Building Inspection Commission approves some amortization extensions, continues many cases and denies two amid documentation gaps

SAN FRANCISCO — The San Francisco Building Inspection Commission voted March 19 on requests from hotel owners seeking extended amortization periods after Ordinance 36-23 narrowed the definition of tourist use for residential hotels.

The commission granted multi‑year extensions for a subset of properties, denied two applications where applicants provided no supporting documentation and continued several other cases to the April 16 meeting for applicants to submit detailed invoices, permits and calculations staff requested.

The commission’s decisions came during a lengthy hearing under the Hotel Conversion Ordinance (HCO), which staff described as codified in chapter 41 of the Administrative Code and that narrows when short‑term stays count as tourist use. Senior housing inspector Matt Luton told commissioners the HCO’s amortization review “is … about the costs that were incurred” and that staff evaluates total investment, how long investments have been in place and the suitability of those investments for continued residential use.

Votes at a glance

- 54 Fourth St.: Continued to April 16 to allow the applicant to provide documentation supporting claimed investments (motion carried unanimously). - 80 Ninth St.: Granted a 3‑year amortization extension consistent with staff recommendation (motion carried unanimously). - 507 Bush St.: Continued to April 16 for supplemental documentation (motion carried unanimously). - 1507 California St.: Granted a 10‑year amortization extension (motion carried unanimously). The commission directed the secretary to prepare written findings reflecting the decision. - 935 Kearney St.: Continued to April 16 for documentation (motion carried unanimously). - 2160 Market St.: Denied for lack of submittal or representation at the hearing (motion carried unanimously). - 2162 Market St.: Denied for lack of submittal or representation at the hearing (motion carried unanimously). - 1906 Mission St.: Continued to April 16 to allow additional evidence (motion carried unanimously). - 240 O’Farrell St.: Continued to April 16 for supplemental documentation (motion carried unanimously). - 411 O’Farrell St.: Granted a 10‑year amortization extension consistent with staff’s analysis (motion carried unanimously). - 161 Powell St.: Continued to April 16 for supporting documentation (motion carried unanimously). - 242 Powell St.: Continued to April 16 for supporting documentation (motion carried unanimously). - 2263 Sacramento St.: Granted a 10‑year amortization extension (motion carried unanimously). - 717 Sutter St.: Granted a 3‑year amortization extension (motion carried unanimously).

What the commission considered

Under the HCO, the commission’s review is limited to whether a requested amortization period is “reasonable” based on factors in the code: the total cost of investments, how long those investments have been in place, the suitability of the investments for continued residential hotel use, and any other relevant factors bearing on a reasonable return. Matt Luton, senior housing inspector, told the commission that applicants should provide itemized evidence — permits, invoices, dates in service, and an explanation distinguishing investments that were specific to tourist operation from improvements that would also serve residential use.

At multiple hearings, applicants said their investments were made on a business model that assumed seven‑day minimum stays, and they presented loss projections tied to shifting to 30‑day minimums. For example, John Lee, who identified himself as the owner of 1507 California Street, said, “We purchased the property for $6,200,000 in 2021,” and argued that his capital improvements, which he put at roughly $3.4 million, were made under assumptions of short‑term stays. After reviewing submitted materials and hearing testimony, commissioners voted unanimously to grant that property a 10‑year amortization period.

Where documentation was incomplete, commissioners frequently continued applications. Several applicants — including properties at 54 Fourth, 507 Bush, 935 Kearney, 1906 Mission, 240 O’Farrell, 161 Powell and 242 Powell — told the commission they would supply invoices, permits or itemized summaries; the commission set an evidentiary deadline tied to its next regular meeting and repeatedly reminded applicants that no further continuances would be allowed after the April meeting.

Two applications (2160 Market Street and 2162 Market Street) were denied after applicants did not appear and did not submit the information staff said was necessary for the commission to evaluate the request.

What applicants were asked to provide

Staff repeatedly asked applicants to submit clear, itemized evidence showing (1) what was purchased or installed, (2) when the work went into service, (3) whether the investment was specific to tourist/short‑term operation or also suitable for residential use, and (4) a concise math summary showing how the applicant calculated the requested amortization. Staff emphasized applicants may redact sensitive financial details but must show enough backing to establish a factual basis for any extended amortization period.

Public comment and other items

A public commenter raised an unrelated but substantive concern about unpermitted work at a Tesla showroom and about whether the Fire Department had performed inspections on that project; the commission acknowledged the public interest but did not take action at the hearing on the Tesla matter. Director’s Report items were received and not presented for discussion, as noticed.

Why it matters

The commission’s rulings determine how long owners can expect to collect revenue under a short‑term model before they must adapt to the new 30‑day standard defined by Ordinance 36‑23. For properties awarded longer amortization periods, owners have additional time to recoup investments that commissioners judged tied to the short‑term model. For those continued to April 16, applicants were given one final opportunity to provide evidence; commissioners stated no continuances would be allowed after that meeting.

Next steps

The Building Inspection Commission set April 16 as the next meeting to resolve continued cases. Applicants whose matters were continued were instructed to submit the requested documentation in advance so staff and commissioners can complete the evidentiary review.