Hotels seek millions for when they were shelters

In September 2021, the owners of Hotel Union Square filed a claim with the city, alleging unhoused residents who the city had placed there had caused $5.6 million in damages — and cost the Dallas-based hotel operator hundreds of thousands more in lost rent.

City officials created the Hotel Program in 2020 during the COVID-19 pandemic and used it to house more than 3,700 high-risk residents in 25 hotels. With federal and state funding drying up, the city has gradually closed most of the hotels.

Representatives from Hotel Union Square noted that a site inspection “identified extensive damage” to the guest rooms, common areas, and elsewhere on the property.

“The city’s failure to promptly repair the damage to the hotel as well as its modest offers of remuneration are inconsistent” with the agreement it had struck with the hotel operator, a representative for the business wrote.

The comments came with dozens of pages detailing damage to the rooms, from broken baseboards to damaged hotel safes and other equipment.

The city responded with an offer for about $400,000 to repair the damage, and an additional $280,000 for lost rent, leading to the legal filing in January. In November, members of the city’s Government Audit and Oversight Committee met in closed session to consider a recommendation from the city’s Human Services Agency to settle the claim for some $5.3 million.

The agency is responsible for setting up and overseeing the provision of mass care and shelter during emergencies, a spokesman said, which is why the agency initially oversaw the hotel program.

“We believe the proposed settlement with Hotel Union Square is a fair resolution to this matter,” said Jen Kwart, with the City Attorney’s Office. “We continue to have conversations aimed at addressing any outstanding issues at other former SIP hotel locations.”

In the aftermath, Hotel Union Square filed the $5.6 million claim. Tilden Hotel also filed a claim, seeking $6.5 million, records show. The Board of Supervisors also has prepared for potential claims from the Good Hotel and Hotel Vertigo, both owned by Oxford Hotels & Resorts of Chicago.

A hotel operator from Hotel Union Square declined to answer questions or allow The Chronicle to visit and review the damage or ongoing repairs.

A representative for Tilden Hotel was not immediately available for comment, and officials from Vertigo and the Good Hotel did not respond to emails seeking comment.

While the city may now be on the hook for north of $10 million, city officials defended the program, which they said rehoused about 1,500 people.

Emily Cohen, spokesperson for the San Francisco Department of Homelessness and Supportive Housing, described the program as “hugely successful” in preventing the spread of COVID among the city’s most vulnerable homeless residents.

“I know what (the hotel is) asking for is expensive,” Cohen said. “But in terms of lives protected, homelessness ended, we still consider it a major success.”

While the city plans to fully wind down the program by the end of 2022, the city is in the process of buying one of the two hotels still housing residents — at 685 Ellis St. — which would eventually be turned into permanent supportive housing, she said.

City supervisors have met in closed sessions several times over the past year to discuss possible claims from Hotel Union Square, Tilden Hotel and others. Members of the board’s Government Audit and Oversight Committee are set to consider the motion again in closed session on Dec. 1. The full Board of Supervisors would then have to vote on the matter.

It’s still unclear how many claims the city may face, but with more than two dozen hotels participating with the program at its peak, city officials could soon be contending with more — particularly since some Shelter-in-Place hotels only recently began winding down operations.

City data show there are still two hotels in the program, housing 297 guests.

Spokespeople for the supervisors on the committee referred questions to the City Attorney’s Office. But another, Aaron Peskin, acknowledged that some of the tenants of the hotels had caused damage to the facilities and said the city was prepared to pay the actual cost of the damage — but no more.

“When we rapidly housed 3,700 people, we were aware that some of them would be tough customers,” he said. “And the city is prepared to pay for whatever real damage has been caused, at its actual cost — and some of the claims were inflated, but we will pay is actually owed. Bottom line is, if it’s legitimate, we’ll settle. And if they think they’re going to fleece San Francisco… we’ll litigate.”

San Francisco Chronicle staff writer J.D. Morris contributed to this report.

St. John Barned-Smith is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @stjbs