Huang Wei provided Huizar with a $600,000 payment toward settling a sexual harassment lawsuit. In return, Huizar, then chair of the Council’s powerful Planning and Land Use Management Committee, would support the developer’s plan to transform the L.A. Grand into a 77-story tower with a mix of rentals, condos and hotel rooms.

The slew of Huizar-related federal indictments and plea agreements never explicitly mentions Shenzhen New World, and the company has not been charged with a crime. Messages with Shenzhen New World and the L.A. Grand were not returned. 

Still, the company was pushed to the center of the scandal while collecting taxpayer-funded fees through Project Roomkey.

“Even with Huizar facing criminal trial, Shenzhen New World Group continues to be very well connected,” said Casey Maddren, president of United Neighborhoods for Los Angeles, a community advocacy group.

The L.A. Grand has played a role in Project Roomkey from the start.

The Salvation Army partnered with the city’s Homeless Services Authority in March, and soon set up outside the Downtown hotel, which expanded its capacity to 500 beds, Buelna said. The hotel was one of several Project Roomkey locations the Salvation Army helped run.

The county is expected to spend $92 million on Project Roomkey and has paid hotels anywhere from $59 to $120 per room per night. Because the L.A. Grand has been participating in the program from the beginning, it’s likely Shenzhen New World has received millions of dollars; the county refuses to say whether it has contracted with the company — or any company — for Project Roomkey.

Identifying participating hotels “would, by definition, result in the disclosure that the residents at these sites are suffering from serious medical conditions, constituting an unwarranted invasion of their personal privacy,” wrote outgoing L.A. County Counsel Mary Wickham.

She also noted that disclosing the hotels could lead to people showing up without having been screened, which could “jeopardize the health of the residents, staff, and the community at large.”

But Lisa Jacobs, an attorney at the county counsel office, offered an explanation similar to Alan Reay’s: Naming the hotels, she said, could “chill their participation.”

Enter Project Homekey

With future funding for Project Roomkey uncertain, the program is winding down.

The governor’s office and L.A. County have pivoted to Project Homekey. For that version, the state acquires hotels and converts them into homeless residences. Already, nearly a dozen Los Angeles properties, most of them motels, have been selected.

On Oct. 23, Newsom announced that an additional $200 million will go to the new program. Unlike Project Roomkey, the Project Homekey hotels have been identified by name.

But the state has drawn criticism for the new program.

“They are paying $360,000 per key for rooms that are probably not worth half that much,” Reay said.

While hotels like Shenzhen New World’s L.A. Grand are now exiting Project Homekey, homeless advocacy groups like the Salvation Army intend to shift to the new version.

“Project Homekey was just temporary,” development director Buelna said. “Our main function is to position the homeless into permanent housing.”


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