California Allocates $80 MILLION FOR TINY HOMES in $1 Billion Homelessness Effort, But None Are Occupied

In March of last year, California Governor Gavin Newsom offered 1,200 tiny homes to temporarily accommodate homeless individuals, particularly those who already live in encampments, in four main regions across the Golden State. However, the concept behind the dwellings goes far beyond simply providing a place to sleep. According to the governor’s plan, the dwellings will serve as a tiny home community, complete with kitchens, dining and living rooms, common areas, and counseling cabins, to assist persons experiencing homelessness in finding stability. Yet, a year after the governor’s declaration, the tiny homes have not housed a single tenant, and the state and localities have only acquired roughly 150 of them. The stalemate is due to changing state parameters, as well as other bureaucratic delays. The plan, part of a $1 billion initiative, is intended to cover the costs of contracting, delivering, and installing tiny homes from six state-approved vendors, as well as provide much-needed relief for the state’s homelessness crisis, as California has the highest percentage of homeless people living without shelter in the country, according to a 2023 federal report. According to the state, the California National Guard was supposed to help prepare and deliver the homes “free of charge and ready for occupancy,” but that changed last winter, when the state stated it would delegate responsibility for purchasing and placing homes to each city and county. Some districts are now unable to fund all of the promised homes, while others are bogged down in protracted board decisions about where to locate them—all while the homeless remain unhoused.

What Will the $1 Billion be Used for?

The governor’s plan includes money for 500 homes in Los Angeles, 350 in Sacramento, 200 in San Jose, and 150 in San Diego County. However, rather than the state purchasing and delivering the units ready-made, most jurisdictions chose to accept funding to allow them to order and build the tiny homes themselves. The ruling implies that some localities, such as San Jose, would now be liable for giving more cash to the tiny-home initiative than was originally envisaged. According to a memo reviewed by the city council in February, the governor’s office sent San Jose a fixed payment of $13.3 million so that the city could build tiny homes on its own. San Jose Mayor Matt Mahan told Fortune that this is about half the cost of buying and building its promised 200 tiny homes, which would cost $22.7 million. “The big moment for us was in March of this year,” he added when the state presented him with a grant agreement outlining how the state would finance the apartments. “We turned that grant agreement and a project delivery plan around within the same month.” San Jose, he added, has already launched 500 small homes in various parts of the city, primarily sponsored by local monies, and aims to build 500 more over the next 18 months, in addition to the 200 units under the state project. “San Jose has moved forward so quickly and stood up so many of these [units] because we have demonstrated that they work,” he stated, “and have been able to secure community and city council support for devoting public land to tiny-home communities.” Mahan stated that the units themselves are neither the most expensive nor the most crucial thing to consider when it comes to reducing homelessness on a state-wide scale. “We need the state and county levels of government to support ongoing supportive services people need, such as mental health care, drug treatment, job training, and other social services that states and counties are well suited to provide.”

The Vendors Were Approved, but Orders Are at a Halt

Last October, the state signed contracts with six companies approved to build tiny homes for the initiative, requesting that many of these companies design units specifically for tiny-home communities, including sleeping cabins and other shared facilities such as kitchens, dining rooms, and classrooms. AMEG, one of the state-approved small home vendors, may provide inhabitants with this type of long-term social support. AMEG constructed 18 distinct units to satisfy all of the state’s requests, including bathrooms, kitchens, and laundry rooms. However, the group, as well as numerous other state-approved suppliers, claim they have yet to receive any orders. Long waits and stringent clearance standards for the models “is the nature of the beast when it comes to these kinds of government things,” according to David Gonzales, AMEG’s chief operating officer. “We’ve changed whatever the state needed us to change in our models, and we’re sitting at the ready,” he told Fortune. He said, “The anticipation is we’re going to see something soon.” Other vendors, including one called Pallet, confirmed to Fortune that no orders for tiny homes had been placed in connection with the campaign. Pallet’s CEO, Amy King, told Fortune that the company can produce tiny-home units, which normally cost approximately $19,000 (or $55,000 with a bathroom), within eight weeks of receiving an order. The corporation also maintains a “safety stock of product on hand for emergency use,” allowing towns and governments to “call on us at any time to get shelters deployed and people housed.” Kam Valgardson, the general manager of Irontown Modular, one of those tiny-home providers, told CalMatters that the company is “absolutely shocked” that it hasn’t received orders for modular homes. He told the journal that obtaining the state contracts required his company to build new goods to match the state’s stringent specifications for vapor-resistant light fixtures and emergency exit lighting, which took months and cost tens of thousands of dollars.

Which Cities Have Created Tiny-home Communities Thus Far?

As it turns out, getting a spot to develop tiny-home encampments is one of the most difficult obstacles that many towns and counties confront, as individuals and businesses are typically concerned about the safety and integrity of their community. “Identifying the site is one of the biggest barriers,” Mahan stated to Fortune, “as is finding a place that has suitable land where you can secure a long-term lease to use for years to come.” The most success has been achieved in Sacramento, where the state purchased approximately 155 dwelling units from Boss, a Montebello-based tiny-home firm. Sacramento, which was given 350 units, had intended to place small homes at Cal Expo, the site of the state’s annual fair and where Newsom first unveiled his homelessness effort last year, but those plans fell through. Sacramento is currently deploying a total of 175 tiny homes on the city’s Stockton Boulevard, which is a “partially built, long-vacant retail center,” according to Julie Hall, a communications specialist for the City of Sacramento, who told Fortune that “the first shipment of tiny homes arrived on site this week.” The city intends to build the remaining 175 homes on Watt Avenue. San Jose has already leased a site, Cerone Bus Yard, to host all 200 state-funded units by July 2025. In Los Angeles, city officials have yet to determine the locations for the 500 promised tiny dwellings. Monica Hassan, the deputy director of the state’s department of general services, told Fortune that the state has “provided their initially requested funding of $980,000 for one of their sites,” which would have 33 beds and begin construction by the end of this month. San Diego County had planned to establish its tiny-home community on the county’s Jamacha Road, but due to “numerous concerns from Spring Valley residents and the impact it will have in their community,” decided to rescind the site approval, according to a letter sent to the governor’s office on June 5th. A representative for the governor’s office told Fortune, “It is disappointing that San Diego County chose to abandon its efforts to provide tiny homes,” adding that the “state plans to recoup the funding provided to them and weigh options for redeploying it to other jurisdictions.” The scenario “underscores the challenges faced at the local level regarding site selection,” according to the state’s spokesperson. It will be considered at the next board of supervisors meeting on June 25. To be sure, barriers such as resident complaints can cause significant delays or even halts in efforts to create tiny home communities. Still, other cities, such as San Jose, could serve as models for how to properly implement them while lowering neighborhood crime rates. Mayor Mahan told Fortune that in the neighborhoods where San Jose has constructed communities, there have been less 911 and 311 calls, as well as fewer calls for service for crime and litter. And it actually makes a lot of sense because we’re taking people who are living in extremely insecure and unstable circumstances with no regulations, security, or sanitation and relocating them to a managed facility with all of those things.” The tiny-home communities are intended to help individuals “stop worrying about the most basic things, like where their next meal is coming from or where to use the restroom, so they can start to focus on their future.” At the tiny-home locations in San Jose, Mahan said, “We have seen that of the 1,500 people who have come through one of these 500 units, 70% of those people remain housed up to three years later, indoors and off the streets.” Source: fortune.com