The dirty little secret of San Francisco rent control is that not everyone has it. Most San Francisco apartments are covered by the rent-control protections that limit annual rent increases to a maximum of 2.2 percent. But there are exceptions that eliminate one’s rent control — say, if someone lives in a unit that was built after 1979, or if they live in what is classified as a “single-family home,” a house whose rooms are all covered under the same lease.
If you live in one of these single-family homes, you don’t have rent control thanks to a 1995 state law called the Costa-Hawkins Rental Housing Act. That law permits landlords of single-family dwellings to increase the rent by any amount they wish. But they usually don’t, because outlandish rent increases carry the risk of a wrongful eviction lawsuit.
“You should not raise the rent indiscriminately,” cautions local landlord attorney David Semel in a 2016 guidance to property owners. “It is important to raise the rent to an amount that reflects your good faith estimate of the market rental value of the property.”
But good faith estimates are just guidelines, and one landlord is saying to hell with them. Attorney Matthew Dirkes, proud owner of a small Outer Sunset single-family home with two tenants, slapped them with a 350 percent rent increase six months after buying the place. Their rent instantly increased from $1,900 to $6,700 per month.
Tenants Danielle Phillips and Paul Kelly couldn’t afford this $4,800-a-month rent increase, and argued that being forced to move out constituted the equivalent of an owner move-in eviction. They sued Dirkes for wrongful eviction in a San Francisco Superior Court in January, claiming they were entitled to $20,000 in relocation fees.
“The Subject Unit remained in the same state it had been when plaintiffs moved in,” their attorney argued in court filings. “Yet the increase more than tripled their rent. The requested rent increase was more than the annual amounts allowed under the Rent Ordinance for two-unit buildings.”
Except it wasn’t a two-unit building anymore. Dirkes demolished the house’s in-law unit, which turned it into a single-family dwelling and got around its rent control protections. That may sound shady, but it is perfectly legal.
Matthew Dirkes is not your average San Francisco attorney. He was the criminal defense attorney for Raymond “Shrimp Boy” Chow, the infamous Chinatown figure serving two life sentences for running a criminal syndicate.
Dirkes had much better luck in his rent-control case than in the Shrimp Boy trial (his client was found guilty on 162 counts). A San Francisco Superior Court judge ruled in May that Dirkes’ 350-percent rent increase, while ethically sketchy, was still within the law.
Phillips and Kelly are appealing the decision to the First District Court of Appeal, and a decision is expected this fall. However the judge rules, it will set a landmark precedent for non rent-controlled apartments in San Francisco and statewide.
If Dirkes wins, the legal precedent will affirm carte blanche, anything-goes rent increases for units not protected by rent control. But if the plaintiffs win, it will mark a strong correction in favor of tenants priced out of single-family homes, and pretty much guarantee them a fat relocation check should their rent be increased by more than market value.
Even if this appeal goes in the landlord’s favor, there is still hope for renters. The California State Assembly is considering a bill, co-authored by our own Assemblyman David Chiu, that would expand rent control protection to single-family homes like this one.
But the Assembly won’t consider that bill until 2018. In the meantime, those poor renters in non rent-controlled units who get served with 350-percent rent increases have no choice but to pay up, lawyer up, or start cruising Craigslist.