The Brief

As COVID-19 tore through California, Jennifer Hark Dietz had a decision to make. The state was making perhaps its biggest push ever to get people off the street, offering up billions of dollars for cities and organizations like hers to turn old motels into new homes.

It was risky. The Homekey program came with up-front cash and a promise to move fast and cut red tape. But it also meant taking on old buildings with little vetting, which had the potential to put a developer in a deep financial hole.

At first the gamble paid off. In just a few months, Hark Dietz’s nonprofit, People Assisting The Homeless, was housing people in the old 40-room Hollywood Orchid Suites in Los Angeles. She called it a “shining light” for what seemed possible with the radical new program.

But then came a pale pink Travelodge in the suburb of Gardena. The city of LA had already bought the motel for $9 million, and Hark Dietz said her team didn’t have a chance to vet or tour the site. They’d only seen online photos and basic inspection reports before they took it over in December 2020. A city consultant estimated that it would take about $50,000 to start moving people into the roadside motel.

“Of course,” she said, “we know now that’s not the case.”

More than five years and nearly $3 million later, the motel — which turned out to need all new windows, plumbing and electrical, among other issues — was still vacant earlier this year. There was plywood over some of the windows, and someone graffitied a ghost on one side.

The boom-or-bust results in Los Angeles underscore how little is known publicly about a generational project with a high price tag and even higher stakes. Some projects were huge successes. Others were total failures. Dozens remain stuck in limbo. CalMatters found there’s been little public accountability for any of it.

Launched by Gov. Gavin Newsom in the summer of 2020, Homekey awarded more than $3.8 billion to local governments to convert motels and other buildings into homeless housing, thrusting many local governments into a new role running multimillion-dollar real estate projects. Cities and counties could hire outside contractors to help or do the work themselves, skipping some of the usual building process for the sake of speed.

It was unlike anything the state had ever done, largely because it sprang from desperation. Homekey launched during peak COVID, five months before vaccines were available, and after cities had already moved thousands of unhoused people into motels through Project Roomkey, another Newsom program. But those rooms were temporary, and officials were scrambling to prevent a mass exodus back to the streets.

With Homekey, local officials across the state bought and gutted Motel 6s, Best Westerns and roadside inns. They got more creative as the program evolved: Tiny homes sprouted in Silicon Valley, and Santa Cruz retrofitted an old dentist’s office. In Southern California, housing took shape in a former Tri-Delt sorority house, an earthquake-stricken church and a hostel that once served as a refuge for Japanese Americans returning from World War II internment.

Live Oak Apartments in Ukiah on Feb. 26. Live Oak offers its residents access to common spaces, such as a community garden and meeting rooms for visitors.

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Manuel Orbegozo

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CalMatters

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“What we’re doing here today is multiples of what any state in American history has committed to address this crisis of homelessness,” Newsom said at a 2021 press conference announcing a major Homekey expansion.

The program came with little built-in oversight. Earlier this year, state lawmakers killed a bill to audit Homekey. No state agency has publicly analyzed the program in detail to find out what’s working and what’s not.

The challenge now: A new and more complex phase is already underway with up to $2 billion from the voter-approved Prop. 1 mental health bond. But no one has publicly accounted for how many of the program’s original projects stalled out and how many succeeded.

To find out what happened, CalMatters filed more than 100 public records requests with cities and counties that were awarded Homekey funds. We asked for key details on 250 projects announced through the end of 2024, covering all but a handful of projects for which less public data was available. Those state and local records — along with dozens of visits to Homekey sites, plus interviews with people who built and lived in them — create a first-of-its-kind window into how it all played out.

Among our findings:

• Homekey made producing housing simpler. But it came at a cost. Homekey provided billions of dollars in housing funding up front, allowing some developers to sidestep the usual webs of investors and lenders and finish much faster than normal. But fewer funders also means less oversight. With rushed vetting, some projects got bogged down in delays, blown budgets or worse. At least one Homekey developer was forced out of business by an unwieldy project. Another is facing fraud charges.

• When Homekey worked, those involved stress that it really worked. Nearly 13,500 people now live at Homekey sites, according to the state Housing Department. For small and rural communities, such as Glenn County, the program provided crucial cash for their first-ever homeless housing. Officials from Mendocino County to Ventura say they were able to stabilize people longer term by adding stronger ties to public services and extra investment in resources such as counseling.

• Those successes magnify the opportunities squandered. Projects involving about 3,000 homes — roughly 1 in 5 promised by the program — weren’t finished as of the end of last year. Another 2,000 units have people living in them on a temporary basis but haven’t been converted into permanent housing, the program’s main goal. In 10 instances involving 500 more units, the state publicized grants that later were canceled or that never materialized because local officials or developers backed out.

• A lack of transparency raises familiar questions about the program’s future. State officials stress that they have extended deadlines and improved vetting for the program’s latest bond-funded iteration, Homekey+. But they refused to publicly provide details about that vetting process. And as homeless services providers have long warned, there remains no guaranteed state funding to keep existing or planned Homekey projects going. 

Yes, many Homekey projects opened late or over budget. But, officials emphasize, they still opened.

Newsom said he considers the program a “phenomenal success.”

“We’re talking about hundreds and hundreds of projects all across the state of California that they’re trying to manage and organize and operate,” he said when CalMatters asked about it at a recent press conference. “And I imagine each one of them brings its own opportunities and own challenges as we move forward and implement at a scale we’ve never implemented in the state’s history.”

Taryn Sandulyak knows that better than most. The Bay Area developer thought Homekey might be her big break, but it ultimately put her out of business. She sees a fundamental mismatch at the heart of the program. It wanted high quality, high speed and low budgets.

“You can only have two of those,” Sandulyak said. “You really can’t ever have three. That’s the issue with Homekey, is they give you not quite enough money to do it, and they want you to do it really, really fast and really, really well.”

