Councilmember highlights Prop 1 local impact, city efforts on sober living homes

By SARA HALL

During a community forum this week, an elected city official highlighted what a recently passed state measure means for Newport Beach and its ongoing effort dealing with sober living group homes.

During the Speak Up Newport monthly meeting on Wednesday (May 8), City Councilmember Lauren Kleiman discussed Proposition 1, its potential impact on the local community, and the city’s overall efforts regarding residential rehab facilities. About 50 people gathered in the community room at the Newport Beach Civic Center and more watched the live stream on local TV or Zoom.

“Everyone is really trying to digest the contents of Prop 1 and get their arms around it. Even those who are responsible at the state level for administering it, I think, are trying to figure out exactly how it’s going to be implemented,” she said.

Although they were told not to bother fighting it as it was sure to go through, Kleiman noted that it “barely passed” with a margin of about 26,000 votes. It was defeated in 42 of the 58 counties statewide and in Orange County by 16%, she added.

“So not exactly the overwhelming passage that everyone was expecting, or at least what we were told,” she said.

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Courtesy of City of Newport Beach

City Councilmember Lauren Kleiman 

Kleiman explained that Prop 1 modifies the Mental Health Services Act (renamed the Behavioral Health Services Act) to include treatment for substance abuse disorders and reallocates some of the funding away from counties to the state. It also refocuses distribution of MHSA funding towards housing interventions.

Prop 1 also authorized $6.38 billion in bonds, meaning the state has to pay it back with interest over time, Kleiman pointed out. The bond funds are aimed at building more mental health care and drug/alcohol treatment facilities, and more housing for people who are homeless or at risk of becoming homeless, and people with mental health and addiction challenges.

“We all can agree that we need to address these issues. We know we have rising rates in homelessness, we know that we have a mental health problem, as well as addiction challenges statewide,” Kleiman said. “The problem is that these funds are going to be allocated by the state and these facilities and units will be entitled to go into any city by right.”

The state has already spent about $24 billion on homeless programs over the last few years and “they have nothing to show for it,” Kleiman said. In fact, she added, homelessness rose last year according to reports, including the U.S. Department of Housing and Urban Development 2023 Annual Homelessness Assessment Report.

Kleiman commented that Governor Gavin Newsom’s CARE (Community Assistance, Recovery, and Empowerment) Act was “promised to be a solution for homeless with mental health issues” but there’s been low enrollment and only a small number of those are actually homeless individuals.

Also, these mental health resources were intended to serve the community where they sit, she said, but are often drawing people from out of the city, outside the region, and even outside the state. Anecdotally, Kleiman said they’ve noticed that the local homeless shelters are seeing individuals who have been kicked out of these facilities for various reasons, including that they’ve violated the rules or their benefits have run out, she added. This ultimately contributes to the homeless problem rather than to the solution, Kleiman commented.

She also noted that the state has been responsible for licensing sober living, detox, social rehabilitation, and other group homes for this population.

“They’ve done a terrible job vetting and monitoring operators and ensuring the safety of those both seeking care in the neighboring residents,” Kleiman said.

The term “by-right” essentially means that the local jurisdiction must allow these facilities without public input and the city cannot impose any conditions or restrictions, Kleiman explained.

Before Prop 1 passed, state and federal laws required that recovery facilities that had six or fewer beds be considered a residential use of property. Any regulation the city places on residential dwelling units has to apply equally to all types of homes, whether it’s a rehab facility or a single-family home.

“The stated purpose of this is to allow those seeking treatment to get well in a residential versus an institutional setting and, in the eyes of the law, residents of these facilities are a protected class and they’re considered disabled due to their addiction,” Kleiman said.

Previously, cities were allowed to require facilities with seven or more beds to go through the permitting process (although most of the facilities that opened in Newport Beach in recent years have six or fewer beds in order to avoid the city process).

“Now, after Prop 1, the short answer is we’re not sure how this is going to play out, but some of these funds will go towards creating more of these facilities or housing units that will be allowed to go, again, on any property that’s zoned specifically multi-family, retail, office or parking – anywhere,” Kleiman said. “There’s no language restricting the number of beds (or) capping the number of facilities.”

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Sharing excerpts from first responder calls from some of the local group homes for overdoses, domestic disturbances, and missing adults and juveniles, Kleiman said this shows why they are concerned. Throughout the industry they are seeing these issues, along with other causes of death, negligence, insurance fraud, and “body brokering” (accepting a fee or bribe for referring a patient to a rehab facility). In a recent case, the local owner of several sober living homes in Orange County was indicted for allegedly paying nearly $175,000 in kickbacks to body brokers for referring patients.

