Maybe it’s the fresh blue paint that makes 2072 Mission stand out from its less-kept-up neighbors on the busy block between 16th and 17th streets. Or maybe it’s the gallery space at ground level that, a couple years ago, once belonged to the struggling Milan Pizza.

Before Starcitya communal living development, opened last spring, 2072 Mission St. was a hotel with 16 single residence occupancy (SRO) rooms, typically reserved for San Francisco’s lowest-income residents. Residents there paid $450 a month. Nowadays, its rooms have been renovated and go for $1,900 to $2,100 a month.  

Legally, Starcity still operates a residential hotel, according to San Francisco’s Housing Inspection Services and Starcity’s co-founder, Mo Sakrani. But Starcity, like other SRO owners, has discovered a loophole in the city’s regulations: owners are allowed to renovate rooms and charge as much for rent as they like.

Upgrading SRO rooms to attract more-affluent tenants has been a trend in recent years, said Diana Martinez, program manager at the Mission SRO Collaborative, a nonprofit dedicated to providing services to the low-income residents of SROs.

“It’s a new type of definition of what SROs are, which was actually not something that was predicted,” Martinez said.

When the city first passed Ordinance 41 in 1981, the intent was “to preserve affordable housing by preventing the loss of residential hotel units through conversion or demolition, and to prevent the displacement of low-income, elderly, and disabled persons,” according to the city’s website.

A 1979 study counted 26,884 SRO units in San Francisco, and those numbers were diminishing. By 2011, the number of residential units stood at 18,910. Those numbers have gone up slightly; in 2015, the city reported a total of 19,166 units, but that includes units that are no longer affordable to low-income residents.

Of the Mission’s nearly 1,000 SRO units, 75 — or 8 percent — had become unaffordable for low-income residents by 2015.

Martinez said those losses have gotten worse in the last two years.

San Francisco’s regulations on SRO rooms are intended to protect a stock of low-income housing vital to many in San Francisco. As of this year, rooms must be rented for at least 32 days at a time.

Although removing a room from the SRO system can be expensive or even illegal, there is no legal limit to how much rent a landlord can charge for an SRO room.

Increasingly, Martinez said, owners are renovating previously cheap, undesirable housing into dormitory-style living for young, entry-level professionals. At Starcity, residents rent private bedrooms while sharing kitchens, bathrooms and leisure space.

It’s a trend the Mission SRO collaborative has been tracking.

“When I started working here almost three years ago, that’s when construction was going on with different SROs,” Martinez said. “We saw them closing temporarily.”

Back then she and her colleagues at the Mission SRO Collaborative could not figure out exactly why this was happening. Then, two years ago, they did a survey of residential hotels in the neighborhood and found widespread conversion of cheap rooms for low-income residents into renovated rooms for higher income residents.

Martinez said she has seen it happen at the Sunrise Hotel on 447 Valencia St., which currently charges $1,800 per month for a single resident room; at the Kaileh Hotel at 1041 Valencia St., which listed one of its rooms on the rental site Hotpads as a studio for $900 a month in 2015; at the Radha Hotel at 2042 Mission St.; at the Eula Hotel at 306116th St.; and at the Graywood Hotel on 29th St., where, she said, walking through the halls before it was destroyed in a fire, it was clear which doors opened to renovated units because those doors were painted white. The un-renovated units had brown doors.

When Starcity bought the building at 2072 Mission St. in 2015, it was called the Yug Hotel. Only three permanent residents lived there, Sakrani said. He attributed this to mismanagement.

Of the three tenants, one was a man who was almost 80 and needed daily care, according to Sakrani. Starcity arranged to have him taken to San Francisco Healthcare and Rehab on Grove Street, where he is staying long-term. Sakrani said the Starcity team checks on him regularly.

The other two residents are Eduardo, a 78-year-old man from Panama, and O.C., a man in his fifties. Both still live in the Starcity building and pay their old rent,  $500 a month. They remained in the building throughout the renovation process, and their rooms were remodeled, Sakrani said.

“We made a decision that we want to keep as much of the history of the building intact as possible, as well as the community of people who were living here,” said Sakrani. “It’s their home, for, in one case, over two decades, and, in another case, over a decade, and so they were informed, throughout our development process, of what was happening, and they were told when they could start utilizing the downstairs space. They were introduced to the new community members as they moved in.”

