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Homeless housing, certainly, but at what cost?

“There is always an easy solution to every human problem - neat, plausible, and wrong.” ~ H.L. Mencken.

Black and white thinking is the death of creative problem-solving. And the tendency to argue by “sound bite,” so normalized by social media, leads to solutions based on nothing more than noise.

Locally, a recent example of this phenomenon was Supervisor Katie Rice’s single-minded obsession to gain approval for the ill-conceived homeless housing project at 1251 South Eliseo Drive in Larkspur. Some support her ideology over practicality approach, but based on recent polling, it’s clear she has far more detractors. That aside, the best way to examine what is or is not an effective thing to do is through the cold lens of financial analysis.

It is important to understand that all the public wealth in the hands of our politicians is the result of the efficient utilization of private manpower and private capital (the government’s tax base), which we measure as economic productivity and measurable outcomes. As such, the efficient utilization of capital is absolutely critical to addressing any large-scale, systemic challenge such as homelessness. Contrary to what our California politicians seem to believe, capital is always limited so it’s important to be good stewards of our taxpayer dollars.

California’s homeless housing policy is based on a theory called “Housing First.” One of the primary funding mechanisms for Housing First homeless projects is called the “Homekey” grants program, whereby private developers receive grants to develop homeless projects in exchange for grants, tax benefits, and relief from state environmental protection laws and many local zoning codes and restrictions.

The goals of the policy sound good, but the more you look at it, the less sense it makes and its track record for solving California’s homeless problem is abysmal.

David Flanagan, a Sacramento business owner and member of the board of directors of Saint John’s Program for Real Change notes,

“In 2009, Housing First was adopted by the U.S. Department of Housing and Urban Development to specifically address the needs of the homeless with severe addiction and mental illness. Without any credible evidence, in 2013, Housing and Urban Development rolled it out as a panacea for all homeless people.

“The state of California followed by adopting housing first in 2016 as its one-size-fits-all policy, as did many local Governments including Los Angeles, San Francisco, and Sacramento.

“Their results are the most dismal in the nation: California homelessness shot up 16.4% in 2019, the second largest increase of any state. Los Angeles, up 16%. San Francisco, up 18%. Sacramento, 19%“

Making matters worse, under “Housing First,” the homeless are provided housing but the program strictly prohibits any requirement for supportive services (mental health, addiction counseling, medical, etc.) that might address the underlying issues that led to a person’s chronic homelessness. As such, non-profits that combine housing with health services are ineligible for federal, state, and local government funding.

So, the question before us is, do we want to follow policies that are ineffective and squander public wealth or policies that effectively use our tax dollars and actually solve problems?

There has to be a better way

A Los Angeles housing audit showed that as of September 8, 2020, the cost of some of the homeless housing units constructed in Los Angeles was as high as $746,000 per unit, more than the cost of building luxury high rise condos in downtown L.A., Los Angeles City Controller Ron Galperin noted, at the time, "It is not acceptable to me, nor should it be acceptable to any of the people of Los Angeles."

Since that time, it’s only gotten worse. As of February 25, 2022, another audit showed that the cost of government funded projects had now risen to as much as $837,000 per unit.

In 2016, the residents of Los Angeles voted to spend $1.2 billion to build homeless housing. Proposition HHH, as it was called, pitched a spending plan that was supposed to result in over 10,000 new units at an average cost of $350,000 per unit. So far, only 1,100 units have been built. Today the average cost of a homeless apartment unit is over $600,000 per unit. At this rate, the $1.2 billion in funding will produce less than 3,000 units at an average cost of approaching $700,000 per unit.

The Homekey grants program combined with grants and gifts of property to the Episcopal Community Services (ECS), from the County of Marin, which is 100 percent of which is taxpayer money--federal, state, county--will pay for the costs of the 1251 South Eliseo Drive redevelopment project.

As of October of 2021, only 4 1/2 months ago, the public was told the project would require $8 million in local funds. According to the estimates that were published by the County back then, the total acquisition and construction cost would be $21 million or $488.372 per unit. In February of 2022, the revised cost estimate rose to $29 million or $674,419 per unit. (A 38 percent increase.) [1]

Since the Homekey grant only covers $12.9 million of that cost, it leaves Marin County taxpayers to shoulder the remaining $17.9 million, plus the costs of any required infrastructure or public services associated with the facility. (Less a possible $1 million grant from the Marin Community Foundation, which is de minimis in the scheme of things.)

The current economists’ consensus estimate of construction cost inflation in 2022 in California is about 7 percent. This would suggest that by the time the 1251 South Eliseo Drive project is completed it will have cost taxpayers close to $30 million or almost $700,000 per unit.

Based on that, the rehabilitation of the existing, former assisted-care facility will cost approximately $1,225 per square foot for what is essentially an interior remodel. That is roughly the same as the average cost to purchase a single-family home in Marin County, including the land.

