Crossroads Village was acquired by RH Community Builders and UpHoldings, Inc. in the first round of HomeKey funding. File Photo.

published on September 7, 2022 - 1:37 PM
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California recently announced plans to begin its third round of Project HomeKey grants, where public entities, nonprofits and for-profits apply for state funds to build or purchase properties to house the homeless. Those recipients can then own and operate the facilities. In the case of jurisdictions, many of those properties are passed off to nonprofits or for-profits.

When the first round of HomeKey funds went out in 2020, the partnership of Fresno-based RH Community Builders, an LLC, and Illinois-based UpHoldings, Inc. were the only ones, along with the Fresno Housing Authority, to receive HomeKey dollars in Fresno County.

The program allowed the footprint of both organizations to grow in big ways. With the grants, RH Community Builders and UpHoldings, like the other public entities and nonprofits who applied, now hold ownership and collect rents on the HomeKey properties purchased with state funding.

 

Who Are RH Community Builders and UpHoldings, Inc.?

In the world of affordable housing, there are more for-profit affordable housing developers than there are high-capacity 501c3s — the tax code for nonprofits, said Jessica Hoff Berzac, co-owner of UpHoldings, Inc.

Most housing authorities don’t purchase and manage their own properties. Fresno has one of the highest-capacity housing authorities she has ever worked with, she added.

Over 20 years, UpHoldings has developed more than 2,000 units, she said.

UpHoldings partnered with RH to split roles and responsibilities. RH has experience running shelters and is quite experienced with operations of interim housing, she said. UpHoldings’ strength has been in navigating complicated affordable housing grants.

Fresno-based RH Community Builders is made up of owners Brad Hardie and Wayne Rutledge. UpHoldings, Inc. is owned by Hoff Berzac and Cullen Davis.

“In general, we can move quickly, we can pivot, we’re not constrained waiting for board approval,” Hoff Berzac said. “We have the interest and capacity and staff to be able to work on things that make sense for a variety of partners.”

But when it comes to investment, ownership of the projects in the Central Valley came at no cost to developers.

 

How did they get their properties?

Of the 71 applicants in the first round of HomeKey, they were two of four for-profit companies in the State to be approved. HomeKey rules for for-profits and some non-profits require them to apply alongside an approved affordable housing authority, such as a city or county. The County of Fresno was the co-applicant for Crossroads Village.

In HomeKey 1.0, projects that cost less than $100,000 per door required no money from applicants. All money came from the $750 million allocated for the project from the State of California. The second round of HomeKey allocated $1.45 billion for projects to provide roofs to the unhoused.

Fresno County, the co-applicant for the duo, received $14.8 million for the 165 units at Crossroads Village. Rents for the rooms are calculated at market rates, then reduced for each missing amenity, such as a kitchen.

A request for average monthly rental income and the breakdown of how it’s spent by RH Community Builders was declined.

After their first motel acquisition in 2020, the State of California awarded three more grants in HomeKey 2.0 to RH and UpHoldings to purchase properties.

 

Is this normal?

When jurisdictions acquire HomeKey properties, they don’t necessarily hold onto them. The HomeKey properties in Los Angeles County are still owned by the County, according to Christina Villacorte, director of communications for the Los Angeles County Homeless Initiative. They are working toward selecting owners for the properties, and they can be non-profit or for-profit entities.

For HomeKey 2.0, the Los Angeles County Board of Supervisors is working on awarding their properties to different organizations.

“Not all of these properties have been awarded, and to date, all the properties that have been awarded have been with not-for-profits,” wrote Villacorte in an email. A list of corporations applying for HomeKey properties in L.A. County does include for-profit.

Not just jurisdictions pass off ownership. The City of West Sacramento is retaining ownership of its sole HomeKey property, according to Raul Huerta-Castro, housing manager for the City of West Sacramento. The City of Fresno will also maintain ownership of recently acquired Villa Motel and Ambassador Inn, according to Fresno City Councilmember Miguel Arias.

The City of Fresno also contracted with RH Community Builders to rehabilitate the Villa Motel and Ambassador Inn to upgrade the units to accommodate permanent housing. There was no bidding process for the work, according to Arias. Arias said the eight-month timeline to finish the necessary upgrades required by the HomeKey project meant they could not do a formal request for proposal, which takes over a year.

In the Aug. 18 Fresno City Council meeting, Arias said he was not comfortable awarding any more no-bids for acquisition, renovations or operations.

“Going forward we need to return back to tradition of putting RFPs out to shield ourselves from criticism,” Arias said.

 

Concerns about transparency

While most affordable housing development is done through for-profit developers, project HomeKey is the first of its kind. Some advocates are upset with the way money was spent.

“The ones that are utilizing the HomeKey funding resources are not happy with what they’re doing with the funding or lack of resources that were promised,” wrote Fresno homeless advocate Dez Martinez in an email. “I know the community in Fresno is upset with the city and county by the broken promises of resources and length of stay of the shelters to be opened for 2 years. I know us advocates are very disgusted by the way they use Project HomeKey funds here in Fresno California and believe there should be an audit done.”

Martinez did not respond to requests for more information. Martinez has overseen homeless encampments and applied to operate one sanctioned by the City. The measure was not approved by the Fresno City Council.

 

What’s next for the two companies?

In 2023, RH and UpHoldings will begin work to do a total gut renovation to the Crossroad Village rooms by adding kitchens and outdoor access to all rooms, making the housing permanent rather than interim housing, according to Berzac.

Almost all the money to begin the renovation has been secured, Berzac said in her interview in June. The cost to renovate was not disclosed

“It’s not going to feel like a hotel,” Berzac said. “We’ve put a little kitchen in, it’s going to feel more like townhomes. All rooms will have outdoor access rather than access through a hallway.”

They are currently working on plans to relocate their current tenants. Interim housing typically means 12-24 months of support and “lots of people will have moved on by the time construction begins,” Berzac said.

Part of the requirement for receiving HomeKey money is that interim housing be transformed to permanent housing.

The partnership is also slated to receive $12.6 million through the County of Tulare to acquire and rehabilitate the 57-unit Madson Gardens in Tulare.

In Merced, $19.7 million will pass through the City of Merced to acquire what’s being called the TwelveThirteen, a 96-unit motel acquisition and rehabilitation.

The third, in Fresno, is going to be called the Park at 1309. That project has not gone through the approval process yet.

 

HomeKey successes

More than 2,400 people have been housed in the nine HomeKey Projects along Parkway Drive, according to a presentation by Phil Sky, assistant director of planning and development with the City of Fresno. Twenty-three percent of people moved onto permanent housing.

Berzac said over 18 months into the project, units at Crossroads Village have been 100% occupied. If someone has moved on from Crossroads, they have moved on to permanent housing.

“That alone is a success,” Berzac said.
Berzac said the HomeKey results have been remarkable for how many people have been housed considering the strict timelines outlined by rules.

“It’s creating amazing results and people are getting housed faster than ever,” said Berzac. “But they’re hard, it’s complicated. It takes really, really committed and invested partners, including our public partners and service partners. They’re a lot of work. I’ve never seen anything like it.”

 


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