Motels no more: Influx of affordable housing planned on troubled Tacoma corridor
On a South End Tacoma commercial corridor in an economically distressed area where crime has unnerved businesses and neighbors, a $30 million market recently sprung up.
The product is real estate. More specifically, motels.
Five former motels on South Hosmer Street have been sold since June 2021, with each now poised to transition into low-income housing, according to interviews, property records and an online listing.
They include the Econo Lodge, the site of two homicides this year — one after it sold — and the Howard Johnson, the site of another. The corridor’s two other homicides in 2022 occurred at other lodging establishments not sold. The violence has underscored broad concerns from area businesses and neighbors about the street’s safety.
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The recent sales may not be the last along the corridor, with other motel and hotel owners reportedly considering whether to unload their businesses in moves that could change the landscape of the street, according to Emily Hubbard, a co-owner of Sage Investment Group, which purchased the Econo Lodge in March.
“Everything’s for sale,” she said.
Over the next 18 months, Hubbard expected most of the corridor’s lodging establishments to change hands and likely be converted into affordable housing, adding that owners wanted to move on because they did not know what to do about crime. Due to the relatively small market for such sales, she said, the properties are unlikely to be publicly listed, meaning the deals will happen under the radar.
While one motel owner told The News Tribune that they were unsure of future plans, Councilman Joe Bushnell, whose district covers South Hosmer Street, said another hotel owner informed him that they were weighing a sale.
Bushnell called the currently known influx of planned affordable housing “a better outcome than just leaving them as hotels or motels.”
“When you have something that has a little more permanence to it ... that helps create stability for working people and families that need low income,” he said.
But Bushnell also expressed concerns over bringing longer-term residents into the high-crime corridor. And he also worried that community resources were inadequate to handle an over-concentration of low-income housing on the street, preferring to see that “sorely needed” housing spread out across the city as he called for bold investments in mixed-income dwellings, infrastructure and other projects, such as parks, to improve the corridor’s walkability.
Millions of dollars of real estate changes hands
Before June 2021, the 1.5-mile-long commercial strip held 13 of the city’s then-licensed 26 motels or hotels. Since then, the Howard Johnson, American Lodge, Travelodge, Comfort Inn and Econo Lodge have been unloaded by former owners.
The Howard Johnson, the first to go, was purchased for $4.8 million in June 2021 by two limited liability companies connected to Seattle-based Integrated Property Management, according to Pierce County property records. The company also bought the American Lodge and Travelodge for $8.2 million the following month, property records show.
While the company did not return messages seeking comment on its plans, each of the three motels it purchased now have multi-family apartment designations and the American Lodge and Travelodge were being marketed online to investors as 142 potential 210- and 280-square-foot studio apartments.
The project is being advertised to prospective new buyers for $14.2 million.
“With current lack of affordable housing supply, this property is positioned to benefit from conversion to multifamily,” the listing read on Compass, a real estate platform.
The Comfort Inn was bought in October for $8.8 million by the affordable housing developer, Low Income Housing Institute, with assistance from the city and two other local jurisdictions. Already a temporary homeless shelter, the site is planned to be converted into 80 permanent affordable housing units in 2024, according to LIHI.
In March, Kirkland-based Sage Investment Group bought the Econo Lodge for $8.7 million, records show. The company is in the process of converting the former motel into studio or one-bedroom apartments, with a target of opening by the beginning of next year, according to Hubbard.
Property records show that the motel was built with 105 units across seven total buildings, excluding an office.
South Hosmer Street: A ‘very low’ equity area
The immediate area that encompasses South Hosmer Street is economically struggling, part of a wider disparity that is visible throughout Tacoma, where equity is much higher in the city’s northwest and northeastern parts and mixed or lower elsewhere, according to the city’s equity index map.
Sixty-three percent of households have a median income of at least $35,000, which is 11 percentage points less than the city average, the equity index showed.
Thirty percent of area units are occupied by owners, compared to 53 percent across Tacoma, and only a quarter of area residents have year-round access to healthy food, while the city average is 75 percent.
Beyond being attractive to investors for the speed in which they can be stood up, hotel and motel conversions can assist with shortages of affordable housing, Hubbard said. In 2019, the city lacked an estimated 12,000 affordable units for the lowest-income households, according to a June 2021 city-commissioned report by Root Policy Research.
Hubbard also said the company had not overlooked the street’s current problems, namely because they have faced them: Contractors were shot at and so, too, were surveillance cameras that the company set up, she said.
Asked how the company could assure that residents would be safe on a site that sees frequent illegal activity, Hubbard said that the company had been working with law enforcement to try to drive out bad action from the property and has on-site security measures.
“When it is ready to take on tenants, it will not be in that state of fear,” she said, adding that the company has experience turning around high-crime hotels.
When the Econo Lodge sold, it represented at least one instance in which a transaction was prompted by concerns over criminal activity.
A woman, reached on a number that records indicated was associated with the Econo Lodge’s previous ownership, Tacoma Hotel Motel, LLC, said they decided to sell the motel because it was unsafe and they were frustrated with crime.
Tacoma Hotel Motel LLC also owns the adjacent Quality Inn & Suites. The woman, who declined to give her name, said she was unsure of their plans for that property.
“To be honest, we have looked at every other option possible,” said Tami Rasmussen, regional manager for the Quality Inn.
Lifeline to the most vulnerable
Bushnell said there was “no doubt” that certain lodging establishments were contributing to escalating crime on the corridor but not by their own doing: He blamed drug dealers for exploiting people with addictions, which he said invited other illegal activities.
“Those hotels, in a lot of instances, are the final step before someone is on the street,” Bushnell said, suggesting that the properties were a lifeline to the most vulnerable.
It was evident in early July in the case of 93-year-old Evelyn Horton, who was living in an Econo Lodge motel room four months after it sold. Much of the surrounding property was boarded up and Horton, who lived with her granddaughter and others, said they had no hot water and she had not been able to bathe in some time.
Hubbard said that the Econo Lodge had about a dozen rooms with occupants who the company could not immediately evict due to pandemic-era rules — issues that were also reported by other lodging establishments.
Taran Johal, 29, manager at the Rothem Inn, which has faced problems with unruly visitors and guests, said that his family had no plans to sell. But like Bushnell, he believed that more housing diversity was needed to bring meaningful progress to an area where he grew up.
“I hope the neighborhood changes,” he said.
