City Attorney Dennis Herrera jumped into the war over San Francisco’s dwindling housing supply and booming short-term rentals Wednesday, accusing two property owners of illegally converting residential buildings into pricey tourist hotels after evicting longtime tenants, two of them disabled.
The owners, one in Pacific Heights and the other in North Beach, violated city housing and zoning laws and added to the worsening shortage of affordable rental space, Herrera’s office said in its first two lawsuits on the issue. The suits seek thousands of dollars in penalties, along with court orders prohibiting the short-term rental practices.
“Illegal short-term rental conversions of our scarce residential housing stock” are contributing to “a housing crisis of historic proportions,” Herrera said in a statement.
To illustrate, the suits cited the proliferation of short-term vacation rentals in San Francisco advertised on popular websites: 6,225 on Airbnb, 1,413 on VRBO and 1,351 on HomeAway, VRBO’s parent company. Herrera said the property owners in both suits sought customers on those sites, but he did not accuse the companies of wrongdoing.
San Francisco bans residential rentals of less than 30 days unless the hosts have a conditional use permit, which Herrera said was not sought by these owners.
Threat of stiffer penalties
The city Planning Department is investigating dozens of complaints that property owners throughout San Francisco have illegally converted homes and apartments to hotels. The department has assessed some fines, but Wednesday’s actions by Herrera threaten stiffer penalties – up to $200 per day of violations, forfeiture of any illegal profits, and other sanctions.
“I think this will send a message to landlords that these (conversions) are illegal, and if you are doing it you’ll have to pay stiff fines,” said Ted Gullicksen, executive director of the San Francisco Tenants Union. He said his organization had urged Herrera to file the suits and has submitted complaints against seven other landlords in preparation for a possible private lawsuit.
Legislation proposed by David Chiu, president of the Board of Supervisors, would legalize short-term rentals as long as the owners lived in their units 75 percent of the time, had adequate insurance and paid the city’s 14 percent hotel tax. The ordinance would also regulate the practices of websites like Airbnb, which has promised to start collecting hotel taxes from its clients this summer.
Airbnb said it has looked into Herrera’s allegations and has removed one of the property owners from its website.
“If a small number of predatory landlords are abusing platforms like ours to illegally evict tenants in search of a quick buck, we wholeheartedly support efforts to bring those landlords to justice and applaud the city attorney for his action,” the company said in a statement. The statement said nothing about illegal short-term rentals, the crux of Herrera’s action.
HomeAway’s co-founder, Carl Shepherd, said the court action “highlights the need for a fair regulation of short-term rentals” in San Francisco.
Pacific Heights property
One of the property owners sued by Herrera, Darren Lee, said he was surprised by the filing. Lee, a real estate agent, and his wife, Valerie, own property at 3073-3075 Clay St. in Pacific Heights and are accused in the lawsuit of converting the formerly rent-controlled units into short-term tourist hotels in 2009 after evicting their tenants under the Ellis Act, a state law that allows evictions by owners who are leaving the rental business.
“I think they have the wrong information,” Lee said. “I’ve got a tenant in there right now, a long-term tenant who’s paying me rent.”
The city’s lawsuit said the Lees bought the century-old Victorian home in 2004, while it was under rent control, and by 2006 had evicted both tenants, one a disabled person who was paying $1,087 a month and the other a family paying $2,200.
They first took in short-term guests in 2009, charging four to seven times the previous rents, and paid the city’s Planning Department more than $8,000 in penalties, the suit said. It said the Lees resumed the illegal rentals in May 2013 while submitting a statement to the city from a man who falsely claimed to be a long-term tenant. As of October, the suit said, the Lees owed the city more than $39,000 in unpaid penalties and fees.
North Beach buildings
The other suit was filed against Lev and Tatyana Yurovsky, owners of buildings at 734 and 790 Bay St. in North Beach. Herrera said the Yurovskys sent eviction notices to the tenants of the rent-controlled units, one of them a disabled person, under the Ellis Act in 2006 and converted three units in the buildings to hotels in 2010, without seeking a permit.
The Yurovskys created a website, greatsfvacation.com, to market their rooms, and have boasted on their Facebook page that they have hosted several hundred tourists, the suit said.
Efforts to contract the Yurovskys were unsuccessful.
Chronicle staff writer Carolyn Said contributed to this story. Bob Egelko is a San Francisco Chronicle staff writer. E-mail: firstname.lastname@example.org