Hotel Conversion Law Faces Private Legal Test

By Rachel Gordon

A Tenderloin housing advocacy agency is suing two residential hotel owners for alleged illegal conversion of their businesses to serve the tourist trade, the first private lawsuit under the city’s revised hotel ordinance.

The Tenderloin Housing Clinic, which filed suit in state Superior Court, wants to obtain a court order within 90 days that would bar the hotels from illegally renting to tourists. “These lawsuits will return over 100 units of affordable housing to residential status.” said Executive Director Randy Shaw. The lawsuits allege that the Lotus Hotel, 580 O’ Farrell St., rents some of its 59 units designated for permanent residents to tourists, and the Amsterdam Hotel, 749 Taylor St., does the same with its 14 designated rooms.

Owners of both establishments deny any legal wrongdoings. “I am doing what the law allows,” said Michael Tsang, owner of the Lotus. Added Kanti Gopal, owner of the Amsterdam, “I have been complying with the law.”

What the law requires
In May, the city’s residential hotel conversion ordinance was strengthened to strictly limit the number of rooms that could be turned over for tourist use. The Board of Supervisors renewed and revised the law to cap further erosion of that segment of the city’s “affordable housing stock” mainly used by the city’s poor and elderly, low- rent inner- city hotels. 

If the residential rooms are not rented, according to city law, they can be used for tourists. But, Shaw noted, the owners first must make a good-faith effort to find permanent residences. The law does not stipulate what rents may be charged.

He said the residential rents the Amsterdam and the Lotus charge are too high for tenants, and higher than rents traditionally charged by residential hotels. The Amsterdam charges $800 per month for a room, $250 to $350 weekly. The Lotus charges $700 a month, $358 weekly. Neither have kitchen facilities. The going rate for other residential hotels in the neighborhood, said Shaw, is approximately $400 a month.

“If defendants are permitted to continue to violate the law,” state the lawsuits, “the purpose and intent of the ordinance to retain decent, safe, and affordable housing for low-income, elderly, and disabled persons will be frustrated, and prospective permanent residents will be deprived of needed housing.”

Under the law, which was opposed by the San Francisco Hotel Association, each hotel must designate a certain number of rooms for tourist use and the rest for residential use. The designation is based on 1979 usage, when the original hotel law was adopted. Owners who comply with the law are allowed to rent up to 25 percent of the rooms tagged for residential use to travelers during the summer tourist season. The revised law also allows interested parties, such as housing advocacy groups, to sue owners to get them to comply. Previously, only the city could pursue legal enforcement.

“Non-compliance with the law is happening at other hotels, as well,” said Shaw, “but we wanted to start here and send a message to other hotel owners that they can’t get away with illegally converting rooms to tourist use.”

Late last week, two of the Lotus’ 70 units were occupied by permanent residents, according to Tsang, the owner. He said three were used by tourists and the rest are empty. Gopal, from the Amsterdam, cited similar figures, saying three of the 14 residential rooms were occupied by permanent residents and half of the 17 tourist rooms were rented.