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Modesto approves Homekey Plus award for El Capitan motel conversion and accepts FY 2026–27 HUD allocations
Summary
The council accepted a Homekey Plus award of roughly $18.69 million and authorized a $3.0 million CDBG loan and related agreements to convert El Capitan Motel into 48 permanent supportive housing units; the council also accepted HUD annual allocations totaling about $2.816 million and advanced other affordable-housing pipeline projects.
The Modesto City Council on May 12 approved multiple funding actions to expand affordable and supportive housing, including accepting a Homekey Plus award and the city’s annual HUD allocations.
Jessica Hill, director of community and economic development, told the council the Homekey Plus award would support acquisition and rehabilitation of the El Capitan Motel at 1121 Needham Street, converting the site into 48 permanent supportive housing units (24 targeted to veterans and 24 for people with behavioral-health needs) plus one on-site manager unit. "We're looking to do a motel conversion into 48 units of permanent supportive housing," Hill said, adding the city anticipates pre-development and escrow closing in June 2026 and a 12-month construction schedule with full occupancy projected for fall 2027.
Hill walked the council through the financing: the overall project is roughly $23 million, including just over $18.6 million in the Homekey award, a recommended Community Development Block Grant (CDBG) loan not to exceed $3,007,163, $500,000 from Stanislaus County Behavioral Health and Recovery Services, a Stanislaus County Community Services Agency award of $922,837, and developer contributions. Hill said the city will target supportive services partners including the VA, Behavioral Health and Recovery Services, and Catholic Charities.
Council voted unanimously to accept the Homekey award and related grant and loan agreements and to amend budgets as needed. Council member Wright praised staff for aggressive pursuit of state and federal funds, saying the city had successfully secured large sums for housing projects in recent years.
Separately, staff presented the FY 2026–27 HUD annual action plan and an entitlement allocation totaling roughly $2,816,391 (approximately $1.8 million in CDBG, $166,000 in ESG, and about $790,000 in HOME funds). The action plan identifies project allocations including El Capitan (the CDBG loan noted above), Seventh Street Village (a partnership with Visionary Home Builders with $2 million CDBG and $5 million HOME), McClure Meadows (ARPA-supported, 38 single-family units for first-time homebuyers), and Morris Village (a proposed 45-unit affordable project under development).
What happens next: With council authorization staff will proceed with escrow and pre-development for El Capitan, continue grant agreement negotiations, and incorporate public comments into HUD action-plan submission. Construction for El Capitan is expected to begin after escrow closes and proceed for about 12 months.
