By admin 
In 2022, looking to address its worsening homeless crisis, Sacramento officials loaned a major homeless nonprofit $2.9 million to build affordable housing in south Sacramento.
Read more Citation: Open alcohol bottle found in Tony Romo’s vehicle
Four years later, construction still has not started.
Under increasing pressure to reduce the city’s rising homeless population — which at the time, was larger than San Francisco’s — approved the loan to Santa Monica-based Step up on Second. The plan was for the nonprofit to buy a vacant lot at 2571 Fruitridge Road, then partner with Lennar Foundation, the charitable arm of a national home builder, to construct 100 to 125 units of affordable housing for homeless individuals and families, that would also include mental health and medical services.
Under Step Up’s contract with Sacramento, the units were to be fully leased by July 2024, or the city could put the loan in default and foreclose on the property.
But two years after that deadline, construction still has not begun — and the city has not taken any action to demand the money back or take control of the property.
Not the only failed Step Up project
Step Up is one of the city’s main contractors for homelessness, and a significant player in the city’s strategies to reduce the unhoused population. Since 2021, the city has paid the nonprofit nearly $20 million to address homelessness. Only two other homeless nonprofits have received more city money for the unhoused in that timeframe.
Most of Step Up’s contracts with the city are to provide services to the homeless, including running case management at the city’s motel housing and River District shelters. The loan appears to be the only time Sacramento has contracted with Step Up to construct housing.
But the Fruitridge project is not the only time Step Up has accepted public funds to build homeless housing that never materialized.
In January 2024, Attorney General Rob Bonta, on behalf of the Department of Housing and Community Development, sued Step Up, along with another development partner, Los Angeles-based firm Shangri-La, alleging that the state had given the two entities over $100 million through Project Homekey to convert seven motels into homeless housing in central and Southern California, but that the housing was never constructed.
A bankruptcy filing for Shangri-La, reported by the Los Angeles Times, said that $2.7 million that the state gave to convert one of those motels, in Salinas, actually went into Step Up’s coffers because the nonprofit needed an infusion of cash and had asked the developer to buy out its interest in the project.
Step Up in October paid $3 million to settle the suit with the state.
In Sacramento, Step Up had planned to work with a different development partner, the Miami-based Lennar Foundation to develop the Fruitridge property, according to city records.
After securing the $2.9 million city loan, Step Up in January 2023 purchased the property from a private owner for about $2.6 million, according to county records.
Construction of the complex has not yet started, and the lot sits vacant.
Step Up CEO Tod Lipka told The Bee that the nonprofit still plans to move forward with the project, but did not provide more details, including to questions about whether Step Up has secured any additional financing outside of the city loan, or if Lennar is still involved.
“Step Up and the city agreed early on that we wanted to try an alternative approach to this housing project,” Lipka said. “We are still proceeding on that path in conversation with existing and new partners with the same goal of a substantial number of units, all for very low income. And we are exploring all funding paths to accomplish that.”
Read more UFW surveys undocumented farmworkers about immigration raids. How were they affected?
“Developing housing projects is a very complicated endeavor,” he added. “They require layered funding from multiple sources. This takes significant time, measured in years. That’s why housing projects typically take up to seven years to develop.”
Lennar Foundation representatives could not be reached for comment.
City could control of the land
Sacramento Mayor Kevin McCarty said he wants the city to consider taking control of the property.
“This is a serious revelation, and we will look at it seriously,” McCarty, who became mayor in December 2024, said last week, after first learning of the city’s loan to Step Up from The Bee. “We need to get people off the streets into shelter and housing so we can’t squander any resources we have.”
“We need to focus on what our next steps are,” he added. “Having some real concrete deliverables for this entity or potentially take the land back and pursue other options.”
Council member Caity Maple said she was aware of the project but did not know it was supposed to be built and occupied by 2024.
“I want to praise the people who tried to make this vision work,” said Maple, who represents south Sacramento, where the Fruitridge development would be located. “Sometimes there are factors beyond our control. But we need to be clear eyed that these are taxpayer dollars.”
Maple, who joined the council several months after the loan was approved, said in the coming months she wants the council to consider telling Step Up to repay the loan. If Step Up does not agree to repay it, she wants the city to take control of the property.
“I will be very involved to make sure we have a resolution quickly because it’s already been too long,” she said.
Developer John Vignocchi, who closely follows affordable housing projects in the city, said it’s unusual for the city to be the first one to provide capital, before a project gets a larger chunk of capital from another source, such as grants or tax credits from the state or federal government.
He agreed with Maple and McCarty the city should get its money back, especially given the recent settlement.
“The challenges (Step Up is) having down south makes everything they’re doing look suspicious,” said Vignocchi, co-founder of Urban Capital, which secured a $32 million state grant for affordable housing last week. “I don’t wanna rush to conclusions but it’s eyebrow raising. Step Up has issues with their reputation now.”
Read more Washington requests California’s assistance to fight ‘unprecedented’ fire season