The chasm between Homekey successes and failures isn’t a simple, one-size-fits-all story. But it does provide an outline of what it will take to make good on California’s big effort to finally make a dent in its homelessness crisis.

‘Failing was not an option’

On the west side of Ventura, just as the surf town creeps up into the hills toward Ojai, sits what used to be one of the city’s worst nuisance properties: a nearly 100-year-old apartment building once known, in a nod to local drug slang, as the “Booyah Mansion.”

The city’s housing authority, Ventura Housing, cobbled together enough money in 2019 to buy the building. But it didn’t have enough cash to fix all 300-something code violations at the crime-ridden property — until Homekey came along.

“We had some scary stuff go on here,” said Karen Flock, Ventura Housing’s real estate development director. “This property failing was not an option.”

Now known as El Portal, the 29-unit apartment complex today serves as a lifeline for a mother with 9-year-old-twins, one severely autistic. It’s a refuge for a woman who lived for six years in a city-funded Tuff Shed. Another neighbor still keeps his shopping cart from the street in his apartment as a reminder of what he’s been through, and why he can never go back.

Cynthia Gomez, 60, at her home in El Portal apartments in Ventura on Feb. 26. Gomez, who was formerly homeless, now lives in a studio apartment.

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Julie Leopo-Bermudez

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for CalMatters

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Ventura and other cities and counties that were able to pull off Homekey projects relatively on time and on budget credit a variety of factors for their success. Some grantees provided services themselves rather than contracting them out, better integrating public resources. Others raised extra money for on-site social services or worked closely with first responders to head off concerns about crime and stabilize residents.

Jeffrey Lambert, CEO of Ventura Housing, said the crucial thing was realizing early that Homekey money alone isn’t nearly enough. Instead, the city combined it with other public and private funding, staffing and resources. Projects that failed or got stuck in limbo often fell apart after they ran out of money.

“Homekey works,” Lambert said, “because of all the stuff added on top of it.”

For housing researchers such as Ryan Finnigan, deputy director of research at UC Berkeley’s Terner Center for Housing Innovation, the real strength of Homekey was not the building minutiae. It was the attempt to challenge the state’s status quo of painstakingly slow housing development while people keep pouring onto the streets.

“If we’re not willing to try a new approach,” he said, “then we’re not going to learn as much about how we can be more creative, how we can work with more urgency than the current systems.”

As fraught and full of delays as the construction process can be, getting a project completed is often just the first hurdle for Homekey. Once a project opens its doors, it typically needs significant resources in addition to the state funding. Mendocino County credits much of its project’s success to extra services for residents, which aren’t paid for by the state grant, said Megan Van Sant, a senior program manager for the county who oversees the Homekey site.

At the former Best Western hotel now known as Live Oak Apartments, there’s a therapist on retainer for tenants, plus a dog trainer paid to work with problem pets. Both try to help residents resolve any issues that come up before they escalate into grounds for an eviction.

To provide those extras, the county runs the project itself, rather than contracting with an outside service provider as many Homekey projects do. Two county staffers work full-time inside the building, using their connections to do everything from enrolling residents in Medi-Cal to pairing them with mental health services.

All that is expensive.

“I think the state should continue to support these projects,” Van Sant said. “The state asked communities to do these projects, and they cost more to do well than what you can earn in rent.”

Resident Sherry Collins inside her room at Live Oak Apartments in Ukiah on Feb. 26. Photo by Manuel Orbegozo for CalMatters

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Manuel Orbegozo

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for CalMatters

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Sherry Collins, 66, moved into the project three years ago, at a time when she was terrified of what would come next. Her husband had died, her health was failing, she couldn’t work, and she couldn’t afford to keep living in her cabin in the tiny coastal city of Fort Bragg.

Now she feels like she’s home. Collins decorated the window of her room with little red and pink hearts and adopted a kitten with extra toes, whom she named Mr. Handsome. She continues to deal with health challenges after losing a leg to diabetes about a year ago. The building has only four units accessible for people with disabilities, making it a challenge to accommodate everyone, but one recently opened up for Collins, where she can more comfortably shower.

“They have been awesome to me,” Collins said. “They’re more like family.”

Never-ending projects

For Sandulyak, Homekey was too good to refuse.

Five years earlier she had co-founded Firm Foundation Community Housing, which helped Bay Area churches turn their parking lots and backyards into tiny homes for homeless residents.

Homekey was a once-in-a-lifetime opportunity to dramatically scale up that vision by using millions in state funds to house dozens of people in Vallejo. It would be the small nonprofit’s most ambitious project by far.

Sandulyak never suspected that by applying for Homekey, she had doomed her organization.

Firm Foundation was awarded $12 million in 2022 to build a 47-unit modular apartment building called the Broadway Project. Over the next four years, nearly everything that could go wrong did.

Some problems had nothing to do with Homekey. The general contractor went bankrupt, and the nonprofit tapped to operate the facility squabbled with the city, leaving the project in limbo for a year. The state wouldn’t let Firm Foundation pick a new partner to run the housing, which Sandulyak says further delayed the opening.

Other problems were directly related to Homekey. By design, the program forced cities to take a much more hands-on role with housing development than they were used to. Vallejo wasn’t prepared for that responsibility. It fumbled its attempt to get a key federal grant and failed to set up important safeguards that protect affordable housing projects from financial risks.

Soon, Sandulyak had $2 million in bills and no way to pay them. With construction three-quarters done, the project ran out of money. Firm Foundation was forced to stop work.

It became such a nightmare that the Vallejo City Council asked for an independent audit to find out what went wrong and why. The audit blamed both the city and Firm Foundation for allowing the project to run out of money before it was finished. Firm Foundation vastly underestimated the project’s cost, and the city bungled efforts to secure additional funds.

In some ways, the audit found, the very nature of Homekey helped set the project up for failure.

