The Hotel Diva is one of two hotels The City is buying with state funds for use as permanent supportive housing. (Kevin N. Hume/S.F. Examiner)

The Hotel Diva is one of two hotels The City is buying with state funds for use as permanent supportive housing. (Kevin N. Hume/S.F. Examiner)

Supes approve purchase of hotel near Union Square to house homeless

State Project Homekey funding helps SF buy Hotel Diva

San Francisco approved plans Tuesday to purchase the 130-room Hotel Diva in the Union Square area with state Project Homekey funds to house the homeless.

Since April, The City has used the 440 Geary St. site as part of its portfolio of temporarily-leased shelter-in-place hotels to provide protection from COVID-19 to more than 2,000 homeless.

Now, The City is moving forward with plans to purchase the hotel and operate it as permanent supportive housing after the Board of Supervisors unanimously approved of the plan Tuesday.

The deal to purchase the hotel must be closed by Dec. 2.

For the transaction, the Department of Homelessness and Supportive Housing has partnered with the nonprofit Episcopal Community Services, which would acquire the site and operate it.

The transaction, including rehabilitation, totals $53 million, which includes acquiring the site for $48 million.

The Homekey grant for the project totals $29.1 million, of which $26 million would go toward acquisition and the remaining $3.1 million for an operating subsidy over two years. The City will provide $27 million to fund the deal and and subsidize the operating costs in subsequent years.

Both Mayor London Breed and Supervisor Aaron Peskin, who represents the area, have previously praised the project.

“The Hotel Diva is a perfect opportunity for yet more permanently affordable housing,” Peskin had said.

Not everyone agreed.

Richard Leider, president of Paramount Hotels Inc., wrote a letter to the board and Breed Monday, opposing the purchase. Paramount Hotels Inc. manages three hotels in the Union Square area. Leider also owns Bartlett Hall, a nearby bar.

He wrote that Union Square generates “a significant portion of The City’s annual tax revenue” and transforming Hotel Diva into permanent supportive housing “could jeopardize this revenue source for the long term.”

Leider suggested The City should purchase hotels located on the Van Ness corridor and Lombard Street, which he said “would not affect or discourage tourism.”

But Peskin said he does not share those concerns and that no one else in the area opposed the deal.

“We respectfully disagree, albeit I’ve never heard of him or his group and have received no other opposition from anyone else in the Union Square area,” Peskin said.

After the vote, Leider told the Examiner, “I am disappointed.”

“I think from a city planning point of view that the board needs to be looking at the financial ramifications of these types of actions,” Leider said. “I am not a NIMBY reaction. I am just being conscientious in trying to preserve a shopping district that is a jewel of The City.”

He added, “There are certain neighborhoods that should be preserved for the greater economic benefit of The City.”

The City has about 8,000 units of permanent supportive housing for the formerly homeless in its portfolio, according to the legislation. Breed has a goal of adding 1,500 more permanent supportive units over the next two years in what she calls her Homelessness Recovery Plan.

The Homekey grant for Hotel Diva was The City’s second received under the state program.

The first Homekey grant-funded project, the Granada at 1000 Sutter St., returns to the board’s Budget and Finance Committee Wednesday after rehabilitation costs came in higher than anticipated.

The state has agreed to increase the initial awarded grant amount from $45 million to $49 million, which is why the purchase needs another vote by the board.

As at Hotel Diva, the 232 single residence occupancy units would become permanent supportive housing owned and operated by Episcopal Community Services.

Currently, 80 of the units are occupied by low-income residents and none are expected to be displaced. The Department of Homelessness and Supportive Housing will place homeless residents into the remaining units, including those who may be currently staying in shelter-in-place hotels.

jsabatini@sfexaminer.com

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