San Diego’s 1,000-Bed Shelter Proposal Stirs Concern Over Costs

The lease calls for the city to pay $1.95 per square foot compared with market rate of $1.44 to $1.54, the budget analyst said.

A homeless encampment in San Diego on Oct. 4, 2023. John Fredricks/The Epoch Times

San Diego’s mayor announced July 17 a lease deal to convert a commercial building near the city’s airport into a 1,000-bed homeless shelter and resource center, but the city’s budget analyst raised concerns over the cost.

“For years, past mayors and city councils have only engaged in ad-hoc, piecemeal, temporary approaches to addressing homelessness,” Mayor Todd Gloria said in a statement. “With this proposal, we are looking to deliver the change that San Diegans want to see with regard to addressing homelessness on our streets.”

The 30-year lease, which awaits approval from the city council on July 22, includes a cost of $1.95 per square foot for the property—with annual 3.5 percent rent increases—and an estimated $12.5 million in facility maintenance costs over the term.

The 64,939-square-foot property at Kettner Boulevard and Vine Street in Middletown spans 1.8 acres over two parcels. It features a two-story building and 134 parking spaces, including rooftop, gated, and surface parking areas.

While the city’s Office of Independent Budget Analyst acknowledged the project’s potential to help with the city’s homeless situation on a July 15 report, it raises questions about its affordability.

The decades-long lease will amount to $72 million in rent for the city, which, according to the report, is above market rates of $1.44 to $1.54 per square foot for similar properties.

Besides the more expensive rates, the report raised concerns over “significant upfront and ongoing costs associated with rent, lease operating, tenant improvement, and program operating costs.”

Instead, the budget analyst suggested that the city purchasing and renovating the property itself could be a more economical option, potentially saving $15.7 million.

However, the mayor said that the property is not available for sale and highlighted several benefits of the agreement:

• Nineteen months of rent would be waived, saving $2.4 million.
• The property owner would contribute $5 million to the property.
• The owner would be responsible for mitigation of any potential hazards identified during the renovation process.
• The city has first right of refusal should the landlord sell the property.
• If the property is sold within five years, the city would receive 14 percent of the net profit.
• The deal would include an adjacent parcel of land that can serve “multiple uses including for additional shelter and services.”

Another concern raised by the report is the project’s operating costs, noting that the source of funding is unclear and could place an additional burden on the city.

San Diego Mayor Todd Gloria speaks at the press conference at H Barracks on June 6, 2024. Jane Yang/The Epoch Times

According to the mayor, the city would need to pay an estimated $26.4 million to operate shelter beds, a commercial kitchen, laundry facilities, dining areas, recreation spaces, and showers. Proposed services at the shelter campus would include job training, meals, housing navigation, and behavioral health support.

However, the report said only $13.7 million in existing operational funds can be reallocated from other homeless programs if no new funds are approved, leaving the remainder uncertain.

The report also detailed a monthly cost of $32,000, covering property taxes, maintenance, utilities, and insurance.

The mayor’s office did not respond to a request for comment by publication time.