One big problem was the timeline. Homekey required projects to finish construction within one year of their award, and to move people in 90 days after that. To meet those deadlines, Firm Foundation created budgets before the architectural drawings were even done, contributing to serious cost underestimates, the audit found.

The audit also found a lack of oversight at the Broadway Project, which it said is typical of Homekey projects. Normally, a single affordable housing project uses funding from multiple sources, including the city, the county, the state, federal funds, tax credits, private banks and more. The more funders and investors, the more eyes watching and holding the developer accountable. With Homekey, the city applying for the grant typically takes on all those risks by itself, the audit found.

The official ribbon cutting at the grand opening of Broadway Village in Vallejo on March 5.

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Nathan Weyland

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for CalMatters

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On a recent Thursday morning, Sandulyak gathered with city officials and her construction partners in front of a crowd to celebrate what they, at times, had thought would be impossible: the Broadway Project was finally open. Behind them rose the terracotta-colored wall of the sleek, new, modular apartment building. A red ribbon waited in front of them.

On the count of three, Sandulyak helped Vallejo’s assistant city manager snip the ribbon. The crowd cheered.

The project ended up coming in two and a half years late and 70% over budget. Despite those setbacks, the audit found it still cost less per unit and was built more quickly than the region’s average affordable housing project.

At right, Firm Foundation Community Housing Executive Director Taryn Sandulyak at the grand opening of Broadway Village in Vallejo on March 5. Photo by Nathan Weyland for CalMatters But it cost Sandulyak everything. She laid off three of her four employees, and she plans to lay off the last one and dissolve her organization. The nonprofit is still on the hook for more than $1 million in unpaid bills related to the project.

Despite her pride in the finished building, Sandulyak wonders how much more housing her nonprofit could have built — if only she’d never applied for Homekey.

Still, 52 people now have somewhere to call home.

“I’m unshaken in my belief that that is worth it,” Sandulyak said.

One of those people is 62-year-old Terrence White, a former refinery worker who was forced into early retirement by an injury and can’t afford market-rate rent. Now, he pays $294 a month and finally has his own place.

“It feels wonderful,” he said.

The Homekey gold rush

During the frantic first two years of Homekey, when many experienced affordable housing developers were sitting out the untested new program, an LA company called Shangri-La Industries stepped in to help fill the void. It scored nearly $115 million in contracts to build 500 homes for homeless Californians in cities from Salinas to San Bernardino.

But a federal indictment and a separate civil lawsuit allege that millions in state funds instead went to fund a lavish lifestyle for the company’s chief financial officer.

Among the charges attributed in court records to Shangri-La’s former CFO, Cody Holmes: $46,000 in monthly rent for a Beverly Hills house with a pool. Designer gifts for a girlfriend, including a $127,000 diamond necklace and a $111,000 crocodile Birkin bag. A $5,000-a-month lease on a Ferrari Portofino. Another $53,000 for Coachella passes, and $44,000 for flights on private jets.

All this while many of the desperately needed motel rooms sat empty.

Homekey set a low bar for contractors to qualify: They had to have worked on at least two affordable housing projects that included at least one homeless tenant.

Shangri-La easily cleared that hurdle. But had any state or local officials done more digging, they might have seen warning signs.

Shangri-La’s construction business was sued twice for breach of contract in 2018 and 2019, court records show, after two firms alleged that it failed to pay them. The company was also a contractor on a troubled LA veteran housing project, where records first reported by KCRW show Shangri-La partners sold the property to themselves, increasing the project’s budget by $8 million.

With Homekey, federal prosecutors allege that Holmes “knowingly submitted fake bank records” to the state Housing Department to boost Shangri-La’s credentials — financial claims that state officials apparently failed to verify with the banks. Holmes has pleaded not guilty, and an attorney representing him declined to comment.

As the company took on the Homekey projects, property records show that entities connected to Shangri-La or its partners paid around $13 million for actress Milla Jovovich’s Beverly Hills mansion, adding to a portfolio that included a $7 million oceanfront home in Long Beach purchased two years earlier.

In a separate civil fraud case, state prosecutors allege in court records that Shangri-La went behind the state’s back and took out undisclosed loans on the Homekey buildings, giving up control of the sites and violating their contract with the state. That became a major problem when the company defaulted on the loans.

For several of the properties, no one had filed crucial paperwork to ensure that they remained affordable housing. After the buildings ended up in foreclosure, some were scooped up by companies with no commitment to homeless housing.

Homekey contracts tasked local officials with vetting projects and reviewing contractors’ organizational documents, budgets and other key details. But records show state officials also reviewed Shangri-La’s financials, and once they paid out the Homekey money, they failed to verify that paperwork was completed to restrict the buildings to affordable housing.

The state Housing Department and several local governments that hired Shangri-La for Homekey projects declined to comment, citing ongoing litigation.

Andy Meyers, the former CEO of Shangri-La, acknowledged in an interview that he had “a lack of control” over his company. He has sued Holmes for fraud. He also blamed the local and state officials.

“My CFO had a lot of wrongdoing,” he said. “But it was a confluence of events that caused each project to go bad.”

Meyers said officials’ failure to file the proper affordable housing restrictions, which were also required by his lender, triggered a financial disaster that led his company to default on some of the properties. On two projects that Shangri-La did open in San Bernardino and Salinas, he estimated that the company incurred around $11 million in unexpected costs.

“We have spent so much money following their guidelines and following their timetables,” he said, “and they never followed their guidelines or timetables.”

Monterey County Supervisor Chris Lopez rallied support for a Homekey project in his hometown of King City. He thought Shangri-La made sense for four projects in the county, since it had already opened one Homekey site in Salinas.

But it didn’t take long for constituents to start asking why rooms were sitting empty behind chain-link fences.

“The longer it went on without seeing any movement, the flag started to get raised,” Lopez said. “I was starting to hear less and less communication and more sort of finger pointing.”

