Long Beach Forced to Return $5.6 Million Grant for Homeless Shelter Project

Long Beach city council voted last night to return a $5,616,752 grant to the California Department of Housing and Community Development, initially awarded for the Modular Non-Congregate Shelter Project under the state’s Homekey Program.

The City Council, with all members voting yes except for Councilmember Supernaw, who was absent, approved the return of funds, citing an inability to move forward with the project.

The decision comes as frustration among residents grows over the city’s handling of homelessness. Despite efforts to expand shelter options, many believe the city lacks a clear plan to address the ongoing crisis. The grant was meant to fund interim housing for those experiencing homelessness, but its return leaves a significant gap in resources.

Adding to the controversy, city officials confirmed that most of the grant money has already been spent. The remaining $2,680,267 has been unspent from the initial Project Homekey Grant from the state (originally reported as $800,000 unspent); the Long Beach Health Department let us know that this was inaccurate. Unspent funding remains within the City’s account and will be returned to the state. The funds were reportedly used for project planning, site preparation, and other preliminary costs, but no modular units were ever installed. This revelation has led to growing concerns over how the city manages homelessness funding and whether it will seek alternative solutions to replace the lost shelter project. The mayor stated during the meeting that they used most of the grant money to construct approximately 33 units, which are currently in storage.

Currently, Long Beach has about 490 shelter beds available, including a winter shelter at 702 W. Anaheim St., which increased its capacity from 85 to 125 beds this season. The city also operates the Multi-Service Center, which offers 60 additional beds during extreme weather conditions. However, with over 3,300 people experiencing homelessness in Long Beach, according to the 2024 Point in Time Count, the available shelter beds fall far short of the need.

City officials claim they have made progress, pointing to expanded outreach efforts, emergency housing vouchers, and a new year-round shelter with 85 beds. Additionally, new projects, including 78 shelter units on Long Beach Blvd., a youth shelter with 12 beds, and 33 new tiny homes, are in development. However, many of these initiatives remain in the early stages, leaving immediate solutions uncertain.

Residents and advocates are voicing frustration over the city’s lack of urgency. “This was a huge missed opportunity,” said one local advocate. “We need more housing solutions now, not years from now.”

The City of Long Beach had to return the $5.6 million grant designated for the tiny home project because it was unable to secure a feasible site for the development. The city originally planned to place the homes near its Multi-Service Center, but that location was deemed unsuitable due to noise and pollution concerns. Officials then proposed building on a site near Willow Springs Park, but a land survey revealed that preparing the site—including excavation and utility installation—would cost around $10.6 million, making the project financially unviable.

With no suitable alternatives available, Long Beach decided to shift its focus toward using the funds for student housing at Long Beach City College (LBCC). However, since the funds were originally allocated for a different purpose, the city is working with the state to determine if they can legally transfer the remaining funds to LBCC. If approved, the money would support transitional housing for unhoused students on campus, though final decisions and project timelines remain uncertain.

With the grant now returned, the city must seek alternative funding and strategies to address homelessness. Meanwhile, those living on the streets continue to face uncertain futures.

A statement was sent to us by the Long Beach Health Department:

Of the $5,616,752 received from the State of California through the Project Homekey program:

-$2,147,825 was spent on the construction, future delivery, and placement of Tiny Home units.

-The City has taken possession of these homes and may sell or otherwise utilize them.

-$788,660 (14% of the total funds granted) was spent on other project-related costs, including:

-Environmental and soils testing

-Architectural design and drawings

-Site evaluation

-Project management

-Planning and community engagement

The total of the above expenditures amounts to $2,936,482, which is being reimbursed to the State from the General Fund.

The $2,680,267 remains unspent from the initial Project Homekey grant. These funds remain in the City’s account and will be returned to the State.

Funds are being transferred from the City’s General Fund to Health funds, as the Department of Health and Human Services (Health Department) serves as the primary contact and contracting agency with the state. The Health Department will then return the funding to the state.

Additionally, the remaining balance owed to the State consists of unspent funds, which will be returned from Project Homekey Round Two grant funds.