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Report regarding an ordinance establishing a permit process for single room occupancy hotel closures, redevelopments, or changes of use including noticing and relocation benefits for residents. (Pierce Abrahamson, Management Analyst II)
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RECOMMENDATION
Staff recommend that the City Council consider adopting an urgency ordinance and introducing a regular ordinance establishing a permit process for single room occupancy (SRO) hotels proposed to be converted, demolished, and/or redeveloped. The intention of this policy is to establish streamlined administrative processes for the City to enforce noticing and relocation benefit requirements for residents displaced if/when this housing type changes use.
BACKGROUND
South San Francisco is home to a unique type of naturally occurring affordable housing - SRO hotels. SRO hotels are residential properties where individual tenants rent small, single rooms with shared bathrooms and often shared kitchens. Single room occupancy hotels provide naturally occurring affordable housing for lower-income households, usually renting for $700 to $1,200 per room, per month. At this rent rate, this housing type is affordable to extremely low-income individuals without requiring an additional rent subsidy. For comparison, market rents as of December 2024 for studio and one-bedroom apartments in South San Francisco are $1,795 and $2,500 per month respectively according to Zillow. Consequently, SRO hotels play a critical role in preserving affordable housing in the City, which currently has a rental housing shortage of 560 housing units affordable to households making under $50,000.
When an SRO hotel closes due to conversion or redevelopment, its residents are displaced and may face significant obstacles finding replacement permanent housing. In South San Francisco, this type of housing is vulnerable to closure and redevelopment due to changing market conditions and the age of the buildings. As SRO owners seek to sell or redevelop these properties, residents are increasingly faced with the challenge of finding limited affordable housing options.
SRO Hotels in South San Francisco
South San Francisco is home to at least seven SRO hotels, comprising of over 220 naturally occurring affordable SRO units. Two of these properties are currently listed for sale on the open market, one of which is protected by affordability covenants that expire in 2031 and the other unrestricted.
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Known SRO Inventory List - Updated December 2024 |
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Property Name |
Property Address |
Number of Units |
Status |
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Metropolitan Hotel |
220 Linden Ave |
68 |
Active; deed restricted affordable housing with City loan; listed for sale. |
|
Industrial Hotel |
505 Cypress Ave |
29 |
Active; operator unknown. |
|
S & L Hotel |
400 Miller Ave |
29 |
Active; listed for sale. |
|
146 Gardiner Ave |
146-150 Gardiner Ave |
21 |
Sold in 2022; code enforcement actions beginning in 2023/2024. |
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The Grand Hotel |
731 Airport Blvd |
Approx. 57 |
Active. |
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Alphonse Hotel |
108 Grand Ave |
19 |
Active, but all units are currently vacant. |
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Atlas Hotel |
322 Grand Ave |
Unknown |
Converted to tourist hotel, but still allows long term stays. |
General Plan & Housing Element Policies
The City adopted a comprehensive update to the General Plan (GP) in 2022 and received State certification for its 2023-2031 Housing Element. As stated in the General Plan, the City’s housing priorities include new housing production while preserving affordable housing and protecting vulnerable residents from housing instability and displacement. The proposed policies addressing SRO displacement help achieve the goals outlined in the Housing Element and General Plan. Specifically, the proposed ordinances contribute to the following policy goals identified in implementing the Fair Housing Plan in the City’s certified Housing Element:
• Policy EQ-3: Support residents who are at-risk of being displaced. Reduce the rate of evictions and support low-income residents who are at risk of being displaced. (GP)
• Policy EQ-8: Protect existing residents from displacement in areas of lower or moderate opportunity and concentrated poverty and preserve housing choices and affordability. (FHAP)
• Program PRSV-5.2 Assist Tenants at risk of Displacement: The City shall assist tenants displaced by the conversion of at-risk units by providing information about tenants’ rights, providing referrals to relevant social service providers, endeavoring to establish a funding source to assist nonprofit organizations that support tenants, and facilitating other support as appropriate.
While the intention of developing a permit process to secure noticing and relocation benefits for residents being displaced from SROs is not to prevent redevelopment or conversion of those properties, this sort of policy can be viewed as an anti-displacement effort. The goal is to lessen the financial, emotional, and familial impact of an eviction from a naturally affordable housing unit into, most-likely, a market rate housing environment. In this way, the proposed policies are an anti-displacement measure, aimed at addressing the causes and impacts of residential displacement.