Local officials like Lopez had to start from scratch, raising millions more dollars to revive the projects as encampments swelled. It took 10 different deals totaling $16 million to open the King City project in March, three years behind schedule.

The full trail of Shangri-La’s deceit stretches from the state’s agricultural heartland to the edge of the Southern California desert. A $27 million Thousand Oaks hotel project sits abandoned today, robbing a region of 77 homes while it had a decade-long housing waitlist. Another $16 million project scrapped in Salinas would have provided 58 homes. Officials still plan to salvage 200 homes in other parts of Monterey County. The only two Shangri-La projects that stayed open during the legal battle, two motels in Southern California, were full of people who were plunged into messy foreclosure disputes.

The Quality Inn & Suites building, a former Shangri-La project, stands vacant in Thousand Oaks on Feb. 26.

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Julie Leopo-Bermudez

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for CalMatters

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Carrie Harmon, San Bernardino County’s director of community development and housing, said in an email that “the county entered into this effort in good faith, relying on representations that later proved to be inaccurate.”

Even some of those whose Homekey projects went well say they’re not surprised that things went sideways. In Mendocino County, Van Sant said the state’s oversight was limited to quarterly progress reports. Once the money was spent, the state stopped asking for any information at all.

“They gave us a bunch of money, made us do some paperwork, and then they’re out of here,” Van Sant said.

For Colleen Robinson, public officials’ failure to see the red flags with Shangri-La was life-changing.

Robinson, now 62, survived years on the street after losing her job and fleeing a bad relationship. The All Star Lodge in downtown San Bernardino was her chance to start over. Shangri-La did manage to renovate and open that project in late 2022.

Two years later, the bank foreclosed. Because no one had put the affordable housing restriction on the property, the new owner told Robinson and other tenants that it was going to quadruple the rent. She said the new owner neglected the building; weeds and stray cats reclaimed the parking lot, police sirens blared, and neighbors died with little explanation.

“This would give hell a run for its money,” Robinson said.

Harmon said the county was still trying to buy the building and figure something out, but Robinson didn’t wait around to see how the saga ended. On a Thursday in February, she packed up and boarded a Greyhound bus for Iowa, where one of her children lives.

Homeless veterans still waiting

An unfinished motel conversion in the Encino neighborhood of Los Angeles on Jan. 27. The project is expected to finish more than a year after the original deadline, city records show.

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Lauren Hepler

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for CalMatters

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Some Homekey projects still haven’t opened.

Santa Cruz County has three badly delayed Homekey projects, one of which will be more than four years late when it is slated to finally be finished at the end of next year. For that project, the county obtained more than $6 million to convert rustic vacation cabins under a grove of redwood trees into housing for homeless veterans. The state initially set a completion deadline of 2023, but the project ran out of money before it crossed the finish line, forcing construction to stop.

There were many reasons why, but one stands out: underestimating the cost, said Robert Ratner, director of Santa Cruz County’s Housing for Health division.

The developers had never undertaken a project this large, and that inexperience contributed to the budgeting error, Ratner said. But so did the design of Homekey, which capped what the state was willing to pay per unit at about half what it takes to build affordable housing in some parts of California.

The idea was that projects would be cheaper because they were converting existing buildings, while also cutting out extra layers of bureaucracy that add time and expense. That led developers to low-ball budgets, which came back to bite them when the savings weren’t as great as anticipated, Ratner said.

Once the budgeting error was made, neither the state nor the county caught it, Ratner said. The county assumed that the state would scrutinize all Homekey applications and throw out any that didn’t seem viable, Ratner said. But it appears that in reality, the state was relying on the counties to do that vetting.

Santa Cruz County had little experience analyzing whether a construction project was adequately budgeted. Typically, the county relies on other funders, such as construction lenders and tax credit investors, to do that job. But those investors weren’t present here.

When asked whether he and his colleagues had done their due diligence to make sure the projects were realistic, Ratner was straightforward.

“I would say no,” Ratner said. “I can’t say yes with a straight face at this juncture.”

Other projects just never happened.

A $14 million Homekey award was supposed to help breathe new life into the Hotel Travelers, a rundown, century-old building in Oakland’s Chinatown, as housing for people returning from incarceration. But once the developer got a look at the building, that plan fell apart. An inspection revealed such severe issues with the building’s construction that the developer determined it would be “morally untenable” to proceed. Oakland returned the grant.

In total, CalMatters found at least 10 cases where a Homekey award was announced, only for the grantee to later withdraw their application, return or redirect the money, or have the state claw it back. Some instances had more public explanation than others.

City officials in Fresno voted down their own project. Long Beach was unable to come up with a suitable location for $2 million worth of brand-new tiny homes left sitting in storage. Projects in Marin and Mariposa counties evaporated when real estate deals fell through, and the state rescinded its grant for a project in Salinas after a nonprofit partner pulled out.

Newsom's legacy and a financial cliff

Despite the vastly different outcomes at Homekey projects around the state, there’s no plan for a comprehensive audit to see what worked and what didn’t — a decision that raises the question of whether the state has done enough to grapple with Homekey as it forges ahead with the new version of the program, Homekey+.

Earlier this year, lawmakers nixed a public accounting proposed by Assemblymember Leticia Castillo, a Republican from Corona.

“While the program has expanded housing options, critical questions remain about its long-term impact and cost-effectiveness,” a summary of Assembly Bill 505 said. “It is unclear how many Homekey-funded units remain occupied after one year, how many individuals successfully transition to stable, long-term housing, and whether Homekey’s cost per unit is competitive.”

The bill was never publicly debated. It died in January.

The state did do one audit of multiple homeless services programs in 2024. It didn’t get into Homekey delays or what actually happened to people living in the buildings, but it analyzed the costs of eight projects. Based on that small sample, the auditor concluded that Homekey was “likely” cost-effective, with an average cost of $144,000 per unit, compared to the hundreds of thousands of dollars more it can cost for new construction in California.

