Long Beach’s ‘innovative’ tiny home project is dead; city to return $5.6M state grant

After years of work by city staff, Long Beach’s tiny home project is dead and the city now must return a nearly $5.6 million grant — almost $3 million of which has already been spent.

“We’d seen some successes in some other cities, but what we found though is in those cities, that is where you have lots of open land, you have actual utility connections that are already established,” City Manager Tom Modica said during Tuesday night’s City Council meeting. “Those don’t really exist in a built-out city.”

This is the first time a city was unable to complete an awarded project, according to a spokesperson from the California Department of Housing and Community Development.

Now, with 33 designed and manufactured tiny homes sitting in storage, the city must return the full $5,616,752 to the state. Having spent $2,936,482 on the units, city employee wages and consultants for environmental review, site review, design and project management, the city must now take that amount out of the General Fund to cover the balance.

According to a staff report, “the appropriation for these costs is requested in the FY24 Year End Performance Report, and will affect the amount available to fund additional priorities from FY 24 year end savings,” but it’s unclear what those priorities are.

“There are no anticipated disruptions to services at the Health Department,” spokesperson Jennifer Rice Epstein said in an email Thursday.

On Tuesday the council voted unanimously, with 4th District Councilman Daryl Supernaw absent, to approve returning the grant.

Despite three failed attempts and Modica stating city staff already has “looked at lots of partnerships,” he and Mayor Rex Richardson spun this latest development as a positive, noting that the city now owns the 33 tiny homes — at its own expense — and can do with them as it pleases.

“We have even more flexibility when we control it locally with our own dollars,” Richardson said during the meeting.

“We now have no strings on what the opportunities are,” he continued. “Now, with local dollars, we have full control here.”

Modica said staff will be looking at different options, including selling the homes to other cities to add regional capacity as well as potential partnerships with nonprofits or churches.

“We’ll just continue that work and at the same time continue to build other houses that are more cost effective for us,” Modica said.

The proposed tiny home project was first publicized in August 2022, when Long Beach officials announced a $30.5 million state grant awarded to the city to combat homelessness. More than half the money was used to purchase the Luxury Inn in North Long Beach, which is still in the process of being converted into temporary housing for the city’s unhoused population.

Just over $5.6 million was allocated to developing a 33-unit tiny home community at the Multi-Service Center, which provides services to unhoused people. The project was “a possible innovative solution addressing the regional and national homelessness crisis,” according to city staff.

In February 2023, the city purchased the units from Connect Homes for $2,087,940. Officials said the homes could come online by the end of the year.

By August 2023, however, due to “unforeseen challenges,” city staff determined the Multi-Service Center location was not “viable” due to its proximity to Port of Long Beach construction projects, according to Tuesday night’s staff report.

At the time, Richardson said the revelation was merely a “stumble.”

“I wouldn’t call it a roadblock, I would just say a stumble,” he said. “I’ve seen what the city is capable of doing.”

After surveying all vacant city-owned sites, staff identified a lot near Willow Springs Park and pushed the projected opening date into 2025. However, in April 2024, staff identified nearly $7.5 million in additional costs if the project moved forward at that site.

As a last-ditch effort, in July 2024, city staff proposed the project be developed on Long Beach City College’s Pacific Coast Campus (now known as the Trades, Technology, and Community Learning Campus). In November, college staff informed the city the project is not feasible.

“So we’ve worked at three different sites, and really put a lot of effort into this,” Modica said during Tuesday's meeting. “Ultimately, it is just not a good cost-effective model.”