Step Up On Second, a once-prominent nonprofit in homeless services, is now embroiled in controversy due to the failure of multiple housing projects. The organization was instrumental in shaping California’s Project Homekey, an initiative aimed at converting old motels into affordable housing for the homeless. In partnership with real estate firm Shangri-La Industries, Step Up secured over $114 million in state grants to carry out seven motel-to-housing conversions across the state.
However, the projects quickly ran into financial trouble. The properties went into foreclosure, leaving some vacant and incomplete. In response, the state of California has filed a lawsuit against both Step Up and Shangri-La, demanding the return of the grant money. The lawsuit accuses both organizations of fraud and breach of contract, casting a cloud over what was once seen as a highly promising initiative.
Step Up’s president, Tod Lipka, has denied any wrongdoing, shifting blame to Shangri-La for mishandling the financial side of the projects. According to Lipka, Step Up’s role was limited to providing tenant services and property management, while Shangri-La was responsible for acquisition, financing, and construction. Despite these defenses, Step Up has seen its expansion plans stall, with cities in North Carolina and Colorado cutting ties with the nonprofit in light of the financial fallout.
Step Up’s rapid growth and high-profile partnerships with for-profit entities like Shangri-La have led to concerns about its leadership and decision-making. While the organization’s initial mission focused on supporting the homeless through direct services, its recent troubles have raised questions about whether its partnership with a commercial developer was the right move. Lipka himself has come under scrutiny, with some insiders pointing to his alignment with Shangri-La’s luxurious lifestyle as a potential distraction from the nonprofit’s mission.
As the lawsuit unfolds, Step Up faces significant challenges in restoring its reputation and ensuring that the failed projects eventually provide the affordable housing they were meant to create. This case highlights the complexities and risks that can arise when nonprofit organizations engage in large-scale development projects without adequate financial safeguards.
