After the hotel, uncertainty

It’s a quiet afternoon as people crowd the counter of the Capitol Park Café, one of the few diners catering to low-wage earners and residents on fixed incomes in the heart of downtown. A full lunch can cost less than $8. The same held true for the soup-and-salad kitchen that was, until recently, just two windows away and also tucked at the base of the Capitol Park Hotel. For a few more months, a similar establishment will soldier on—the historic hotel’s bar, Henry’s Lounge, which is clinging to drink prices from an era when service industry workers could still unwind after punching the time clock.

But it's all going away—just like the last of the single-room occupancy units for people one step above homelessness.

The rooms, known as SROs, traditionally represented a final housing option for disabled renters, people with criminal histories and locals surviving on Social Security.

The Capitol Park Hotel once had 180 units. Now, it has 73. Soon, it will have zero.

Under a joint agreement between the city and county's housing authority and a statewide nonprofit, the nine-story, 60-year-old hotel is in the process of being converted into a temporary homeless shelter. Later, it will be remodeled into permanent apartments to support formerly homeless Sacramentans who struggle with addiction and mental health issues. It's exactly the type of long-term project that advocates have been pleading for as the county's homeless numbers rose by another 19% in the past two years.

Yet it comes at the cost of a tool the city has used for nearly 50 years to stave off homelessness.

In 2016, the current City Council—minus Mayor Darrell Steinberg—voted to weaken a policy that protects the 712 remaining SROs in the urban core by more than doubling the amount of time the city has to replace lost SRO units to seven years.

City leaders and the housing authority cited tougher economic challenges for developers as part of the reason, though, at the same time, they ignored the economic challenges for renters by keeping their displacement fees low, despite skyrocketing rents.

Alan Durning, the founder of the Sightline Institute, a Seattle think tank, and the author of Finding Home: Three Keys to Affordable Communities, says that declining political support for SROs across the West Coast has played an acute role in the affordable housing crisis.

“We make it so difficult to build and operate a new SRO, but we have huge housing shortages all across the West,” Durning said. “It strikes me as shooting ourselves in the foot.”

Lessons from the past

On a November evening in 2016, the Sacramento City Council prepared to amend its ordinance on SROs, even as city staff acknowledged such units had been an important source of affordable housing between 1920s and 1960s.

Once, there were 78 downtown hotels offering those inexpensive rooms, but by the '70s, they were fast disappearing. When six residential hotels closed in the early '80s, the council passed a 1983 moratorium against converting SRO hotels for other purposes. Three years later, when there were just 16 of the hotels left, council members passed a measure that required relocation benefits be paid any time a renter was displaced.

And in 2006, when the council took action to protect the last of downtown's 10 SRO hotels, it established in city code that there always be at least 712 units. If any were converted or torn down in the name of economic development, they had to be replaced within three years.

The city's ordinance worked. Between 2009 and 2015, the code allowed the Wendell Hotel to convert some of its SROs while the Marshall Hotel was gutted to make way for a luxury Hyatt near the Golden 1 Center. Those lost units were replaced by the 7th and H Housing Community.

But by 2016, the disappearance of state redevelopment funds made it more difficult to replace SROs within the three-year mandate. The Sacramento Housing and Redevelopment Agency requested a seven-year window instead.

Only two residents spoke against that change that evening. One was Linda Roberts, who works with the disability rights group, DOGFITE.

“We do not feel that there have been any positive outcomes to folks already moved from the SROs, and we want to see proof that there were any positive outcomes,” Roberts said. “Three years is unreasonable for a replacement. Seven years is a nightmare.”

She also commented on the virtually stagnant displacement fees—$2,400 to an ousted SRO renter, or $4,000 total for two or more people occupying the same room.

“In less than six months, the moved person would be out of this relocation money and be on the streets,” Roberts said.

Her arguments did not sway the council.

Capital foresight

In 1983, the United States was only beginning to emerge from a recession when Sacramento council members enacted the moratorium against destroying SROs. In 2016, the country was experiencing its seventh straight year of economic growth when council members weakened their SRO policy. Now the renters in the Capitol Park Hotel have to figure out what that means for them.

Stephan Daues, a regional director for Mercy Housing California, said the nonprofit has hired an experienced real estate and logistical firm, Overland Pacific Cutler, to help displaced renters look for new housing.

“The consultants are really taking the time to assess the needs of the residents,” Daues said. “We're trying to make sure they're going to land in a place that works for them.”

But Carmen Setser, who has lived in the Capitol Park Hotel since 2016, is skeptical. She says that under the building's former owner, Irene Henry—who still owns the café and bar in the building—major problems were fixed quickly.

However, now that it's being operated by SHRA and a contract property manager, there have been a host of water, elevator and vermin issues. Setser says this isn't inspiring a lot of confidence that the plan put together by the city, SHRA and Mercy Housing will end with former residents landing on their feet.

“I'm very concerned about finding a new place,” Setser told SN&R. “Downtown is my home. It's where I live. No one here is going to rent to me for the same price. All the seniors who live in the building are in the same situation. It's their home, too.”

Erica Jaramillo of the Sacramento Tenants Union says that since learning about the situation at the Capitol Park Hotel, her organization has gone into the building numerous times to conduct outreach. She says that many of the elderly and disabled tenants are still confused about what will happen to them.

“A lot of these tenants have mobility issues, cognitive issues,” Jaramillo said. “Many down there don't know who to talk to, and a lot of them don't know their rights.”

On that first point, Daues of Mercy Housing agrees. “There is a wide spectrum of needs with these residents, as anyone would know who's spent any time there. … Right now, there are a few who aren't cooperating with the consultant, but most of them are.”

Due to the complicated formula of state and federal housing funds Mercy Housing is using for the project, the tenants at the Capitol Park Hotel will be getting far more financial assistance than the meager $2,000 displacement fee. Daues says most will be receiving between $400 and $700 a month for 42 to 60 months.

As for whether the 180 SRO units in the hotel will be replaced within the mandated seven years, the agency charged with making that happen, SHRA, says that they don't need to replace the units at all.

SHRA spokeswoman Angela Jones told SN&R via email that the housing authority arrived at this conclusion through the following formula:

In recent years, SHRA has helped build enough housing units that are similarly priced to SROs in downtown that the equivalent SRO count is 763 units. That is 50 units higher than the 712 minimum required by the city code.

Jones went on to explain that the 130 permanent supportive housing units Mercy Housing will eventually build inside the hotel will be counted by SHRA directly against the 180 lost SROs. That means there is only a net loss of 46 units, and those will be replaced with the previous 50-unit surplus, she wrote.

But from the perspective of Durning, the author, cities should strive to build as many housing units as possible for those on the very bottom of the economic ladder because while the factors leading to homelessness are complex, there are mathematical realities.

“The entire housing market in a city is like a big game of musical chairs,” Durning said. “Unless you have enough homes for everyone, someone's getting pushed out.”