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LA Mayor Wants To Buy More Hotel Buildings To House Homeless. But Inventory Is Tight.

Updated: May 4, 2023

Hotel Building in Hollywood

By Jack Witthaus CoStar News

April 18, 2023 | 6:28 P.M.

The mayor of Los Angeles wants to increase the portfolio of hotels and motels to house homeless people despite a tightening inventory of available properties. Mayor Karen Bass seeks $250 million in funding to expand the city's Inside Safe program providing housing in motels, hotels and other buildings as part of an effort to address homelessness, she said Monday night at a State of the City address. The Inside Safe program has resulted in more than 1,000 Angelenos receiving temporary housing.

"As we scale our homelessness strategy, renting motel rooms is just not a sustainable model," Bass said. More details about the program are expected to be released as part of Bass' first budget after getting elected to the office in November 2022. The mayor of Los Angeles proposes an annual budget as part of the office's official duties, and Bass said her budget calls for an "unprecedented" $1.3 billion to be spent on homelessness initiatives.

Los Angeles has one of the nation's worst homelessness problems and counted roughly 69,144 people who were unhoused in 2022, according to the Los Angeles Homeless Services Authority.

That's roughly 11% of the nation's total homeless population, according to the a U.S. Department of Housing and Urban Development report.

The city of Los Angeles and state of California have been buying motel and hotel properties for years to create more affordable housing, which has reduced the for-sale inventory of these properties in greater Los Angeles, said Vinnie Park, a hospitality broker for Coldwell Banker Commercial Realty. Park is marketing the 16-room Viva Brazil Motel for sale at 11740 W. Washington Blvd.

Under Contract

There are now eight hotels that are being actively marketed and aren't under contract to sell in the city of Los Angeles, according to CoStar data. These hotels have roughly 480 units combined.

"The number of mom-and-pop hotels are diminishing every day," Park said.

Further, Park said the city also is paying more than $300,000 per key for hotels and motels, meaning mom-and-pop hotel and motel owners are expecting above-market average prices for their properties. The L.A. market's average sales price for a hotel room is $239,000.

In September, the Housing Authority of the City of Los Angeles bought 532 hotel rooms for $184 million, or about $345,000 per key, according to CoStar data. The properties are expected to be converted to offer affordable housing for homeless or families at risk of homelessness.

Meanwhile, the state of California has approved hundreds of millions of dollars during the pandemic to buy motels, care facilities and other housing types to house those in California who are homeless. California, the nation's largest state by population, has more homeless people than any other state in America.

Beyond for sale inventory, greater Los Angeles has seen a declining amount of hospitality construction. There are 2,469 hotel rooms under construction in Los Angeles, down from 3,699 units.

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