“I mention this because it highlights just how much money there is to be made in this industry. If they’re paying thousands just to get someone in the door for referral fees, obviously there’s plenty of profit margin to spare,” Kleiman said. “Make no mistake, this is a big and extremely lucrative business.”

Another concern is the over-concentration of facilities in neighborhoods, she added. This is particularly true for Orange County, which has some of the heaviest concentrations of group homes and sober living residences in the country, according to an OC Grand Jury report.

“Because what better place to send your loved one to get well, right?” Kleiman commented.

However, drug and alcohol rehab facilities are exempt from the Community Care Facilities Act, which contains restrictions intended to protect the character of residential neighborhoods.

Although state code requires that licensing agencies deny an application for a new residential facility if it’s too close to an existing facility, it’s often not followed, Kleiman pointed out. Multiple rehab homes will be placed in one community or even on a single block, which ultimately negates the intention to have people integrate and get treatment in a typical neighborhood rather than an institutional setting, she said.

Knowing all of this and recognizing the problem, Kleiman said the question everyone wants answered is: “What are we going to do about it?”

The most significant step the city has taken regarding policy changes is initiating an audit of the Department of Health Care Services, which is one of the two agencies responsible for issuing permits to these recovery homes, she explained. They drafted a request and worked with legislative partners to kick off the process at the state level.

“We’re looking to expose the lack of oversight, we’re looking at the flaws in the licensing system that demonstrate the need to change the legal framework in order to protect against bad operators and ensure accountability for positive outcomes,” Kleiman said.

Former City Councilmember and current Assemblywoman Diane Dixon (R-Newport Beach) recently got bipartisan support to initiate an audit of the Department of Health Care Services. In a letter to the audit committee chairs, Dixon wrote that their “intent is to ensure that DHCS is properly licensing/regulating facilities and complying with the law so that residents of these facilities and their neighbors are protected.”

At the Speak Up Newport meeting in November, at which Dixon was a featured speaker on the topic of group homes, she explained that the audit will gather the data needed to ultimately change the laws.

Dixon’s staff put together a list of questions, based on her own experience in local government and input from the community, of what questions they want answered. Some of the inquiries include: How many people are rehabilitated? How long is the average stay? How many patients go in and out of these homes? The topics cover the frequency that DHCS certifies the facilities, enforcement, frequency of denials, revocations and suspensions of licenses, evaluate the effectiveness of treatment/patient care, and more. There is no data answering these questions, Dixon said. Last year, on June 26, the audit request was unanimously passed by the Joint Legislative Audit Committee.

The audit is expected to be completed this summer, Kleiman said at this week’s SUN meeting.

They are also going to be working with local representatives to support an audit of the California Department of Social Services, which is the other state agency responsible for issuing licenses for these facilities, Kleiman explained.

They are also “battling this out in the court system,” Kleiman added, noting litigation the city and other jurisdictions have faced after adopting ordinances that attempt to regulate and/or restrict the facilities.

Kleiman also highlighted that eight facilities in Newport Beach have closed and Sober Living by the Sea abandoned their agreement with the city that provided additional allowances, including up to 204 beds throughout the city.

She also pointed out that a majority of the council recently voted to leave League of California Cities primarily due to their opposing stances on Prop 1.

“They’ve certainly taken positions in the past that we haven’t necessarily agreed with them on, but never one that’s in direct contradiction with both their own mission statement and our values,” she said.

Councilmembers voted 5-2 on March 12 to not renew Newport Beach’s membership with Cal Cities. Although a time limit was not placed on the exit, a majority of councilmembers commented that they would like to revisit the idea in about one year. Councilmembers Erik Weigand and Robyn Grant dissented (both clarified that their votes were not because of the Prop 1 issue, but instead in support of the other benefits from Cal Cities membership).

During the back and forth in the deliberation of membership in the organization, the lynchpin of the discussion was Prop 1.

In an announcement in late 2023, Cal Cities noted that they had supported the measure for much of the year before some last-minute changes drew concern from cities and prompted the League to withdraw its support. The amendments would allow for by-right approvals of unlocked and locked behavioral health facilities, sober living homes and recovery housing, Mayor Will O’Neill said at the March council meeting, quoting from the Cal Cities December 6 statement. While existing law generally requires by-right approval of these facilities in residential areas, Prop 1 would also apply this approval process to office, retail and parking zones.

After withdrawing support, the Cal Cities board decided to override that decision and directed staff to engage in the regulatory process and pursue legislation to address these concerns, while also supporting Prop 1.

Kleiman also noted at this week’s meeting that they’ve also been supporting and tracking a number of relevant bills.

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Sara Hall covers City Hall and is a regular contributor to Stu Newport.


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