Court Invalidates Part Of Resident-Hotel Law
Effort to Increase Low-Income Housing Hurt

By Howard Mintz
Recorder Staff Writer

A state appellate court has invalidated San Francisco’s practice of requiring residential hotel owners to pay the city in order to get out of the residential hotel business, a blow to the local push for increased low-income housing.

The First District Court of Appeal, in reconsidering one of its earlier decisions, concluded in a ruling Friday that the city’s “one-for-one” requirement amounts to a form of “ransom” for those residential hotel owners exercising their right to stop renting residential rooms. The “one-for-one” regulation forces residential hotel owners to compensate the city if they choose to eliminate residential units, a practice the appellate court found violates a landlord’s rights. 

Specifically, the appellate panel found that residential hotel owners who invoke the 1986 Ellis Act — a state law enacted to protect landlords in the wake of widespread rent control legislation — are legally entitled to escape the San Francisco regulation. The appellate ruling in Bullock v. City and County of San Francisco, A043073, damages a portion of the city’s Residential Hotel Unit Conversion and Demolition Ordinance, a law city officials have relied on to protect the dwindling low-income housing market. 

“We agree with plaintiff [hotelier Peter Bullock] that, having properly invoked the Ellis Act, he is entitled to quit the business of providing residential rental units,” wrote Justice Marcel Poche. “We further agree with plaintiff that the Ellis Act pre-empts a crucial provision of the Conversion Ordinance. 

The latest decision, a 3-0 ruling, appears to be a compromise meant to address the concerns expressed by Channell in the dissent. While the court invalidated the one-for-one provision, it clearly stated that it was not questioning the constitutionality of the overall ordinance. The court, citing prior decisions upholding the right of cities to legislate the issue, stated “If a change is to be made, it must come from a higher court.” Further, the decision cautions hotel owners that the opinion has not immunized plaintiff from otherwise valid provisions of the Conversion Ordinance and the ordinance establishing the North of Market Residential Special Use District.

“Nothing in the Ellis Act gives any landlord invoking its protection the unilateral power to effect what amounts to a rezoning of his property simply by invoking his right under the Ellis Act to get out of the residential hotel business,” the court added.