And let’s keep in mind that these figures do not include the costs of any additional operating services, such as the much-touted, but yet to be funded, “Community Service Safety Team" (the CSST) that will supposedly be the “eyes and ears for the community” and provide outside security to “de-escalate issues,” comprised of a “team” that will wear “clearly marked uniforms,” said to be a “robust community presence.” (It turns out that this “team” will consist of one person outside the facility only during business hours).

How does any of this make sense? Why are we spending more to house the homeless than we are to house the average resident and the working poor in our community? These are the questions people have been asking in Los Angeles and other cities around the state about the Homekey Grants program.

The community has questions that remain unanswered

At the recent Marin Board of Supervisors hearing where the South Eliseo project was approved, residents came with a long list of questions. Among those were,

So far, there have been no answers to any of these from the Marin County Board of Supervisors.

Is there an alternative?

In October of 2021, a $5.1 million “tiny home” village for the homeless opened on a 1.5-acre vacant lot in Los Angeles. The project consists of 117 prefabricated, plug and play, tiny homes. Each home can have a total of 2 beds for a total population of 224 individuals. This is the largest tiny home village in the United States according to the private, nonprofit developer, Hope of the Valley.


The project provides all the same support services, on-site, that are proposed for the 1251 South Eliseo Drive project. But the financial costs per unit are so astronomically lower than what Marin County is spending that it’s stupefying.

Each prefabricated unit costs about $54,000 and includes an air conditioner, heater, microwave, and electric installation (there is a communal bathroom/shower building and a communal kitchen), plus land cost, which in this case was about $1.5 million--for a total of approximately $67,000 per unit. (The land for this tiny home village was relatively inexpensive since it was a vacant, unused, former retail zoned parcel.)


The costs for this project are significantly less than previous tiny home villages in L.A., which have cost up to $100,000 per unit because the developers are constantly finding new ways to economize on design and construction methods. (Previous attempts have also cost more due to lack of vital infrastructure at the sites.)

This means that for the $30 million in total spending, Marin County could have bought multiple sites for a total of about $10 million in land costs—approximately $2 million per acre for a total of 5 acres of scattered sites--and built about 370 tiny homes to house 740 individuals for the same cost they are spending to house 43 people!

At the other end of the spectrum, consider the Crest Apartments in Van Nuys in Los Angeles County. Designed by architect Michael Maltzan for its private, nonprofit developer, the Skid Row Housing Trust, this spectacular 65-unit homeless housing project is located on a less than 1-acre infill site--a vacant retail site in a commercial district within walking distance from every possible amenity.


This is a new, 45,000 square foot, LEED Platinum building (the highest sustainable construction rating). It was built using the most inexpensive materials and methods available, intentionally reflecting the local construction vernacular of the surrounding community and traditional Los Angeles housing. Yet, it is as beautiful a work of contemporary design as can be found anywhere. Its total construction cost was just $14.2 million.

That equates to a construction cost of $315 per square foot or $221,875 per unit for a brand new building from the ground up. Compare that to 1251 South Eliseo Drive’s $21 million construction budget for an interior remodel and an exterior face lift, which equates to $488,375 per unit.


Its studio apartments are spacious and well-appointed. The first floor has ample community rooms, a communal kitchen, and support services offices.

The comparison of the two projects remains shocking. And all it took was proper due diligence and some imagination.

Granted, the Crest project was built 3 years ago and construction costs have risen, but that factor alone doesn't come close to explaining the cost differences between it and the 1251 South Eliseo Drive project.

One major reasons for the difference is that somewhat ironically the Crest homeless housing project created value because is was a higher and better use for a piece of land that had lost its economic value, (functionally obsolete, vacant retail sites are becoming common in the San Fernando Valley) whereas the South Eliseo Drive project is just the opposite. The Board of Supervisors overpaid for the South Eliseo site, which has higher value and a better use if the existing structure was torn down and replaced with a multi-story, state-of-the-art medical services building.

All this considered, it’s time the Marin Board of Supervisors was held to task for their incompetence. How does the South Eliseo Drive project make any sense? How is it even remotely defensible on a bang-for-the-buck basis? Is there anyone in any County agency even aware of what’s going on elsewhere in the state? What do all these people on the County payroll do to justify their generous salaries, automatic pay raises every year, and retirement benefits packages?

If our goal is to house and help the maximum number of homeless individuals these are the questions we need to be asking Katie Rice and the other, equally culpable board members.

[1] These are just the County’s newest estimates. We are told that more detail concerning the construction and operating subsidy will be provided when the Department returns to your Board with a proposed operating agreement with ECS. Translation: actual costs will be higher.

Bob Silvestri is a Marin County resident, the Editor of the Marin Post, and the founder and president of Community Venture Partners, a 501(c)(3) nonprofit community organization funded by individuals and nonprofit donors. Please consider DONATING TO THE MARIN POST AND CVP to enable us to continue to work on behalf of California residents.