Fire! Fire! Fire! Fire! Fire! Fire! Fire! Fire! Fire! (Yawn.)

Lame city regulation leaves burned-out residents of nine SRO hotels completely SOL

The Hartland Hotel, too, sits empty, save for the hotel manager locked behind a dingy gate with a sign reading "Closed Sundays" tacked onto it. The manager, Raymond Patel, sits on a sheet-covered sofa, facing a television. "We are closed. Fire," he says simply.

The Delta, the Thor, the Park, the Leland -- all empty.

Of the nine SROs that burned recently, only the Jerry Hotel is back "online."

Jennifer Hale

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Considering San Francisco's housing crunch -- the supply-and-demand-fueled environment in which property is at a premium, and wealthy newcomers continually outbid each other for residential space -- an obvious question arises: Why haven't the burned hotels been rebuilt, or razed to make way for new residential construction?

The answer to that question appears to involve the city's Byzantine system of rent control. Andrew Zachs, a lawyer who represents a number of SRO hotel owners (although none whose hotels have succumbed to fire), believes San Francisco's regulatory environment creates strong disincentives for the landlords to rebuild. "Severe rent control is driving many people out of the rental market," Zachs says.

What lies at the center of the failure to rebuild, despite a white-hot housing market, is a regulation meant to protect displaced tenants: San Francisco Rent Board Rules and Regulations, Section 12.19. The rule states that if a tenant is forced to vacate a unit due to fire or other disaster, the landlord must offer that tenant a room at the same rent he had paid, pre-disaster, once the building is repaired.

Bernadette Borja, the daughter of Delta Hotel owner Dr. Mario Borja, says her family had considered rebuilding the Delta after the fire, but the costs of repair would have required increasing the rent to market rates -- something that could not legally be done for former residents, and something that people housed in the run-down Sixth Street corridor would find "unacceptable."

"It would have been a gift to fix it," Borja says. "We couldn't pursue it; it made no economic sense." The hotel was recently sold to the Tenant Owner Development Corp., a nonprofit entity that deals in low-income housing. According to its executive vice president, John Elberling, bringing the hotel back online is an arduous process that involves, among other things, developing a financial plan to be reviewed by the city's Redevelopment Agency, and applying for federal low-income tax credits. "It's tremendously complicated," he says. "If we're on schedule, the hotel will be reopened by the end of 2002."

Francis Pinnock, a lawyer at the West Coast Center for Law and Justice who represents SRO tenants, says rent control regulations do keep burned-out SROs from being rebuilt quickly -- but that doesn't mean landlords suffer. "There is an economic motive to keep the hotels empty. It is totally clear to me," Pinnock says, in a soft English accent that hints at controlled anger as she explains the politics behind the rent control paradox. "A tenant has the right to go back. If the landlord delays repairs and keeps the hotel empty for two or three years, the tenants most likely settle elsewhere or disappear.

"Look at it in the long term. If the tenants don't return, they [the rooms] are no longer low-income units."

In other words, the longer the hotels are closed, the more likely that when they are rebuilt, their rooms can be rented at market rates that far surpass what SRO tenants have been paying.

Pinnock cites an example from a case she recently settled against the landlord of a residential hotel that had been closed for two years due to fire. According to Pinnock, the landlord projected that only 10 to 15 of his previous tenants would return after the long closure; he therefore advertised some of the units for rent before his hotel had even gone back online. He was asking $1,100 to $1,300 a month; the units had rented for roughly $400 before the fire. "The real estate market has never been as hot as it is now," Pinnock says. "Hotels are rent-controlled. Landlords are using small fires to close them down."

The city has done little to encourage the rebuilding, rehabilitation, and rerenting of residential hotels that have been taken off the market due to fire. The SRO task force has focused on two possible methods for getting the hotels rebuilt: the seizure of damaged properties through eminent domain; and the provision of low-interest loans to SRO owners through the Mayor's Office of Housing.

Eminent domain, or condemnation, is an involved, controversial, and time-consuming legal process that entails confiscating private property for public use. There is no indication the city is likely to begin any sort of eminent domain program for SROs soon.

The Mayor's Office of Housing does have access to a large cache of bond funds that can be used to assist landlords who apply for loans; but of the hotels that have burned, only the owners of the Delta have sought assistance. "We make a commitment to projects that are ready to go," says Planning and Monitoring Director Joe LaTorre. "These owners are not, [so] we move on to other projects."


Robert Gray, a slight, soft-spoken man with reddish hair that looks like it has just been lifted from a pillow, is reluctant -- almost a year later -- to speak about the Thor fire. "It was devastating. I never experienced anything like it," he says, delicately leaning against his bed, smoking a cigarette. Gray, once a permanent resident at the Thor, is one of hundreds of SRO tenants uprooted by fire and red tape. It took him four months, hopping from hotel to hotel -- at one point collecting 315 cockroaches to commemorate his disgust with the King -- before Gray found permanent housing.

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