The California state government has filed a lawsuit against the homeless services non-profit Step Up On Second Street and its partner Shangri-La Industries, seeking $114 million in grant money after their seven motel conversion projects for the homeless fell into foreclosure. Initially celebrated for their role in Governor Gavin Newsom’s 'Homekey' program, which aimed to convert motels into permanent housing, the organization failed to deliver on the promised apartments, leaving four properties empty and unfinished. Former Step Up consultant Philip Mangano expressed disappointment, calling it a 'failing of national consequence' as the organization sought to take its model nationwide. The partners had initially secured substantial funding but faced financial difficulties that led to project cancellations, including a recent withdrawal from a planned conversion in Fayetteville, North Carolina. This situation highlights the challenges faced by non-profits in addressing homelessness despite having supportive frameworks in place. As the lawsuit progresses, the viability of similar future projects may be at risk.