The challenge is that when Homekey plans fell short of ambitions at job sites around the state, the consequences were often murky. In extreme cases, where cities acknowledged that projects failed to materialize, the state has clawed back grants. But usually, the main penalty for blown deadlines or other missteps is that the state may hold it against a local government or developer the next time it applies for funding — a dynamic that provides no public transparency.

Gary Wish stands outside El Portal apartments in Ventura on Feb. 26, 2026. Photo by Julie Leopo-Bermudez for CalMatters What happens next will be left up to a new state housing agency set to be launched this summer, the California Housing and Homelessness Agency. That effort is expected to include a new development committee to “provide centralized, coordinated guidance to state housing policy and funding decisions.”

For now, the state’s Housing Department maintains that it “monitors each project closely” if issues arise or deadline extensions are granted. Even with widespread delays, the agency maintains that “Homekey has helped build more and faster.”

The state said it is learning as it gives out the new Homekey+ funding. After seeing so many projects miss the one-year deadline, the state doubled the timeline for new construction to two years. Homekey+ projects that serve veterans now can propose bigger budgets for new builds, potentially addressing the issue of under-budgeted projects running out of money.

Officials also said they’re scrutinizing applications more closely now, including looking carefully at whether applicants are budgeting enough funds for their proposed projects, said California Health and Human Services Secretary Kim Johnson.

“We are improving our own vetting process, if you will,” she said during a recent news conference, “to ensure these projects are successful in delivering.”

The state’s housing department maintains that Homekey accomplished a major feat: building thousands of units despite a global pandemic, labor shortages, supply chain issues and other challenges.

“It is tremendously rewarding to see so many vulnerable Californians housed so quickly, and to have voters expand the successful Homekey model to house and support veterans and others facing behavioral health challenges,” Assistant Deputy Director Cari Scott said in a statement.

As the state’s housing policies shift, there’s one big question left for people like Van Sant in Mendocino: Will there be enough money to keep Homekey projects running?

Most of the projects have a pay-as-you-go model, versus standard 10- or 15-year affordable housing financing — a calculation that leaves a financial cliff looming for thousands of Homekey homes.

“If [Homekey] is going to be a long-term, permanent, successful program,” Van Sant said, “I think the state’s going to have to find a way to find some ongoing funding for it.”

Data reporters Erica Yee and Kate Li contributed to this story.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.

This story first appeared on Long Beach Post.

What do Ukrainian food, soft serve and Thai fusion tacos have in common? They’re all served out of trucks built from scratch in an industrial building on Anaheim Street next to the Los Angeles River.

“This is where food trucks are born,” said Martin Ramirez, owner of California Food Trucks.

Over the past 15 years, he’s quietly had a hand in the success of some beloved local businesses and major corporations. He’s built custom projects for the Long Beach dessert shop SnoCorner and Peruvian food truck Mikhuna, along with major 30- and 40-foot catering trucks for high-profile clients like Google and Monster Energy.

Ramirez, his shop manager Cody Madole, and four other employees are a one-stop shop for everything a food truck needs, including plumbing, welding and electrical work to transform vans and commercial trucks into functioning mobile kitchens.

It’s a niche manufacturing business that caters to enterprising chefs and restaurateurs who are testing a concept or hitting the road for music festivals, farmers markets or a meal break at offices.

The food truck industry has grown as the costs to start a brick-and-mortar restaurant have steadily increased. In a business that’s notorious for having razor-thin profit margins, a truck is a safer bet — and one you can also resell if things don’t work out, Ramirez said.

Martin Ramirez, who owns California Food Trucks, at his workspace in Long Beach, where he builds food trucks in Long Beach on July 14, 2026.

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Thomas R. Cordova

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Long Beach Post

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Ramirez, who grew up in Bellflower, found his way to food truck manufacturing through his stepmother. In the late 2000s, she discovered how lucrative the business could be when she bought a truck to start selling tacos in Miami. Before she sold her first taco, she decided to list the truck on Craigslist to test the resale market. Within a few days, a buyer offered her double what she had paid for it, Ramirez said.

After some coaxing from family, Ramirez realized he was perfectly equipped to create mobile kitchens from scratch.

He had spent more than a decade remodeling homes as a general contractor and also had experience in metal fabrication from a job building race cars. Food truck manufacturing was like a blend of the two, Ramirez said. 

For years after he started building trucks, Ramirez and his cousin also ran a taco truck called LA Tacos and Co. 

He’s no longer involved in that business but runs a pizza truck with Avalou’s Italian Pizza founder and Long Beach resident Louis Lombardi. 

The two met through a mutual friend, Lombardi said. Ramirez loved the pizza and offered to build a truck to make the pop-up concept mobile.

“We hit it off, and we’ve been great buddies since,” Lombardi said.

Starting next week, the pair plan to sell pizzas for delivery through UberEats from the truck parked outside Ramirez’s California Food Trucks business.

Working in food truck businesses has given Ramirez first-hand knowledge of how to efficiently lay out a mobile kitchen and set up new food vendors for success before they even pick up a knife.

Ashley Monconduit, owner of SnoCorner near Long Beach Poly High School, ordered a custom food cart from Ramirez in 2024. Her brick-and-mortar business specializes in New Orleans-style shaved ice, called Snoballs, but Monconduit was looking for a cart to serve beignets and soft serve at corporate events and birthday parties.

Ramirez made the cart “based entirely on what was in my head” and even made the soft serve machine removable, Monconduit said. That’s been a big help for events where she only serves beignets because the soft serve machine accounts for a significant portion of the cart’s weight.

Martin Ramirez, owner of California Food Trucks, shows the solar power and battery technology on his latest food truck, which he built in Long Beach on July 14, 2026.

