Riverside City Council voted 4-3 Tuesday night to reject a $20.1 million state grant that would have converted the Quality Inn at 1590 University Ave. into 114 studio apartments for homeless and low-income residents, sending the funding back to Sacramento after more than 90 minutes of public comment and heated debate.
Councilmembers Philip Falcone, Steven Robillard, Chuck Conder and Sean Mill voted against the project. Clarissa Cervantes, Jim Perry and Steve Hemenway voted in favor.
The project, proposed by Riverside Housing Development Corporation, would have converted 114 motel rooms into studio apartments—94 permanent supportive housing units for people with documented mental health or substance use challenges and 20 affordable units. Units would have remained affordable for 55 years.
The rejection ends what would have been Riverside's largest permanent supportive housing development. The $29.7 million project—branded University Terrace Homes—had received one of five Homekey+ awards announced by Gov. Gavin Newsom in December.
Mill argued that providing housing without addressing underlying mental health or substance abuse issues fails to help people. "Housing First has failed," he said, calling the model "housing stabilization without human stabilization."
Cervantes, whose Ward 2 includes the project site, made an impassioned case for approval, noting she lives half a mile from the property.
"We are not in a position to say no to over $21 million of state grant funding when we are tightening our budgets," she said. "This is fiscally responsible and morally imperative."
Bruce Kulpa, RHDC's CEO, emphasized his organization's 35-year track record managing 1,300 affordable units in Riverside County.
"These are apartments, not a shelter—can't stress that enough," Kulpa told council. "Residents of these units will not be a source of trouble in the neighborhood."
Kulpa also challenged the business community's framing, arguing the city already pays an economic price for inaction.
"There is already an ongoing negative economic cost to Riverside due to the perception that we are not adequately addressing the homeless problem," he said.
He promised 24/7 security, six on-site case managers and zero tolerance for disruptive behavior.
Robillard, who voted against the project in May and again Tuesday, questioned whether the Housing First approach delivers results.
"If the need were as urgent as described, we would not be seeing service acceptance rates hovering around 5%," he said. "That tells me the challenge is not simply the number of units—it's engagement, accountability, and whether this model is delivering the outcomes we want."
Robillard added that Riverside "continues to shoulder a disproportionate share of the permanent supportive housing for the region."
Perry, who supported the project, pointed to RHDC's track record in his ward, where the organization took over troubled apartment complexes and transformed them.
"It went from a war zone to a place that is clean, that is safe, and actually not only has a waiting list, has a very long waiting list," Perry said. He moved to approve the project, with Cervantes seconding.
Retired Judge William Bailey Jr., a lifelong Riverside resident and Salvation Army Advisory Board member, also spoke in support.
"One of the few good things that's come out of Sacramento in recent times was this amendment to the constitution approved by the voters, which requires this housing," Judge Bailey said. "We need affordable housing for senior citizens...but especially for homeless."
The Quality Inn has generated more than 160 police calls from January 2024 through October 2025. Supporters argued the conversion would reduce problems; opponents said changing the use doesn't guarantee better outcomes.
Business owners near the site, including the Bailey family who invested $15 million in the nearby Farmhouse Collective, spoke against the project.
"Our family believed in the vision of Riverside," Beverly Bailey told council. "Is this something that is just a bandaid or is this a vision for our city as a whole?"
Brent Sherman, regional manager for University Village Shopping Center, also opposed the project.
"My opposition is to this specific siting and scale," Sherman said. "114 units with 94 units of permanent supportive housing for individuals with behavioral health challenges placed on a major gateway corridor directly next to student housing and active small businesses."
Housing and Human Services Director Michelle Davis told council that 312 individuals are currently prescreened for permanent supportive housing on the city's coordinated entry waitlist, with 219 awaiting placement. Of those, 68 are 55 or older.
Mill also questioned RHDC's eviction standards. Miranda Hundley, the organization's vice president and COO, confirmed that three lease violations—regardless of the type—would typically trigger eviction proceedings.
Citing the Quality Inn's police call history, Mill called for immediate action against the current operator.
"I'd recommend tomorrow morning that we start the process to go after the Quality Inn just like we've done the motels along Magnolia," he said, referencing the city's enforcement efforts against problem motels on another corridor.
Mayor Patricia Lock Dawson, who cast the deciding vote to authorize the Homekey+ application in May, expressed frustration before the vote.
"I don't want to do this again where we fight over money that's coming to us from the state for a project that is a good project that may not be in the best location," she said. "I don't know if that's true or not. But when we do these types of projects, it has to be community-led and community-supported."
The city had until January 16 to sign the state's acceptance of terms. The $20.1 million Homekey+ award will now return to the California Department of Housing and Community Development.
The city's $9.5 million in committed local funds was also tied to the project, and staff warned some face expenditure deadlines in the coming months.
