Conversion of SLO Motel 6 into affordable housing hits an unexpected hurdle
The opening of a San Luis Obispo affordable housing project slated to open late last year was pushed to late 2026 after serious infrastructure issues were detected in the building — nearly doubling its original budget.
In early 2024, affordable housing developer People’s Self-Help Housing received a $17.4 million Project Homekey grant to convert the Motel 6 and 1433 Calle Joaquin into 70 units of permanent supportive housing, a form of affordable housing that supports long-term homelessness recovery and prevention with case management and other services.
But People’s Self-Help Housing CEO Ken Trigueiro said while the planned renovations of the Motel 6 that reshaped the building’s facilities and living spaces from the motel format into full-time living spaces were successful, serious flaws with the building were discovered midway through the renovation.
“All the plumbing systems really needed to be replaced, the sewer system needs replacement and the electrical system really needed upgrade — with all the new standards of demand for electricity, it’s really not enough,” Triguiero said. “We’re doing all that work now, in addition to adding a couple more units too — that was a good thing — and we’re adding more common areas and community space, so it’ll be a much more robust project and much better condition, and it’ll last a lot longer.”
Between a full replacement of the motel’s plumbing, sewer and electrical systems, the project is now facing around $19 million in total repairs — doubling the original price to a total of $38 million.
“Sometimes you open the walls, and you discover a lot more than what you’re expecting,” Trigueiro said. “We had a pretty short escrow on this one, and so we didn’t get to do a whole lot of investigations.”
Project costs balloon by $19 million
While the original refit of the Motel 6 required $17.4 million in Homekey funding to get off the ground, it wasn’t the only source of funding attached to the project.
People’s Self-Help Housing received $400,000 of matching affordable housing funds from the city of San Luis Obispo for the project, while Wells Fargo committed $150,000 in Homekey Accelerator funds.
San Luis Obispo County committed $2.6 million in capital and operational funding to the project, while the Balay Ko Foundation, a Los Angeles-based private donor, provided another $800,000 in gap funding.
Rolled together, that’s around $4 million of additional contributions, on top of the $17.4 million Homekey grant to cover the original purchase and refit.
It also received project-based vouchers — which keep units affordable long-term — from the Housing Authority of San Luis Obispo to the tune of $1.152 million annually, for a 15-year term starting in the fourth year of the project.
Just purchasing the property without any improvements cost around $14 million, while the repairs made up the rest of the original funding total, Triguiero said.
Now, People’s Self-Help Housing is assembling the $19 million required to gut and refurbish the building’s infrastructure from private investors through the low-income housing tax credit program.
By the end of work on the most recent renovations, more than $41 million will have been spent on the project.
Low-income housing tax credits are awarded by the state housing finance authority to developers each year, which can then be sold to investors as a means of securing immediate funding for their projects, while investors can use the credits to reduce their federal tax liability.
Triguiero said People’s Self-Help Housing has already been awarded the credit, and is currently working through the financial closing process with an investor, with funding expected within the next month.
“This probably won’t be done until about the end of this year,” Triguiero told The Tribune. “We’re going to have to really tear up the ground and the pavement and some of the exterior sections so they can replace the electrical system, so it’ll take a while, but it’s going to be really in good shape thereafter.”
