Salinas, CA – Three Project HomeKey properties in Salinas, California, intended to provide crucial housing for the unhoused, are embroiled in significant financial controversies and legal battles, casting a shadow over the state's flagship homelessness initiative. The projects, located at the former Sanborn Inn (180 S. Sanborn Road), Salinas Inn (1030 Fairview Ave.), and Good Nite Inn (545 Work St.), were designed to create over 200 permanent supportive housing units. However, they have become central to a lawsuit filed by California Attorney General Rob Bonta against developer Shangri-La Industries, with the City of Salinas also named as a defendant.
The state's lawsuit alleges that Shangri-La Industries, which received $36.5 million from California for the Salinas conversions, engaged in financial misconduct. According to the Attorney General, the developer illegally took out loans against the properties without state approval and failed to incorporate affordability restrictions. Reports indicate that Shangri-La defaulted on loans, did not pay vendors, and transferred project funds to a CEO's credit union account, with one lender alleging the firm operated a "Ponzi scheme."
Project Homekey, launched by Governor Gavin Newsom during the COVID-19 pandemic, aims to rapidly convert hotels and other properties into interim or permanent housing for individuals experiencing homelessness. The program has been widely touted as a successful statewide effort, with the California Department of Housing and Community Development (HCD) reporting over 15,000 homes created across 250 projects. However, the situation in Salinas highlights severe breakdowns in oversight and execution for some projects.
Despite the legal challenges, efforts are underway to salvage the Salinas properties. The Housing Authority of the County of Monterey (HACM) has acquired at least one of the troubled sites, the former Salinas Inn at 1030 Fairview Avenue, which recently celebrated its grand opening as the Fairview housing complex. This development, financed through a mix of local, state, and federal funds, will provide 46 units of permanent supportive housing with on-site management and comprehensive supportive services.
The ongoing legal proceedings and the arrest of a former Shangri-La CFO on federal mail fraud charges underscore the severity of the alleged mismanagement. While the state continues its broader Homekey program, the Salinas case serves as a stark reminder of the complexities and potential pitfalls in large-scale public-private housing initiatives. The original tweet from "Inner Rhythm Media," stating "Three Project HomeKey properties in Salinas, California… Let’s check it out🤙🏽," now takes on a more complex meaning given the revelations of financial impropriety and the subsequent efforts to restore these vital housing projects.