Relationship to Anti-Displacement Roadmap
While the City continues to pursue its Commercial and Residential Anti-Displacement Roadmap, the City Council has directed staff to bring forward more urgent policies and not to wait for the conclusion of the multi-year Roadmap preparation if the policies are warranted in the immediate term. Due to recent code enforcement actions at an SRO, the listing of two SRO hotels for sale on the open market, and monitoring efforts at a deed restricted SRO property that has found it out of compliance with affordability restrictions, it is evident that a policy to address SRO conversion may be necessary in the near term, including as an interim urgency ordinance, and not at the conclusion of the Roadmap process.
Benchmarking Research
Staff conducted extensive research on existing policies in the region. In developing policies to address SRO conversion or redevelopment in South San Francisco, staff consulted with jurisdictions that have implemented similar measures and engaged with community-based organizations familiar with these housing types. Insights from these discussions were instrumental in crafting policies to address SRO hotel conversion.
Single Room Occupancy Hotels
San Diego Housing Commission
A notable example of SRO regulation is by the San Diego Housing Commission (SDHC), which emphasizes tenant rights and the preservation of SRO units. The SDHC policy mandates the replacement of SRO hotel rooms that are demolished, converted, or rehabilitated, unless specific exemptions apply. The SDHC ensures compliance with these regulations and provides relocation benefits to displaced tenants. SDHC staff shared that this ordinance has effectively brought SROs into compliance, preventing their conversion into transient or tourist hotels and preserving affordable housing for vulnerable residents. One specific hotel, the Occidental Hotel, was sold to a developer in 2022. The developer intended to convert it into a tourist hotel. Under the SDHC policy, displaced residents received advance notice and relocation assistance, maintaining their access to affordable housing.
San Francisco
Staff also reviewed the Residential Hotel Conversion and Demolition Ordinance in San Francisco, designed to protect SRO units from conversion or demolition. This ordinance requires SRO hotel owners to log occupancy information daily and submit annual usage reports, alongside applying for permits for any property conversion or demolition. Additionally, it mandates a one-for-one replacement of units through new construction or in-lieu payments to San Francisco Residential Hotel Preservation Fund. Although the notice and relocation requirements in San Francisco are not very strong, the larger stock of SRO units (over 19,000 units) facilitates easier relocation within the City.
DISCUSSION
At this time, staff recommends adopting an urgency ordinance to address SRO hotels that amends the City’s Health and Welfare Ordinance, Chapter 8 of the South San Francisco Municipal Code. An urgency ordinance goes into effect immediately and can be adopted at a single meeting. This ensures the protections afforded by the ordinance are immediately applicable. Staff also recommend introducing a standard version of the ordinance. As Council is aware, a standard ordinance requires two readings and cannot go into effect earlier than 30 days after adoption. The urgency ordinance will cover any regulated changes to existing SRO hotels while the standard ordinance process is completed. Both the urgency and regular ordinances are drafted to:
1. Define triggering events;
2. Define qualifying tenants;
3. Mandate substantial noticing before an SRO hotel is closed, demolished, and/or converted;
4. Establish relocation benefits for SRO hotel tenants; and
5. Develop a ministerial approval process for SRO hotel conversions. This would not include a ministerial approval of any new use, simply that the property is permitted to convert after having met the noticing and relocation requirements of the ordinances.
Staff does not recommend requiring permanently preserving SRO hotels, as the policies in San Francisco and San Diego do by requiring unit for unit replacement or payment of in-lieu fees. What staff recommends is formalizing a process that maximizes protection for displaced tenants, the primary objective of which is to ensure vulnerable residents can remain in South San Francisco (if they would like to) and avoid displacement from the community at large.
Triggering Events
Staff recommend a Conversion Permit (the primary mechanism of enforcing the ordinance) is triggered when a property owner proposes any one of the following actions:
1. Conversion of the SRO from long-term housing to providing short-term stays;
2. Conversion of the current housing units to another use, such as office;
3. Conversion through vacancy, including holding a percentage of units vacant over the long term; and
4. Closure.
The use of a unit for tourist and/or short-term use is also considered a conversion and would be captured under #1 above. Even though a housing unit may still serve a residential purpose, if a unit transforms from serving residents with long term leases (leases over 30 days) to a day-to-day basis, this is considered a conversion to short term use. Additionally, to prevent SRO hotel owners from coercing residents to vacate and deliberately keeping spaces empty to evade paying relocation benefits prior to closure, staff recommend defining vacancy for the purposes of triggering the Conversion Permit process. Specifically, if 25% or more of the rooms in an SRO hotel remain uninhabited for over ninety consecutive days, without being due to a natural or physical disaster, this condition should be considered a conversion under the ordinance.
