A controversial plan to convert a River District hotel into housing for the homeless has been nixed.
Sacramento had scored funding from a competitive state program called Project Homekey to convert the Hawthorn Suites into 100 units of homeless housing in a part of the city where the homeless crisis is dire.
Since the location was announced, the city has been hit with two lawsuits trying to block the project – one by the developer of luxury apartments across the street and one from an organization that represents businesses in the area.
But the lawsuits did not kill the project, said Jeree Glasser, Jamboree Housing’s vice president of Northern California.
“This was purely an appraisal issue,” Glasser said.
Jamboree, an affordable housing developer, had signed a purchase agreement for the property, Glasser said. But then the state required an appraisal, which came back at a lower amount than one that was done prior to the coronavirus pandemic. The seller wanted to sell for the higher price, but the state’s rules prohibited Jamboree from paying more than the appraised value, Glasser said.
The hotel owner, Calabasas-based the Ezralow Co., did not immediately return a call seeking comment.
The news will mean at least one of the two lawsuits will be dropped.
“I don’t think there would be any other reason to continue the lawsuit from my perspective,” said Anthony Scotch, a representative for the 500 Bercut LLC group, which sued the city in September. The lawsuit claimed that with the project, the city was going back out on its promise to stop placing homeless services in the River District, hurting the area’s revitalization efforts.
The homeless project would have stalled efforts to attract investors for a 250-unit high-end apartment complex planned to be built next to the American River levee on Bercut Drive, just east of Interstate 5 on the former Rusty Duck and Hungry Hunter restaurant sites, Scotch has said. The Hawthorn Suites sits across the street from that site.
It’s unclear if the news will cause the River District to drop its lawsuit, which it filed earlier this month against the city, Sacramento Housing and Redevelopment Agency, Jamboree Housing and several state agencies.
River District board executive director Jenna Abbott did not immediately respond to a request seeking comment.
That lawsuit claims local officials were planning to improperly use federal coronavirus stimulus funds to help fund the project, which would have provided permanent homeless housing for about 55 years.
The city and SHRA declined comment on the River District lawsuit because they have not yet been served with it, spokespeople said.
The city was planning to use about $9 million in CARES funds for the project, which can now be used for other items before the end of the year, said Mary Lynne Vellinga, Mayor Darrell Steinberg’s spokeswoman. Reallocation of those funds would need City Council approval.
Bob Erlenbusch of the Sacramento Regional Coalition to End Homelessness called the news “a tragedy for our unhoused neighbors.”