Another motel in Costa Mesa will turn into housing for homeless people under a California effort to convert transient lodging to permanent homes and combat an increasing housing crisis.

It will be the city’s second such motel conversion under the statewide program, but this time, one major County of Orange official is questioning whether the state’s rules give cities enough time to think through a well-planned development.

One that could even help generate some tax revenue to help pay down loans.

Namely, state rules don’t allow much flexibility if city or county officials wanted to tear the whole thing down and construct differently-designed spaces on the same property. 

When starting over, “you’re not retrofitting, you have a savings on a scale of materials and products and you can design it more efficiently,” said Supervisor Katrina Foley at the OC Board of Supervisors’ regular meeting on Tuesday. 

“We could tear the building down and build new, and it wouldn’t be as expensive and would actually make more money because we could add more units.”

At that meeting, Foley and her colleagues approved a $6.7 million loan to an affordable housing developer, American Family Housing, to remodel the 120-room Travelodge located at 1400 Bristol Street in Costa Mesa.

Officials said the timeframe under state rules for a teardown and rebuild is too tight.

OC Supervisor Doug Chaffee voiced concerns about the loan size, about how it would balloon over time, and whether the builders could pay back the amount they would owe by that time.

“I just want to look at this in a realistic way,” said Chaffee, who called the proposed operating costs “excessive” and added that “at some point, the amount of debt owed will exceed the value of the project, probably by multiple times.” 

“And the reality is, when it comes time to pay it, some of it may have to be written off or simply made a gift and not collectible,” said Chaffee.

Still, he said he supported the project. 

Foley said she was concerned about the cost as well, but lauded the project’s situational planning as “unique and different to this home project than all the other ones that we’ve approved so far.”

The county could recoup some of the money, Foley said. 

“In this particular situation, and if the state approves this Home Key project, we have a revenue source, because there’s a restaurant and a Tesla charging station on site.”

Foley added:

“And hopefully, the contracts are going to be written so that the county and the cities have a share of that revenue that we can then pay towards the debt service. I think that’s going to be unique and different to this home project than all the other ones that we’ve approved so far.”

But there are more ways to think differently, said Foley, who wondered aloud whether it made sense to start from scratch with motels acquired by the public.

As opposed to spending money on remodeling, “it’s my understanding that we could just tear down the whole motel and build new.”

Julia Bidwell, the deputy director for county community services, in response, said the state rules for Home Key programs “will allow for anything.”

As long as it’s done by a certain date.

“They will require it to be completed in 12 months, which doesn’t necessarily lend itself to an 18 month construction, new construction timeframe,” said Bidwell.

A design concept from scratch could open up more possibilities, like housing units that could help generate tax revenue to pay off the loan, Foley said. 

“You’d be able to lay it out better, you’d be able to provide a higher quality project with more units, more diversity in terms of size of units,” she said. “You’d be able to get in at some more market rate (housing). So a mixture, which I think is a better model.”

She called for getting additional time than state rules allow for, “so that we can take advantage of the Home Key program component that allows for a tear down, I really feel that that’s going to be more helpful, overall, is to build more quality projects.”

Chaffee agreed, “I would support the concept of building new because we can improve the density in your unit mix, among other things.”

Brandon Pho is a Voice of OC reporter. Contact him at or on Twitter @brandonphooo.

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