Winston-Salem leaders touted a motel conversion project as a solution to homelessness. Now delays and lawsuits are raising questions about its future

This week the city of Asheville pulled the plug on a long-awaited project to convert a motel into housing for people experiencing homelessness. The move came after the partner organizations managing the project were named in a multimillion-dollar lawsuit.

Winston-Salem has been attached to a similar project with the same partners since 2022. And city leaders say that partnership stands, despite repeated delays. 

“An outstanding idea”

When city staffer Marla Newman made the initial pitch to the Winston-Salem City Council in October of 2022, it sounded pretty ambitious. 

“So with this particular partnership, we have the opportunity to reduce our homeless population by approximately a third,” she said. 

The plan was for nonprofit Step Up America to work with a partner, in this case Shangri-La Development, to purchase a motel and convert it into permanent supportive housing for the city’s most vulnerable residents. It would likely only take a year, Newman said. And the city would just be responsible for covering the costs of the support services for residents once the renovation was done. 

City leaders were sold. They signed on to give them $2.2 million in COVID relief funds to support the project once it was completed. 

Fast forward to September of 2023. That one-year deadline had nearly passed. A city staffer told council the new timeline for completion was between June and September of 2024, but that the developer had zeroed in on a property on Peters Creek Parkway. Councilmembers appeared unfazed by the delays.

“What they do is a model that they have done all over the country," said Councilmember Jeff Macintosh. "They know how to do it."

Councilmember Barbara Hanes Burke was also optimistic. 

“I think this is an outstanding idea,” said Burke. “And we need to find more hotels throughout the city so that we can increase the number of beds so that we can have more opportunities to take care of our citizens.”

Months later though, it appears that progress still hasn't been made. The motel that city staffers said Step Up was eyeing for the project is continuing to accept bookings. And a call to the hotel’s front desk seemed to confirm that no renovation is in the works.

Legal challenges emerge

Before their work in Winston-Salem, Step-Up and Shangri-La were awarded $114 million by the state of California to convert motels into housing for the chronically homeless as part of the state’s Homekey program. 

Reporting from public radio station KCRW revealed that four of the seven Shangri-La Homekey projects are empty and unfinished. On Tuesday, Blue Ridge Public Radio reported the state of California filed a $100 million lawsuit against Step Up and Shangri-La, alleging that the two companies violated contracts and failed to pay contractors, among other things. 

A spokesperson for the California Department of Housing and Community Development told BPR it “will continue to make every effort to ensure Homekey dollars go toward housing individuals experiencing homelessness, and not enriching developers.”

Shangri-La and Step Up did not provide comment on the matter to WFDD.

Local stakeholders react

The companies’ legal troubles were news to Kevin Cheshire, the director of the Housing Authority of Winston-Salem (HAWS). Cheshire says HAWS had taken steps to solicit housing vouchers for residents of the new complex, but didn’t receive a response from Step Up and the deadline ultimately passed. 

“And I reached out to city staff several times to see if city staff could find out where things stood with Step Up. And I know that city staff did make attempts to reach out, but I never heard anything back.”

Cheshire says he’s disappointed because they invested time in the project. 

“And just the frustration of not getting a deal done that you wanted to get done,” he says. “Because we need it, right? I mean, we need the housing and it sounds like a good concept. So I hate that.”

Representatives for the city of Winston-Salem declined to be interviewed for this story.

In an emailed statement, Assistant City Manager Patrice Toney said she wasn’t aware of the lawsuit filed against Shangri-La and Step Up, or Asheville’s decision to end its partnership. 

“We will need to discuss this with our city council members and determine the city's next steps related to this project,” the statement said. “The need for permanent supportive housing for our unhoused population still remains an issue for our community and we will continue to actively look for solutions to address this need.”

Several other North Carolina cities also signed on to motel conversion deals with Step Up, including Greensboro.

A spokesperson for Greensboro’s housing department said their project also remains unfinished. 
 

*Correction: An earlier version of this story misattributed a quote by Councilmember Barbara Hanes Burke to Councilmember Annette Scippio.