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Thomas R. Cordova

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Long Beach Post

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Ramirez also tries to stay ahead of the curve on innovations in the food truck industry. He now steers clients away from using generators in favor of solar-powered batteries. Ramirez knows from experience that if you use a generator, “it will break down at the worst time.”

With most of the batteries he installs, he can troubleshoot problems from his desk no matter where a truck is.

But he still makes his fair share of on-site repairs for drivers who accidentally sheared off a side mirror or rooftop exhaust fan in their scramble to make it to an event.

Not all the repairs are a drag: He’s built out several trucks for clients in Hawaii. Ramirez, an avid surfer, makes a point to visit those trucks whenever his schedule allows.

Gov. Gavin Newsom is in his populism era.

He started the year vowing to stop corporate investors from buying up large tracts of single-family homes, a desire shared by both socialists and President Donald Trump.

Last month, after he was unable to keep a proposal to tax California billionaires from appearing on voters’ ballots, he tried to get ahead of the debate by pitching nationwide higher taxes on the wealthy.

Last week, he spoke to a crowd of national Latino policymakers about the need to “democratize our economy” in the face of artificial intelligence-driven job losses.

Newsom’s populist appeals come as he prepares to leave office and looks toward an expected 2028 presidential campaign in which widespread anxiety about wealth inequality and the effects of AI on the economy will feature prominently.

“The old bargain is dead, and AI is going to finish it off,” he said last week in Los Angeles, of the concept that Americans could support families with working-class jobs. “We need to wake up to that foundational reality.”

The posture is new territory for Newsom, who is not a natural populist and who maintains his longstanding relationships with wealthy tech donors who have railed against the proposed billionaire tax, Proposition 40.

As governor, he’s kept his image as a liberal who favors progressive income taxes and expanding the social safety net without teetering too far into the overtly redistributive politics of democratic socialists. He eschewed most new tax proposals and stood by several state corporate tax benefits that progressives have longed to scrap.

By focusing on AI-driven inequality now, Newsom is choosing a popular issue to define his expected 2028 run. But it’s not yet clear whether voters will buy his solution.

“Newsom is balancing two pressures,” said Kevin Liao, a Democratic strategist who worked on billionaire Tom Steyer’s “tax the rich” gubernatorial campaign this year. “There’s a desire to meet the demands of his constituents and the current appetite to be against billionaires, and to address the massive wealth inequality in the state and the country, with the cold political reality that much of his career and presumably his future ambitions have also been built on the financial support from a lot of wealthy folks in Silicon Valley.”

Four tax measures on the California ballot

Even as he adopts a more progressive posture while appearing in other states, Newsom is walking a fine line back home, where his vocal opposition to California’s billionaire tax proposal could confuse voters staring at multiple tax measures on the November ballot.

Proposition 3, sponsored by the California Teachers Association, is also a tax on the rich: It would make permanent the state’s higher income tax rates for the top 2% of earners. That money goes into the state general fund, 40% of which pays for schools.

Voters approved those rates temporarily in 2012 at the behest of then-Gov. Jerry Brown, and extended them again in 2016. If they expire as planned in 2030, the state stands to lose between $5 and $15 billion a year in revenue.

Early polling shows that measure is popular, but CTA President David Goldberg acknowledged it will be tricky to campaign in favor of it with another tax on the ballot. The union opposes the billionaire tax because it would not send the same proportion of its revenues to schools, instead prioritizing healthcare.

A large banner hangs at a campaign event for a proposed billionaire tax in Los Angeles on Feb. 18, 2026.

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Jae C. Hong

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AP Photo

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Voters will also be asked to weigh in on three other tax-related ballot measures: two backed by tech billionaires designed to undercut the billionaire tax, and one by an anti-tax advocacy group that would make it harder for cities to raise local taxes.

“It’s always hard when you have a bunch of things” on the ballot, Goldberg said. “It is going to mean that we have to really go out there and make the case for this.”

Asked whether his opposition to Prop. 40 could hinder public support for Prop. 3, Newsom told reporters recently: “I hope that’s not the case. … It’s a legitimate question.”

How Newsom wants to be seen

For years, Newsom has defended California on Fox News and on social media against a national reputation that it is over taxed, often arguing that lower- and middle-income families pay more in taxes to live in states like Florida and Texas. The basis of his claim is a study from the left-leaning Institute on Taxation and Economic Policy that found Florida and Texas rely heavily on property and sales taxes, which effectively take a greater share of those households’ earnings than those of the wealthiest. The states do not tax personal income.

“He taxes low-income workers more than we tax millionaires and billionaires in the state of California,” Newsom said of Florida Gov. Ron DeSantis, during a 2023 debate hosted by Fox’s Sean Hannity.

Critics say those arguments don’t take into account the lower costs of goods and property in other states.

“California is a high-tax state,” said Jared Walczak, a senior fellow at the right-leaning Tax Foundation. “A state like California can get away with higher rates than some other states because the state has so much to offer. … It doesn’t mean there isn’t a tipping point.”

Now nearing the end of his term, Newsom is touting all the progressive programs California’s tax system has made possible, including universal school meals and subsidized child care.

At the same time, Newsom often chides more left-wing colleagues in the Legislature “not to be profligate” with public spending. He touts that he’s never raised taxes in his eight years as governor, though critics may quibble over limiting businesses’ tax deductions or a law he signed this month raising a tax on health insurance plans.

When Democratic lawmakers pushed to raise new revenue in the face of budget deficits the last three years, he quickly quashed the idea.

“We have among the highest tax rates in the United States of America for high-wage earners, we have among the highest tax rates … for corporate taxes,” he said in 2024. “I feel strongly that we have to live within our means.”

This year, some Democrats insisted on a proposal to tax corporations whose workers earn so little that they qualify for public healthcare; Newsom would agree only for the state to study the idea.

