A prohibition on San Francisco’s large hotels converting rooms into high-end condominiums is being proposed, city officials said, to protect the tourism industry, jobs and the hundreds of millions of dollars The City receives annually in hotel room tax revenue.
The proposal is not a new idea, but builds on an interim prohibition approved by the Board of Supervisors in 2005.
Board of Supervisors President Aaron Peskin had introduced a ban at that time as several hotels — including Nob Hill’s Fairmont Hotel, located in Peskin’s district — were considering converting hundreds of rooms into more lucrative condos, angering hotel worker unions who said it would result in hotel job cuts. The conversion of hotel rooms into condos is a growing trend in other cities as well.
But Mayor Gavin Newsom worked out a compromise with hotel worker unions and Peskin to ensure the prohibition would last for only 18 months, during which time the effects would be studied.
The compromise also just affected hotels with 100 rooms or more, not 50 rooms or more as originally proposed.
There are in San Francisco about 33,000 hotel rooms and 200 hotels, of which 80 have 100 rooms or more.
Peskin introduced legislation on Tuesday that would enact the prohibition for at least a decade.
It does, however, allow the Planning Commission to grant up to 500 exemptions in the first two years, allowing the conversion of 500 hotel rooms into condos. In subsequent years exemptions would be considered after weighing certain criteria, including whether the conversion would not “reduce the supply” of rooms in large hotels.
After the 18-month prohibition, Peskin said analysis shows “hanging on to our existing hotel rooms is vital to the economic future of San Francisco.”
Supervisor Jake McGoldrick thought the bill to be too lax.
“As far as I am concerned the number needs to be zero in terms of hotel room conversion into condos,” he said.
During this fiscal year, The City is expected to take in $210 million in hotel room tax revenue, and visitors paid out $478 million in taxes, or $14,563 per room, the legislation says.
Supervisor Michela Alioto-Pier was not supportive of the prohibition. She said hotels should be able to convert rooms if they so choose.
The legislation is expected to be taken up in the coming weeks by the Board of Supervisors Land Use and Economic Development Committee.