For the new 14 residents of Starcity, rent is four times what Eduardo and O.C. pay, and what other tenants would have paid before the renovation. But, Sakrani noted, all of the current residents enjoy much better facilities, including a communal kitchen and a backyard patio. The communal spaces are cleaned, and a live-in manager coordinates activities for the residents.

Before the renovation, Sakrani said, one of the rooms was full of black mold, and in a different room, the electricity was out. The building had no kitchen and few bathrooms. There was no laundry facility.

Sakrani believes the two tenants from the Yug Hotel have appreciated the improvements to their living space. O.C. spends time in the common spaces and plays music with the building’s other residents.

Martinez said the Starcity founders have met and worked with the Mission SRO Collaborative to ensure those two residents’ needs are met. Starcity has participated in fire safety training at the Mission SRO Collaborative’s request. Representatives from the fire department and the Collaborative were present.

“We have been in contact with Starcity because … we are working with the city to preserve housing stock and do what we can to mitigate the situation, but in the meantime, SRO buildings are being flipped,” said Martinez.

Closing the Loophole?

Martinez said there are efforts to control rent increases in SRO rooms. The Mission Action Plan 2020, a planning department initiative to retain low-income residents in the neighborhood, recommends additional regulations for SROs. The idea, however, is considered “‘on hold’ because of legal, political, or financial constraints,” according to the plan.

In a city with a housing shortage, Sakrani emphasized that providing housing for middle-income residents helps alleviate the crisis. Compared to other housing development projects in the Mission, Starcity’s rents are more affordable.

The company hopes to attract people who make $50,000 to $80,000 a year. Most new housing development projects in the Mission, Sakrani noted, target people with much higher incomes.

But Martinez said converting buildings designed for low-income residents doesn’t do any good for traditional SRO clients. “Any new housing that does not have low-income rents is not beneficial to the community we work with,” she said.

Sakrani said the company is relatively new and does not plan to develop any more existing residential buildings. “We started to realize the implications of developers who do this on a mass scale,” he said. “It’s really important for us to build partnerships in the community and have a positive effect in the community. There’s still a lot that we can do.”

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  1. Great work. Need more of this. The community does not benefit from maintaining substandard third-world level accommodations. That entire block needs. Our community is regularly victimized on that corner and I fear walking there.

  2. Rent control sounds great until 30 years later and the person orginally renting the aprtment/house has to retire. With Prop 13, the rents don’t justify the cost which leads to run down/moldy buildings and slum conditions. More rent control means more slums. If you are for rent control, you are ignorantly supporting crappy living conditions in the long term. Sorry to ruin your feel good policy.

  3. Expect this practice to gain momentum since their short term rental revenues have been squeezed out by Peskin and Kim et al. They have to make up the difference somehow.

  4. Remember when everyone was blaming Airbnb for prices going up? Now we have severely restricted Airbnb, leaving fewer available rooms, and the remaining landlords have less competition so they can increase prices even faster. Oh what a mess.

    At least more housing seems to be under construction.

    1. is it time yet to talk about loosening the noose of rent control? The top economists show that rent control does not keep rents down, it raises rents. The average rent of SF when you take into account rent control is $1700. I know folks who hold their rent control apt. while having a custom built home on a golf course. I know of a family whose kids now grown, all buy houses in Oakland, and always have one kid living at home to hold the rent controlled apt after their aging parents pass. Yes, i know my neighbors who don’t have the money to pay for renovations and are having a hard time making ends meet as they deal with large bills for cancer treatment for his wife, and their long term tenants all pay very little and make a lot of money now. all true stories.

      How is this fair and why aren’t we atleast talking about this as not everyone is a scumbag landlord/developer? Lets be fair just for a moment in the dialog.

      1. An apartment with rent control isn’t the same as one without. Initially, one pays a little bit extra, but gets an insurance policy, if years later rents in the area increase above the rate of the CPI inflation rate, one is protected from above inflation increases by the rent control insurance policy.

        Cities decisions to require rent control, is the same thing as California deciding that car drivers have to have insurance. Sure it would be cheaper for driver not to have insurance, but as a society we voted to raise the price of driving because of the benefits of stability and safety.