‘He’s never banged this drum’ 

He’s taken a similar stance with the state billionaire tax. Along with a cadre of Democratic allies like Planned Parenthood, he argues that billionaires could easily move their assets to another state — as some, like Google co-founder Sergey Brin, have done with their homes and businesses. Early polling shows a slim majority of Californians support the measure.

Newsom pressured SEIU United Healthcare Workers West to drop the measure in exchange for concessions, but when he didn’t succeed, he pivoted to proposing his own federal billionaire’s tax, taking a page from progressives like Elizabeth Warren.

He’s calling for a minimum tax rate on anyone making more than $100 million, undoing corporate tax cuts that President Trump and Congress approved in 2017, boosting inheritance taxes and closing loopholes used by the wealthy to borrow from unrealized capital gains without paying income taxes.

Gov. Gavin Newsom speaks during a news conference in Hayward on March 2, 2026.

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Manuel Orbegozo

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CalMatters

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Without getting into details, he also said he supports the idea of a public fund using AI-derived wealth to support displaced workers.

Rob Stutzman, a Sacramento Republican strategist, said Newsom risks being seen as inauthentic in a primary campaign.

“He’s never banged this drum … he’s a big spender but not a big taxer,” Stutzman said. “This whole jiu-jitsu he has to do to oppose the (billionaire) tax in his state and then support it federally, it doesn’t sound as authentic as others might sound on the soapbox at the Iowa State Fair.”

Voters are anxious about AI

The call for sharing wealth also opens doors for anti-tax attacks from the right, which is eager to link a wide swath of Democratic policies to communism.

“Most Democrats have the foresight to tie their tax hikes to a far-left policy, but Newsom just wants to take your money because he wants to take your money,” Republican National Committee spokesperson Nicholas Poche said in an emailed statement, criticizing Newsom for trying to “have it both ways with progressives and establishment Democrats.”

But political strategists agree that framing tax proposals as a response to AI anxiety is appealing across the ideological spectrum.

“A wealth tax is more simplistic and falling along ideological lines,” Liao said. “If we’re talking about broad societal change, it is much more than wealth redistribution. It is something that’s going to touch every single person.”

More than half of Americans worry the technology will leave someone in their household jobless; a growing sense of precarity has seized workers from customer service representatives to Silicon Valley’s own elites. Meanwhile, the upcoming public offerings of AI companies like OpenAI and Anthropic are expected to turbocharge the nation’s already unequal distribution of wealth. The top 10% of the country owns nearly 70% of its wealth, and the bottom half own just 2.5%.

Former Chicago Mayor Rahm Emanuel, known as a moderate Democrat, is floating more aggressive regulations on the technology as he weighs a run for president and is open to basic income payments for displaced workers. Progressive standard-bearer U.S. Sen. Bernie Sanders is proposing a national sovereign wealth fund paid for with a 50% tax on AI companies that would directly pay Americans, making the nation essentially a part owner of AI.

Even Vice President J.D. Vance is considering the issue, telling a podcaster last month that his biggest concern about AI is not mass unemployment but the breakup of “social harmony” that comes with increasing inequality.

“If you make rich people way richer, you are going to have significant problems,” he said. “That is one of the consequences that I see from AI.”

He added that Trump is generally supportive of Sanders’ idea, though the president also has developed cozy ties with many tech leaders during his second term.

But many progressives are holding their applause for Newsom for now. Lorena Gonzalez, leader of the California Labor Federation, said she’s pleased he is taking on AI-driven inequality, but unions still want the state to curb AI in workplaces and stop mass displacement of workers. Newsom has been reluctant to back aggressive regulation or bans on the technology.

Flanked by labor leaders in important presidential primary states earlier this year, Gonzalez warned the governor that unions could withhold their political support if Newsom does not rein in use of the technology.

“It’s not enough to say, ‘I feel your pain,’” Gonzalez said. “We don’t think that catastrophic job loss is inevitable.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.

As California officials try to block immigration facilities across the state, the Trump administration is deploying a new strategy to secure detention capacity on the West Coast. It’s buying up the real estate outright.

The Department of Homeland Security’s $1.5 billion purchase of the Otay Mesa Detention Center and the California City Detention Facility from the private prison company CoreCivic is a direct response to the state’s political resistance to new and existing ICE detention facilities, government officials said.

Immigration and Customs Enforcement spokesman Jason Sweeney said in a statement that California detention centers are “crucial to ICE’s detention network on the West Coast.”

“Unlike in states like Florida and Oklahoma, ICE can not rely on local state and county partners for detention space in California,” Sweeney said. “The state’s sanctuary politicians continue to push legislation to outlaw or make private prisons financially infeasible.”

The conflict dates to the last Trump administration, when California Democrats raced to adopt policies that would counter his first deportation push.

Gov. Gavin Newsom in 2019 signed a law aiming to phase out all private for-profit prisons and immigration detention centers by 2028. Private prison operator GEO Group and the federal government sued, arguing the law violated the Supremacy Clause of the Constitution, which bars states from interfering with federal authority. They won, with the 9th Circuit Court of Appeals in 2022 striking down the ban on privately run immigration detention facilities.

Since then, California lawmakers have pushed newer measures, such as imposing heavy taxes on private detention centers to make them financially unviable.

The federal government’s purchase of CoreCivic properties comes in the middle of a showdown between California Attorney General Rob Bonta and the Trump administration over the controversial construction of new ICE offices near Gilroy, a former farm town south of San Jose. The city has grown to about 60,000 people and is ringed by garlic fields and vineyards in south Santa Clara County.

The state argues the land has been designated exclusively for agricultural uses since 1967.

“ICE’s plans to construct a facility near Gilroy violate multiple federal laws,” said Bonta, arguing ICE failed to examine the potential environmental consequences before beginning construction.

Federal contracting records show in 2025 the General Services Administration leased the property for 20 years from Beverly Hills-based ECG 6 LLC for a total of $26.5 million.

The federal government agreed in July to pause construction on the 26-acre site while the lawsuit proceeds.

