Palo Alto's Homekey Project Delayed by Contract Dispute

Disagreement between contractors pushed back the opening of the 88-unit transitional housing complex

Apr. 10, 2026 at 12:06am

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A high-end, photorealistic studio still-life photograph featuring a collection of premium, polished construction materials and tools, including a hardhat, a level, a wrench, and a blueprint, arranged elegantly on a clean, monochromatic seamless background, conceptually representing the abstract challenges of construction project management.The ongoing contract dispute between the Homekey Palo Alto project's general contractor and subcontractors has exposed the complexities of coordinating large-scale affordable housing developments.Palo Alto Today

A dispute between contractors has disrupted the construction of the transitional-housing complex that Palo Alto and the nonprofit organization LifeMoves are preparing to open on San Antonio Road. The Homekey project was scheduled to be completed earlier this year, but has faced delays due to a payment dispute between the general contractor, Devcon Construction, Inc. (DCI), and its subcontractors. While the project looks largely complete, it has yet to receive a temporary certificate of occupancy, causing LifeMoves to open a temporary shelter location in Sunnyvale to meet state deadlines.

Why it matters

The Homekey project is a crucial part of Palo Alto's efforts to address the local and regional housing crisis, providing shelter to more than 200 unhoused individuals and families. The delays have already caused significant complications for LifeMoves, forcing the nonprofit to open a temporary location in Sunnyvale as it scrambled to meet state deadlines.

The details

The payment disputes between DCI and its subcontractors, ARECO Construction and Volumetric Building Companies (VBC), have totaled $1.4 million. DCI is now paying ARECO directly to complete the project on time. The remaining work includes balcony brackets, fire alarm repairs, and other miscellaneous items that need to be finished before the site can receive a temporary certificate of occupancy.

  • In November 2025, ARECO Construction halted work, citing nonpayment from VBC.
  • In November 2026, the remaining work was moved from 'high risk' to 'low risk' by mid-December.
  • The project was originally scheduled to be completed earlier this year, with a construction deadline of April 21, 2025 set by the state.
  • LifeMoves anticipated the end of construction on March 25, 2026, a date that has since passed.
  • The Homekey project is currently undergoing fire inspections this week and an elevator inspection on April 13, 2026, after which it can receive a temporary certificate of occupancy and begin moving people in.

The players

Devcon Construction, Inc. (DCI)

The general contractor for the Homekey project.

ARECO Construction

A subcontractor that halted work in November 2025 due to nonpayment from another subcontractor, Volumetric Building Companies (VBC).

Volumetric Building Companies (VBC)

A subcontractor responsible for the modular units on the Homekey site.

LifeMoves

The nonprofit organization partnering with Palo Alto to operate the Homekey project, a transitional-housing complex.

Ed Shikada

The Palo Alto City Manager.

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What they’re saying

“This is clearly a payment dispute between DCI and their subcontractors. DCI remains contractually responsible for delivering the site per at the agreed-upon Guaranteed Maximum Price.”

— Paul Simpson, CFO, LifeMoves

“We've helped those guys out by paying them and doing those kinds of things. We stepped up and are making sure that some of the subs that work for VBC are going to get paid by us, and then we'll deal with VBC after the job is finished.”

— Gary Filizetti, CEO and President, Devcon

“The important thing is to get the people in the affordable housing that need to get in there. That's our goal.”

— Gary Filizetti, CEO and President, Devcon

What’s next

The Homekey project is currently undergoing final inspections and is expected to receive a temporary certificate of occupancy in the coming weeks, allowing LifeMoves to begin moving residents into the 88-unit complex.

The takeaway

The delays in opening the Homekey project in Palo Alto highlight the challenges of coordinating complex construction projects, especially when subcontractor disputes arise. However, the city and LifeMoves have worked to mitigate the impact on unhoused individuals by opening a temporary shelter location in Sunnyvale, demonstrating their commitment to providing much-needed transitional housing in the community.