SAN FRANCISCO (KPIX 5) — 2020 has been dubbed the year of the ADU, as new laws are making it easier to build accessory dwelling units, often called in-law units or granny flats.

The idea is that these small structures can help with the housing affordability crisis, but small landlords in San Francisco are finding they’re much easier to build than they are to legalize.

Erik Terreri is one such small landlord in San Francisco. He owns an old Victorian on Potrero Hill with six tenants living inside. Upstairs is a two bedroom with two couples, downstairs is an ADU. He recently found out the ADU unit is illegal after a neighbor complained to the building department.

“I was pretty shocked when we heard why it was considered an illegal unit,” tenant Matt David said.

The ceiling is off by a couple of inches, as are the floorboards, and groundwater access isn’t ideal all of which make this unit technically illegal.

“They could fine me $250 a day for not legalizing it,” Terreri said.

Terreri is hoping he can keep the unit on the market. His tenants want to stay, he’s charging below market rate rent and doesn’t want to displace six people. But right now, Terreri can’t take the unit off the market or find a path toward legalizing it.

“It’s a total catch 22,” Terreri said.

To legalize the unit, Terreri would have to tear up the sidewalk out front, which would cost at least $50,000. The excavation work needed to raise the ceilings would cost more than $200,000.

It is work the tenants don’t think needs to be done and that Terreri says he can’t afford to do.

“It’s extremely frustrating for someone who doesn’t have deep pockets like me,” he said.

“It’s a very scary situation,” tenant Brittany Carrico said.

“My hope is the city finds ways to make it easier to make an ADU be permitted to be legal,” David said.

Two conflicting San Francisco laws are at play here. The first is David Chiu’s ordinance from 2014 when he was a supervisor. That ordinance allows landlords to bring illegal in-law units onto the market without a permit.

Another law that passed in 2016 makes it difficult for landlords to remove any unit, legal or not from the market. So Terreri would have to be granted a hearing by the Planning Commission to remove the unit, something he says he’s been waiting two years for.

“Dealing with the Planning Commission is sort of like playing Russian roulette,” Terreri said.

“It’s incredibly difficult to be a small property owner in San Francisco,” attorney Daniel Bornstein said.

Bornstein represents small landlords. He says he regularly hears stories of mom-and-pop property owners being confused by regulations in San Francisco and deciding renting here isn’t worth the hassle.

Bornstein points out that Terreri is taking a legal risk either way. If he continues to rent an illegal unit, his tenants could sue him.

“You’re between a rock and a hard place,” Bornstein said.

So what’s a small landlord with happy tenants in a city experiencing a housing crisis to do? It’s a house of cards and whether it falls hinges on Terreri’s decision to either break the law or find a way around it.

“What I would say to the Planning Commission is, if you really care about the housing crisis and providing affordable housing to the citizens and residents of San Francisco, help me legalize this unit,” Terreri said.

A hearing has been scheduled to consider removing the unit from the market on April 2nd.

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