California officials are using another law dating to the first Trump administration to demand entry and inspect detention centers. Bonta sent a letter to the Department of Homeland Security in December highlighting “dangerous and inadequate living conditions” at the California City Detention Facility. In San Diego County, local health inspectors are in a legal feud with CoreCivic over inspections of the Otay Mesa center.

Selling the properties to the federal government likely will shield them from California health inspections, said Claire Trickler-McNulty, who was a senior ICE official in the Biden administration.

“It gives them protections from state and local laws, especially from zoning and environmental requirements,” Trickler-McNulty said.

Sales reveal a new strategy

A year ago President Trump signed a spending bill with a huge windfall for immigration enforcement. It gave ICE $45 billion for detention capacity, and the administration had a plan to build new sites all over the country.

The purchases of Otay Mesa and California City mark a significant reversal, according to Aaron Reichlin-Melnick, a senior fellow at the American Immigration Council.

That plan, laid out in early 2026 in a document known as the ICE Detention Re-engineering Initiative, centered on converting warehouses into mega-centers designed to hold 7,500 to 10,000 people — each larger than any correctional facility built in the U.S. since Japanese internment during World War II.

Reichlin-Melnick described the system as one that was never thoughtfully planned out. Todd Lyons, then-acting director of ICE, at the 2025 Border Security Expo in Phoenix said he wanted deportations to run “like [Amazon] Prime, but with human beings.”

“At no point did anyone sit down to intelligently design the ‘Amazon Prime for human beings,” Reichlin-Melnick said.

The Detention Re-engineering Initiative has largely collapsed, undone by lawsuits, an unrealistic timeline, and national shortages of correctional staff and prison healthcare workers, Reichlin-Melnick said.

But that leaves billions of dollars that ICE needs to spend before the money expires.

“We expect them to buy other facilities,” said Reichlin-Melnick.

One former senior Department of Homeland Security official said conditions for immigrant detainees in ICE-owned facilities could be an improvement.

“ICE taking over an actual facility is maybe better than warehouses or putting people in soft-sided facilities or the privately run facilities,” he said.

A detention officer waits outside the main entrance of the Otay Mesa Detention Center in San Diego on Feb. 20, 2026.

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Adriana Heldiz

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CalMatters

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Prices eclipse assessment rolls

County assessor records show the federal government paid a premium on the real estate. In San Diego County, the Otay Mesa property’s assessed value for the current tax year is $164.9 million. DHS paid $739.2 million for it, or about 4.5 times the assessed value. In Kern County, the California City facility was assessed at $171.5 million; DHS paid $732.6 million or 4.3 times the figure.

A former senior ICE official, who spoke on condition of anonymity because they were not authorized to discuss the matter publicly, questioned whether the price tag matches the actual security need. “So, $1.5 billion just for the facilities and how many migrants are ever going to come in and out of there who are national security and public safety threats? The people that we actually do need to keep off the streets,” the former official said.

A spokesperson for Gov. Newsom, Anthony Martinez, called the administration’s deportation agenda a “reckless and cruel misuse of taxpayer money,” and accused the federal government of pouring billions into contractors while avoiding transparency over conditions inside their facilities.

San Diego County Supervisor Paloma Aguirre connected the purchase directly to CoreCivic’s political spending, noting the company’s $500,000 donation to the Trump’s inaugural committee. That preceded what she called a “billion-dollar taxpayer-funded windfall” that will help erase the company’s debt while letting it continue running the facilities. She said the arrangements treat detained immigrants as revenue streams rather than people.

CoreCivic said the “valuations for the facilities were established through the federal government’s required appraisal process, which is designed to determine objective fair market value.”

“CoreCivic has contributed to presidential inaugural events across multiple administrations, including Democratic ones. The federal appraisal process is conducted independently of any political contribution,” said Steven Owen, the vice president of communications for CoreCivic.

He added that under California law, the assessed values of the properties may differ greatly from their market value. He pointed to California’s Proposition 13, which prohibits most property reassessments outside of sales.

“California's Prop. 13 limits annual increases in assessed value, which means assessed values for commercial properties can diverge significantly from current market value over time. The two figures are not directly comparable,” said Owen.

The company also expects to earn $130 million a year to run the California City detention center, according to its filing with the Securities and Exchange Commission.

Will feds buy more detention centers?

What’s next? Former ICE official Trickler-McNulty said the abandoned plan to buy 24 warehouses under former Homeland Security Secretary Kristi Noem could hold some hints to the agency’s plan under Secretary Markwayne Mullin.

An internal roadmap obtained last year by the Washington Post reveals at least 10 “turnkey” facilities originally targeted under Noem.

They include the California City facility, but not Otay Mesa. The rest of the facilities are in Texas and Oklahoma.

The purchase of an immigration detention facility eliminates risk for both the private prison companies and the Trump administration’s deportation program, said R. Andrew Free, an immigration lawyer and writer, pointing to divestments California’s two biggest pension funds made from CoreCivic and GEO Group in 2019 that contributed to the companies’ spiraling liquidity crunch and cratering stock prices five years ago.

If private prison investments become politically toxic on a national scale, Free said, federal purchases of the detention facilities safeguard the companies and the detention space itself from divestments and the kind of environmental reviews that have ended similar projects in other states.

“This is a big upfront cash award from the federal government,” Free said.

Local governments and the state will be essentially locked out of the facilities, but will still have some contact with the people inside, Free said.

The detention centers are “still going to need police and fire, they’re still going to need coroners,” Free said, but noted that the majority of traditional inspections from the state are probably over.

Free said there are two ways to look at ICE’s detention expansion. One is, to him, optimistic: They’re simply gifts from a friendly government to their valued contractors. The other is more cynical.

“The cynical view is this definitely will be used to hold people who are not migrants,” Free said. “That it will be used to hold U.S. citizens.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.