Not Too Shabby

LA Homeless Tower Cost as Much as 5-Star Hotel to Build

Thanks again to the California Globe for running this piece. You can visit the website at: https://californiaglobe.com/

A Rendering of the building. credit - swinerton.com

Gym, balconies, restaurant, soundproof music studio, business center, located in downtown Los Angeles, and it’s pet friendly!

Sounds like a pretty good hotel, four-stars at least.

Sounds like, but isn’t – it’s the new Weingart Center 19-story “Permanent Supportive Housing” for the homeless tower that is now taking lease applications.

There will be 278 units – about 80% studio-type apartments – and – unlike a hotel – it will also offer its soon-to-be-residents (largely, one assumes, culled from the surrounding Skid Row neighborhood) a menu of “life skills” services very few hotels offer:

• Benefits counseling and advocacy

• Substance use referrals

• Employment assistance

• Education assistance

• Financial and budgeting assistance

• Pet and service animal services

• Health and wellness classes/event

What did you expect for $594,000 a unit?

The project cost about $165 million dollars and the studio apartments are essentially the equivalent of what one would find at a decent “extended stay” hotel – large room kitchenette, bed, tables, chairs, bathroom, TV, etc.  At $594,000 a unit, that works out be a bit over $1,000 per-square-foot to build.

Extended stay hotels do not cost that much – not even close, especially when the land is somewhere between cheap and free.

For example, right now a five-star resort costs about $604,000 per room.   A three star hotel, which may be a better comparison as the Weingart Center doesn’t have a golf course – yet – costs about $220,000 per unit to build.

Wondering about “comps” in LA for $600K?  Here’s one downtown – a bit bigger -  and here’s one in Marina Del Rey, also more than twice the size of the typical Weingart studio unit, and it has a view.

As with the $1 Million dollar per-unit recently approved Santa Monica project,  the cost of the “housing first” philosophy of the LA homeless advocates and agencies is simply eye-popping.

Splitting the difference and coming in closer to what former City Controller Ron Galperin found in his audit more than a year ago,  a typical new unit will come in at about $700,000 per.  That means that housing the entire LA-area homeless population of about 75,000 will cost about $52 billion dollars.

$52,000,000,000 - the state could build a third of the high speed rail project for that money.

So why is it these projects cost so much?  A hint could be found in the 2020 filing with the state that Weingart made for a 144-unit project called Tower 2.  The concept is the same, though neither of the other two buildings scheduled for the same area are listing themselves as having 144 units, though this project actually has two “towers” so it could refer to one of them.

For that proposal, the cost was going to be about $90 million (or $625,000 per unit, so the comparison is most likely apt) with a hard (construction, etc.) cost/soft (architecture, fees, etc.) ratio of two to one.  In other words, about $60 million was for construction and $30 million for the rest, including a developer’s fee of more than 10% (that’s reaaalllyyy high, by the way.)

In a typical private hotel complex, the “hard” costs are typically 75% and “soft” 25%. 

That’s a three to one ratio – far higher than seen in the private sector.

There is also the issue of how “permanent” the housing will be and whether or not there will be behavioral standards enforced in the building.  In other words, how long can people stay, what will they have to pay in rent, and is it a “wet house,?” i.e. a place that allows substance use.

The Weingart Center did not respond to an email (as of publishing time – if they do, the story will be updated) about these questions.  However, considering federal policy and the standards set for the Santa Monica project, it is most likely the building will be “wet” and have no time limit for residency.

As to rent, that too is not exactly clear, though typically at least some form is paid based on a sliding scale percentage of the amount a person earns, or takes in, or reports, or what have you.

If the rent is minimal, the entire benefits package a resident would most likely receive – Medi-Cal )California’s Medicaid), food stamps, housing, direct assistance, etc. – would have a total value of about $60,000 per year.

And that number is higher than the average a Californian who works makes in a year.

Oh, and if you are now homeless or thinking about becoming homeless, here’s the leasing information.