        Also, the proof that rent control works, is that he great cities of the world have rent control. In the US, think New York and San Francisco. Requiring that people pay a little extra, for future event security is proven good policy.

        For people who want to try out the city for a year or two, they probably pay for the rent control insurance, and never get the benefit. Same type of thing happens with health insurance.

        1. Unfortunately, rent control in SF is tied not to CPI, but to 60% of CPI capped at 2% a year. Historically this works out to far less than CPI, so over the long term, rent controlled rents go DOWN significantly in real terms over time.

        2. Willie,

          Insurance is a good thing I couldn’t agree more. As insurance goes, there are variables in cost to each persons insurance, depending on driving record etc.

          All i am asking is to have a dialogue not about ending rent control. Having a dialogue about tenants who take advantage of rent control apartments hurting those who really need the protection.

          Yes, there are bad landlords and Yes there are bad tenants who game the rent control system.

          Thats it, honestly.

        3. p.s. Rent control is capped in NY at 30 years (some 50) and you can’t leave the rent controlled apartment to your kids and they have much stricter controls on them and the ability to raise the rent more than in SF.

      2. It is awful and sad your friends have cancer.

        But as described, their current difficult financial is a result of their own irresponsible bad decisions. When they started renting their rent controlled apartment, they knew that they were getting premium rents, and that the future rental stream might be front-loaded if both the tenant stay a long time, and market rates outpace the inflation rate. A responsible landlord would have recognized that there was a cap on potential future earning, and planned accordingly. They should have saved for the rainy day, instead of spending on whatever they did.

        The landlord knew at the start of the contract that they were getting premium rental rates because of the rent control laws. If they choose to spend their windfall on the days equivalent of avocado toast, rather than plan for the future time when they could only raise rent the same as inflation that was their bad decision. We shouldn’t be socializing away the landlord’s irresponsible financial decisions

        Its sad she has cancer, but its not a reason to break a contract with long term people who paid rent reliably for years.

        1. HI Donna. You are assuming the landlords made bad decisions and they have not. This is a Latino family who worked hard to buy a house and kept their tenants long term. Of the 4 tenants, 1 is a vietnam vet who deserves all the protection he can get, the three others makes worlds more money now than the landlord could have made and will never move while buying other homes and renting them out for income.

          You make an interesting assumption that it was avocado toast eating folks as landlords. Quite the contrary.

          As noted to Willie, all i am asking is an open discussion about tenants who game the rent control system to get ahead while the Non awful landlords find it hard to make ends meet.

          Honestly, this is happening more than you know and i think we need a dialogue about it. That is all.

          Sincerely, Katie

  5. “When I started working here almost three years ago” This is the problem, the boosters nurture institutional memory because that is profitable. San Franciscans must depend on a never ending contingent of rotating, itinerant young people doing their public policy rotations on low income people in a place that they have no roots or institutional knowledge. We don’t stand a chance.

  6. Hello people of Mission Local. I am the CEO and cofounder of Starcity. I am a 33-year Bay Area, 12-year San Francisco resident, and I would like to make a few comments about your article.

    We thank you for taking the time to review our work, and spending time to highlight this issue will hopefully lead to discussion that is a very important one. We are huge fans of Mission Local, which is great publication. I would just like to clarify a few components of the story that are inaccurate or under-appreciated.

    All of the founders of Starcity came to SF with nothing in their pockets. My parents came from New York with nothing in the 1960’s and called San Francisco home for a decade. My first apartment in San Francisco had no windows and many times I’ve had to scrape by with nothing left over just to pay rent. Also, one of our founders was previously homeless. Needless to say, the issue of trying to make it work in this city, has been, and is top of mind to us at all times.

    So to talk a little bit about the issues…

    First, the condition of this hotel was in disarray with black mold and no structural reinforcements. It was one match away from a fire. We came in as a favor to a previous owner to see if we could upgrade the dire situation.

    Second, we displaced none of the existing tenants and provided them with higher quality rooms and access to a brand new kitchen, at the same rent they were previously paying. You should reach out to Lutheran Social Services to get the story on how we helped one of their clients. We went out of our way to look out for one of the tenants who had no family. To continue, although the new price is higher than what existing tenants would pay, it is far cheaper than $3,000+ studios and $4,500 1BR’s being contemplated for new construction in the neighborhood. We also include community budgets for events, dinners, free laundry, weekly cleaning and volunteer opportunities within the neighborhood. Our base rents are closer to $1,500 per month. Our long term goal is to make new housing that is affordable to people making minimum wage.

