Winston-Salem says housing project is 'not likely to move forward' after developer named in lawsuit

A Winston-Salem official says the city’s effort to convert a motel into supportive housing for those experiencing homelessness is “not likely to move forward.” The news comes weeks after the city’s partners on the project were named in a multi-million dollar lawsuit. 

The suit alleges nonprofit Step Up on Second and development partner Shangri-La Industries violated contracts and failed to meet performance milestones in work on the state’s Homekey program, an initiative to provide housing to the chronically homeless. 

The city has been partnered with both organizations on a similar motel conversion project since 2022. Assistant City Manager Patrice Toney spoke to WFDD shortly after the lawsuit was filed. 

“I think people are disappointed," she said. "Everyone was excited about this opportunity. And now we know where it's kind of heading.”

The project had already been delayed. No motel property has been purchased, more than one year after the development was initially slated to be completed. 

Step Up CEO Tod Lipka says his company has no plans to continue its work with Shangri-La. 

And in a statement, Toney said Wednesday “since a new developer has not been selected to purchase and rehab the property, it is not likely that the project will move forward.”

The city of Asheville was involved in a similar project with both Step Up and Shangri-La. It pulled out of that deal shortly after the California lawsuit was filed.