Residential Hotel Conversions
A Tenant Lawyer’s View

by Randy Shaw

Adam Sparks’ challenge to the legality and morality of the Residential Hotel Conversion Ordinance is really an attack on the elderly and low-income people for whom residential hotels are the last remaining source of affordable housing. Sparks’ comments remind us why we fought to have the ordinance passed and now must pressure the city to enforce it against Sparks and other violators.

A moratorium against the conversion of residential hotels to tourist lodgings was first passed by the Board of Supervisors in 1979, in response to pressure from groups like the Gray Panthers and the North of Market Planning Coalition. Members of these groups lived in hotels like the Argyle and the Dalt, whose owners were harassing and intimidating the longtime, elderly residents in order to convert their hotels to tourist use. A strong anti-conversion ordinance was passed in 1980, but was replaced by a substantially weaker version in 1981. The latter ordinance has remained in effect to date.

Adam Sparks is not the first hotel operator to believe that the ordinance violates their constitutional rights. In 1981, the owner of the St. Moritz Hotel on O’Farrell Street filed a challenge to the ordinance, charging that it violated owners’ constitutional rights to use their property as they wanted. The constitutionality of the ordinance was subsequently upheld by both the Superior Court and the California Court of Appeals.

Other claims made by Sparks are also erroneous. First, the hotel ordinance does not exempt “upscale” hotels. Rather, the ordinance exempted hotels that were more than 95 percent tourist or whose rooms rented for more than $1000 per month in 1979 (few permanent residents were paying such rates). A well-maintained hotel that did not meet these requirements remained covered by the ordinance. Ironically, in one of the many irrational loopholes of the ordinance, exemptions were granted to hotels closed by the Health Department for code violations prior to the effective date of the ordinance. Sparks’ anger is thus misdirected.

Second, Mayor Feinstein’s Carlton Hotel obtained an exemption from the ordinance through a loophole that was unfortunately available to all hotel operators. This loophole, which was not included in the stronger original version of the ordinance, granted exemptions to operators who could prove to the Bureau of Building Inspection (BBI) that they had “partially completed converting” their hotel prior to September 1979 (when the moratorium was passed). My research has uncovered twelve hotels which obtained exemptions under this loophole. Some of these hotels, such as the Diva (formerly the Somerton), the Pensione (1668 Market) and the Pickwick (17 Fifth St.), provided insufficient evidence to support an exemption being obtained. Nevertheless, BBI bowed to the interests of the hotel operators and approved the conversion of these hotels. The “partially completed conversion” exemption resulted in the loss of over 1000 residential hotel rooms.

Third, it is quite likely that the city’s homeless program has previously violated the ordinance by placing persons in residential units for short-term stays. But Sparks is confused when he states that the “city doesn’t have to obey the same laws.” The city is not the landlord of the homeless hotels, and violations of the ordinance are the responsibility of the hotel operator.

I take exception to Sparks’ assertion that the hotel ordinance creates substandard and deteriorating housing. If that is true, why has Sparks recently attempted to sell his hotel for substantially more than he paid for it? As Sparks must know, real estate values in the Tenderloin have risen steadily since passage of the hotel ordinance in 1979.

Rather than feel sympathy for Adam Sparks, our concern should be directed to the many elderly, disabled, and low income victims of real estate speculators who will stop at nothing to illegally convert their residential hotels. Sparks purchased the Sequoia Hotel in 1984. The law in place at the time required him to operate a predominantly residential hotel, and the purchase price reflected this. He could have purchased one of the many tourist hotels available in this city, but he sought to obtain a windfall by paying a low price for a residential hotel so that he could increase its resale value by illegally renting to tourists.

Sparks will not be the last real estate speculator to cloak his unbridled greed with pious words of “free enterprise” and “constitutional rights.” When persons like Sparks use these words, reach for your wallet.