A Fresno plan to build affordable tiny homes for people experiencing homelessness escalated into a legal battle on Aug. 14, when city leaders voted to pursue litigation against Poverello House over the stalled project.
After the roughly $2 million modular housing effort stalled, Fresno officials moved to sue Poverello House, putting both public funding and a planned source of urgently needed shelter in jeopardy, according to Fresnoland.
Here's what to know
Nearly $2 million in public money was committed to the proposal — about $965,000 in ARPA pandemic relief funds and another $1 million from California's Encampment Resolution Funding grant.
That was before the Fresno City Council, meeting in closed session, voted to pursue a lawsuit against Poverello House over a deal to build about two dozen tiny homes that was never completed, Fresnoland reported.
Poverello House leaders say the nonprofit did not simply abandon the development.
Zachary Darrah, CEO of Poverello House, and Cary Catalano, a spokesperson for the nonprofit, told Fresnoland that the modular housing contractor failed to deliver and then stopped engaging in good faith.
TCD Picks » Quince Spotlight
💡These best-sellers from Quince deliver affordable, sustainable luxury for all
"That's why we're caught off guard by this," Catalano said.
Fresno City Attorney Andrew Janz rejected that explanation in a text to Fresnoland.
"They are well aware the City has requested the full amount to be returned, totaling nearly two million in tax payer dollars," he wrote.
"Poverello has asked us to forgive the remaining balance which we have communicated is unacceptable especially when the FBI and Attorney General are involved."
More background
Fresno has viewed modular construction as a way to add lower-cost housing quickly while reducing expenses.
Through a bidding process, Poverello House chose Fresno-based PreFab Innovations Inc., run by contractor Dave Clevenger, for the project. The city had previously worked successfully with Clevenger in 2023 on modular homes for at-risk youth.
Scrutiny around Clevenger has since intensified.
In February 2026, California Attorney General Rob Bonta's office filed a licensing complaint seeking to revoke Clevenger's contractor's license, Fresnoland reported.
Poverello House leaders also confirmed that the FBI interviewed them about their experiences with Clevenger and PreFab Innovations.
Clevenger did not reply to requests for comment.
What's being done?
Fresno's answer is a lawsuit.
The city is seeking its money back and appears ready to press for repayment of the full amount.
Poverello House, however, says it has proposed a partial return. The nonprofit says it offered to return the $1 million in state funds while continuing to work with the FBI to recover the ARPA money sent to the contractor.
"The city is well aware of this. Our counsel has been in contact with the (Fresno) City Attorney. This is not new information to them, so again I'm a little confused about everything that's going on here," Darrah reiterated.
Even if Fresno recovers the federal funds, ARPA deadlines have passed, meaning the money may have to be returned to the federal government instead of redirected to another local housing effort.
If that happens, the community could be left with no homes to show for the project, along with lost time and fewer resources to address homelessness.
The dispute has also prompted warnings from Clevenger's past business partners that failed affordable housing deals carry costs beyond dollars alone.
"We've been trying to sound the alarm on this guy for years," one source told Fresnoland.
"This man is taking public and private funds and he's wasting them. He's defrauding people and cities," the unnamed individual added.
Get TCD's free newsletters for easy tips, smart advice, and a chance to earn $5,000 toward home upgrades. To see more stories like this one, change your Google preferences here.
