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City challenge to Newsom’s homeless-hotel plan risks Project Homekey statewide

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(The Center Square) – A California city is suing one of the governor’s Homekey homeless-to-homeless-shelters projects, claiming the state constitution requires local residents to have the opportunity to vote on publicly-funded low-income housing.

Should the court side with the city, billions of dollars of projects across the state could be put on hold as they are faced with new requirements for costly ballot measures.

The City of Millbrae contends San Mateo County’s planned $33 million purchase and conversion of the 100-room hotel to a “supportive housing” project would cost the city half a million dollars per year in occupancy taxes alone, with additional lost sales tax, property tax and other losses leading to another half a million dollars lost for the city each year. Under Project Homekey, supported by federal COVID-era funds and state general funds, more than 15,000 hotel rooms have been converted to supportive housing units focused on serving homeless individuals at an approximate public cost of $200,000 per unit in state-directed funds, excluding funding from other sources.

The city uses these potential losses in revenue to help justify its standing in the lawsuit, which it advances on constitutional grounds, citing the wording of Article 34 of the California Constitution, which states: “No low rent housing project shall hereafter be developed, constructed, or acquired in any manner by any state public body until, a majority of the qualified electors of the city, town or county, as the case may be, in which it is proposed to develop, construct, or acquire the same, voting upon such issue, approve such project by voting in favor thereof at an election to be held for that purpose, or at any general or special election.”

“Given the above, Article [34] guarantees Millbrae’s residents the right to vote on the project, and in so doing weigh the costs of the project on the community (namely, the loss of significant City tax revenue, impacts on nearby businesses, and the loss of local jobs associated with the closing of the hotel), against the obvious and pressing need for low income housing,” wrote the city in its lawsuit demanding a preliminary injunction against the sale and development of the project while the case is ongoing and an order that Article 34 be followed by placing the matter in front of local voters.

However, California Democrats passed several state laws exempting Homekey projects for the homeless from the California Environmental Quality Act – a 1970 act that created significant environmental barriers to development – and Article 34.

A lawsuit similar to Millbrae’s was carried out by residents in Marin County regarding another Homekey project, according to the South Eliso Neighborhood Alliance. The residents’ lawsuit focused on technicalities of the exemptions to CEQA and Article 34. They argued the legislature’s CEQA exemption for homeless residents was for “individuals and families” and not just “individuals,” as the project was promoted, and that the Article 34 exemption was only for facilities that were already dwellings or lodging spaces, not the nursing facility in question, but the organization said this technical argument failed to sway the court.

The Millbrae case differs in that the city’s attorneys focuses less on technicalities and more on the extent to which the legislature can make exemptions to the state constitution without, as required by the constitution, ensuring such changes are adopted by not only two-thirds of both houses of the legislature but also by the majority of voters.

Voters have consistently rejected efforts to eliminate Article 34, with the most recent effort in 1993 being rejected by 60% of voters. A similar measure to change the constitution is on the ballot again for the November 2024 general election after passing through the legislature in 2022. Californians will also have the opportunity to repeal limits on government’s ability to impose rent control — similar to efforts in 2018 and 2020 that were nonetheless broadly rejected by the state Democratic-leaning voter base.

The case for the preliminary injunction is set for Jan. 24, 2024, with a trial set to follow in the coming months.

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