San Jose officials exploring more potential Project Homekey sites

San Jose officials are quietly inquiring about hotels that might fit the criteria to acquire through Project Homekey funds in 2022.

Mayor Sam Liccardo recently contacted the owner of two hotels—the Quality Inn on 13th Street and the Tully Inn on Tully Road—to see if they might be a good fit for the Project Homekey program. San Jose has previously applied for funding through this state program, which makes available $2.75 billion for interim and permanent housing projects.

Dhaval Panchal, whose family owns the hotels, told San José Spotlight he spoke with city officials about two weeks ago regarding his properties in Districts 3 and 7. He said they’re interested in the properties, but said nothing about purchasing them.

“I think it’s exploratory, definitely,” Panchal said. “All I can say is everything is up in the air right now.”

There haven’t been any formal conversations about purchasing the properties, Liccardo spokesperson Rachel Davis told San José Spotlight. The city is looking for potential sites to include in the third round of Project Homekey funding, which Davis said is slated for the second half of 2022.

“We’re continuing to look for every opportunity to buy hotels to provide housing for our residents living on the street,” Davis said. “We’ve reached out to (Mr. Panchal) and will be reaching out to others as we work to meet our housing goals.”

Liccardo's office contacted the owner of the hotels through Erik Schoennauer, a land use consultant. Schoennauer disclosed the call in a lobbying report to the city and confirmed to San José Spotlight he connected the mayor's office and his client, hotel owner Panchal.

Applications for the second round of Project Homekey funds opened Sept. 30, with about $200 million available for cities in the Bay Area. San Jose applied in early October for funds to convert four hotels—Pavilion Inn, Residence Inn, Pacific Motor Inn and the Arena Hotel—into emergency housing.

The city also wants to set up an interim housing site at the corner of Branham Lane and Monterey Road to replace a homeless encampment that expanded during the pandemic. That project is partially funded by a $5 million donation from real estate developer John Sobrato. Residents living near the proposed site have gathered a petition with more than 1,000 signatures opposing the plans.

The sites would add 548 units in total. Five existing interim housing sites are currently able to house about 300 people. Last year, San Jose received $12 million in Homekey funds to convert a 76-unit hotel, SureStay, into permanent affordable housing. The state accused San Jose of charging rents exceeding the amount allowed for sites using Project Homekey funds, forcing the city to recalculate rent.

Project Homekey funds are a critical part of San Jose’s strategy to house the thousands of homeless residents spread out across the city in encampments. In September, Liccardo and several councilmembers proposed creating 2,300 new permanent and transitional housing units by the end of next year.

San Jose Housing Department spokesperson Jeff Scott told San José Spotlight the city has evaluated numerous properties for acquisition with Project Homekey funds.

“We never stop looking for opportunities to expand access to affordable housing,” Scott said.

Contact Eli Wolfe at [email protected] or @EliWolfe4 on Twitter.