    Third, you mention that there is a concern of “flipping” — we are not intending on selling. We expect to hold on to this wonderful community for a long time. We’d be happy to meet and discuss our plans to add additional affordable units for low and middle income workers in the Mission because ultimately this is our long term goal — make great cities accessible to everyone. We have already been doing that with long-time Mission residents and invite you to join those conversations.

    Fourth, you highlight Ms. Martinez’s quote about believing that developers should make partnerships in the community, without asking for the other side of the story. Mo, Meg and my team have been doing a lot of hard work with the community thus far and even prior to being here. Many developers only do this in order to get their entitlements and then move on. We are here and we’re not going anywhere, we expect to be a long term stakeholder in the community, and one with a positive impact. We implore you to reach out to La Cocina, to the local Mission contractors we employed to open this building, to Alan Santos (a long time Mission resident), ArtlyOwl (who we worked with to feature local Mission artists within our community), the owners of Stanza and many more of our neighbors. Our intention is to understand and create conversation within the community, because there is a huge gap in dialogue between long time residents and new people to any community.

    Fifth, we understand that the SRO issue is real. We don’t intend on doing projects that willfully make neighborhoods more expensive. However, is it right to leave 17 units vacant because the quality of a building is so substandard that even the existing tenants have to sleep on the streets some nights? We believe there is a middle ground here and we would love to find a way to create an ongoing dialogue.

    Thank you for your review of our work, we continue to be long time supporters of Mission Local, and we hope to continue to have more conversations like this. I would be happy to meet in person and talk about solutions for making San Francisco more affordable to everyone. We can create a future that allows both the existing community and new people moving to the city to coexist in a positive and affordable way. It will take a lot of work but we’re up for the challenge.

    Thank you, Jon Dishotsky –

    1. Jon: Of course we would be happy to talk with you further. “Flipping” refers to taking housing stock out of what was available to low-income residents. As we write in the story, it is legal to do this and you are not alone in doing so. And yes, as we reported, the building was in bad shape when you took over and you made a lot of improvements and worked with the SRO collaborative. We are working on a follow up story about your reports to the city. The reporter will be in touch today. Best, Lydia

        1. Yes it does mean that, Martinez used the word in this instance to mean a unit that is renovated and flipped from being a unit that low-income individuals rent to units rented by higher income tenants. I thought that was pretty clear, but I hope now it is. Units are being flipped from one purpose to another.

    2. Hey John, I’m one of the residents in a communial SRO on your block. While we appreciate your attempt at making affordable housing for people with minimum wage, we find your presence on our block very troubling and the first sign of gentrification on Mission street between 16th and 17th. While $1500 (even though it’s listed on your site for 1900-2000) seems like an affordable price for millennials the reality is the average income for millennials is under 30,000 meaning the young healers and artists of this community that you claim to be protecting will no longer be able to afford to live here. You guys claim you’re trying to help the neighborhood- then why didn’t you make a space that could be actually afforadble for young creatives. Didn’t we see a real need for this after Ghostship? I must say I’m also very impressed with the diversity of your community that you’re promoting on your site almost as much as the decision to put a slate gray white box store front in a historical Latino neighborhood.

      1. Jacqui, we have more work to do here and would like to share some ideas on what to do with the retail space. We would like to share these with you personally as a local resident if you’re open to it? If so, shoot me an email, and we can sit down to discuss –

    3. Thank you Jon. I applaud the work you are doing. When was the last time we heard that someone remodelled a low rent paying tenants premises and they are joined into the community moving in? This is truly a step in the right direction and gives me hope for both sides of the housing issue to find common ground.

    4. Personally, I would like to thank you, Jon. Ive lived less than 1 block from your building for almost 15 yrs and it’s been a frickin scary mess mainly due to many of occupants of the SRO’s. If I had a dollar for every contemptible act I’ve witnessed or for each time a loitering person screamed/threatened me for my dog coming to close, I could afford to move.
      I appreciate that you are providing affordable housing to people who are not pimping, pandering, dealing drugs or human slaves.