Herrera’s $1.46 Million Settlement Not Too Harsch for Low-Income Housing in San Francisco

Decade-Long Dispute Over Allison Hotel Conversion Ends With Direct Payment By Harsch Investment Corp. to City Housing Non-Profits

Following nearly a decade of lawsuits and countersuits in both state and federal courts, City Attorney Dennis Herrera today announced the successful resolution to the City’s longstanding legal battle with Harsch Investment Corp. over the Residential Hotel Conversion Ordinance, a 1979 law intended to staunch the rapidly diminishing supply of low-income housing in San Francisco. Although Harsch lost its case in San Francisco Superior Court last June for illegally converting residential units at its Allison Hotel to hotel rooms for tourists, the company retained rights to appeal the decision and was continuing to pursue litigation against the City in Federal Court. Under terms of the settlement negotiated by the City Attorney’s Office, however, Harsch has agreed to drop its lawsuit in federal court, waive all rights to subsequent appeals and pay $1,364,000 to three City non-profits to assist in creating new affordable housing units. Harsch will pay another $100,000 to support an existing program that provides affordable housing for seniors.

“This is a just outcome that upholds the integrity of an important law and will make a real difference in the lives of those most affected by our City’s affordable housing crisis,” said Herrera. “To anyone who doubts our resolve about protecting low-income housing in San Francisco, this settlement should send a clear, unambiguous message that we stand ready to fight. I commend the Board of Supervisors and Mayor Brown for their unity and sound judgment in approving the agreement so expeditiously.”

The settlement, which was approved at the November 18, 2002 meeting of the San Francisco Board of Supervisors, was signed by Mayor Willie L. Brown, Jr. last week. Under terms of the agreement, Harsch will give up its right to appeal its judgment in the Superior Court case, dismiss its federal action, and pay $1,464,000 directly to the following four non-profit organizations providing affordable housing:

  • $1,064,000 to the Tenderloin Neighborhood Development Corporation for the West Hotel Renovation Project at 144 Eddy Street, which will help create 47 new residential SROs and correct severe code violations that affect another 58.
  • $150,000 to North of Market Senior Services to help create 13 new residential units at 315 Turk Street for extremely low-income homeless seniors.
  • $150,000 to Friendship House Association of America to help build an 80-bed facility on Julian Street in the North Mission, which will provide transitional housing and residential substance abuse treatment targeted to Native Americans.
  • $100,000 to the Hebrew Home for Aged Disabled in the South Mission, a skilled nursing home for about 430 senior citizens of limited income.

“This is an excellent settlement that contributes to the solution rather than the problem and averts costly litigation down the road,” said Deputy City Attorney Andrew Schwartz, who handled the litigation for San Francisco and negotiated the ultimate settlement with Harsch Investment Corp. “I congratulate Harsch’s management team for deciding to do the right thing.”

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