Qualifying Tenants
Staff propose that a qualifying tenant be defined as a resident residing in the SRO hotel for a period of longer than thirty consecutive days in the one-hundred-eighty-day period prior to the issuance of a notice of intent to apply for a Conversion Permit. This does not include short-term hotel guests who are individuals staying for a period of less than thirty consecutive days. This definition may be expanded to include the spouse, parents, children, and grandchildren of the legal resident when those people legally reside in the unit on the date of the application.
Noticing Requirements
Staff recommend SRO hotel owners be required to provide notices to tenants throughout the Conversion Permit process. Specifically, the ordinances are drafted to require Owners to notify qualifying residents of the following events or triggers:
• The intent to apply for a Conversion Permit;
• Informational meeting(s), with one meeting minimum required for the SRO Conversion Permit;
• No sooner than 12 months after the intent to apply for a Conversion Permit, the approval of the Conversion Permit Application;
• The approval of a relocation impact report; and
• No sooner than 12 months after the approval of the Conversion Permit Application, the termination of residency would be given.
Relocation Benefits
While it does not permanently preserve SRO hotels, a requirement to pay relocation benefits seeks to formalize a process that maximizes protections for displaced tenants. The primary objective of relocation benefits is to ensure that vulnerable residents can remain in South San Francisco and avoid displacement from the community at large.
The ordinances are drafted to provide the following relocation benefits, informed by research into best practices
• Noticing (as described above);
• Mandating a relocation impact report to identify adequate replacement for displaced residents and identify relocation costs;
• Use of a "relocation counselor" to aid residents who are in search of alternative housing, particularly subsidized housing;
• Payment of moving costs for personal belongings and first and last month's rent and security deposit at the identified alternative housing for all eligible residents;
• Payment of temporary lodging of up to six months, if necessary.
The table below outlines the projected costs of providing relocation benefits for one displaced household seeking to rent a one-bedroom apartment in South San Francisco.
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|
Amount |
|
6 months rent cash benefit |
$16,908 |
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Security deposit |
$ 2,500 |
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First and last month rent |
$ 5,636 |
|
Moving costs |
$ 1,850 |
|
Subscription to relocation counselor |
$ 500 |
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TOTAL |
$27,394 |
SRO hotel owners may request a waiver of the relocation benefits specified in the relocation impact report in cases of bankruptcy or if the required relocation assistance exceeds reasonable costs for displaced residents.
Approval Process for Conversions
Staff propose to create a Conversion Permit process to monitor and enforce noticing requirements and relocation benefits for residents at risk of displacement. To receive an approved Conversion Permit, owners would have to provide a notice of intent to apply for a permit to all residents at their SRO hotel at least twelve months prior to the approval date of the permit.
During this 12-month period, the owner would work diligently to complete the following steps.
1) Complete a Conversion Permit application form and pay a fee (to be established and incorporated into the Master Fee Schedule);
2) Prepare a relocation impact report;
3) Compile a list of all qualifying tenants.
Staff propose that 12 months after the Conversion Permit has been granted, the owner could terminate the residential leases on the property.
This Conversion Permit process could happen in parallel to an entitlement process for a new use, should that be the owner’s intent. However, staff recommend no permit for a new use, change of use, or demolition would be granted until all requirements of the Conversion Permit have been met.
FISCAL IMPACT
The implementation of the new permit requirement will lead to minor increased costs for the Planning and Housing Divisions. These additional expenses can be offset by new fees collected from permit applications once a corresponding amendment is made to the City’s Master Fee Schedule.
CONCLUSION
In August 2024, staff presented this policy framework to the Housing Standing Committee of the City Council and Planning Commission. The Housing Committee provided feedback that adopting it via an urgency ordinance may be necessary to avoid a gap between introducing the ordinance and its effective date. The Committee moreover advised providing noticing for the urgency ordinance, which were mailed out to property owners, managers, and residents on December 30, 2024. Additionally, they advised providing relocation radius more generous than San Mateo County limits. This feedback was incorporated to allow for relocation assistance to another housing unit within a 30-mile radius, or up to 100-mile radius with the approval of the Director of the Department of Economic and Community Development.
At this time, staff recommend the Council consider adopting an urgency ordinance in tandem with a regular ordinance for SRO hotels proposed to be converted, demolished, and/or redeveloped. The intention of the policies is to establish streamlined administrative processes for the City to enforce noticing and relocation benefit requirements for residents displaced from these housing types.