Government Audit and Oversight Committee Hearing on Small Business Rent Relief – March 18, 2021
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Government Audit and Oversight Committee Hearing on Small Business Rent Relief – March 18, 2021
The Government Audit and Oversight Committee, chaired by Supervisor Dean Preston and joined by Vice Chair Connie Chan and Supervisor Rafael Mandelman (with Supervisor Hillary Ronen also participating), met on Thursday, March 18, 2021. The committee first handled three litigation settlements totaling $244,000, including a case concerning sleep deprivation in jail, and then devoted the bulk of the meeting to a hearing on the economic impacts of commercial landlords’ failure to grant rent relief during the COVID-19 pandemic. The hearing featured presentations from the Budget and Legislative Analyst (BLA), the Office of Economic and Workforce Development (OEWD), the Office of Small Business (OSB), the Small Business Commission, and the Lawyers’ Committee for Civil Rights, followed by extensive public testimony from small business owners.
Litigation Items (Agenda Items 2-4)
- The committee unanimously recommended approval of three settlements to the full Board of Supervisors for the April 6, 2021 meeting:
- Settlement of lawsuit – Jose Poot, Kishawn Norbert, Kenyon Norbert, Marshall Higginbotham, Antoine DeWhitt, Corey Butler, Montrail Brackens, Delon Barker, Javonn Allen – $30,000
- Settlement of lawsuit – Jose Parra – $115,000
- Settlement of unlitigated claim – Sharon Eastman – $99,000
- Chair Preston and Supervisor Ronen expressed concern about sleep-deprivation practices in the Sheriff’s Department highlighted by the first case, and Vice Chair Chan emphasized the need for the newly established Sheriff’s Oversight Commission.
Public Comments & Testimony
- Callers included small business owners, merchant association leaders, and community advocates from districts including the Castro, Valencia Street, Haight-Ashbury, Japantown, the Mission, and the Richmond. Many reported that landlords refused to negotiate rent reductions, demanded full back rent despite closures, or used legal threats. Several speakers requested an extension of the commercial eviction moratorium, direct legal representation (including litigation defense), a reinstated vacancy tax, a citywide “shop local” campaign, and more oversight of grant funds. Some noted that the moratorium merely deferred debt, and that small businesses were drowning in rent obligations. Testimony highlighted that minority-owned, immigrant, and non-English-speaking businesses were disproportionately affected due to lack of legal sophistication and language barriers.
Discussion Items
- BLA Report on Unpaid Commercial Rent (Fred Brousseau): Taxable sales fell 48% in Q2 2020, with food/drink services down 67% in Q3. Estimated unpaid retail rent totaled $18.5–39.8 million per month; including office/industrial, $19.1–45 million per month. Over nine months, the cumulative range was $172–404 million. Federal PPP loans ($4.2 billion) were unevenly distributed, favoring professional services over hard-hit retail and hospitality. Only 9.4% of local grant/loan applicants (1,405 of 15,000) received funding. Recommendations included enhancing OEWD and OSB outreach and legal services, especially for underserved businesses.
- OEWD Presentation (Diana Ponce de Leon, Manish Goyle): The commercial eviction moratorium was extended to June 30, 2021 (aligned with Governor Newsom’s order). Small businesses (≤$25 million gross receipts) have up to two years to repay back rent and can terminate leases if no agreement is reached. OEWD provides guidance, referrals to legal service providers (13 CBOs, Lawyers’ Committee, Bar Association partnership), and handles ~400 referrals annually. Data on vacancies from storefront surveys showed a 3.5% average increase across 24 corridors since 2018, with the largest jumps on Union Street (9%) and others. Business closure data from the Treasurer’s office was noted to be incomplete because tax deferrals delayed reporting; an uptick expected after the April 30 registration deadline. OSB Director DeCondrizi reported a 44% increase in service requests (6,475 businesses served) and 361 real-estate guidance inquiries, with 85% referred to legal services. The legacy business rent stabilization grant has secured 42 leases with 10-year terms, paying $140,000 in first-year obligations and $1.138 million in subsequent years, but half of grant recipients said landlords used the grant to offset unpaid rent rather than reducing it.
- Small Business Commission Survey (President Sharky Laguana): 582 responses; 77% lease their space; a large portion reported no rent negotiation; 44% had missed payments. The commission recommended fully funding the rent stabilization grant, expanding legal support, and leveraging the American Rescue Plan. Laguana also described personal experience of dwindling revenue and the difficulty of negotiating with landlords.
- Lawyers’ Committee for Civil Rights (Tobias Damler): Many small business tenants face cryptic leases, are unaware of their rights, and cannot afford litigation. Landlords increasingly file civil damages lawsuits that go unanswered. Legal representation in negotiations and litigation is critical. The current network can meet transactional demand but there is a gap in litigation defense. Assistance must include full-scope representation, not just advice.
- Supervisor Commentary: Chair Preston criticized the absence of proactive OEWD outreach and the neutral mediator role, calling for clear advocacy on behalf of small businesses. Supervisor Ronen proposed exploring a vacancy tax reinstatement and a shop-local campaign. Supervisor Chan highlighted the need for right-to-counsel legislation for commercial tenants and focused on the challenges of immigrant business owners. Supervisor Mandelman noted the market failure where landlords refuse to negotiate despite high vacancies, and called for stronger penalties for bad actors. All expressed frustration with state-level preemption of local rent control.
Key Outcomes
- The committee voted unanimously to file the hearing (no further action on this item).
- Chair Preston pledged to work with the City Attorney to explore policy reforms that would directly address back rent, potentially including compelled rent reductions or stronger commercial tenant protections.
- Supervisors committed to continuing collaboration on legislation to expand legal representation (right to counsel), evaluate the vacancy tax, and develop a citywide “shop local” campaign.
- OEWD and OSB were asked to provide better data on the effectiveness of current rent-negotiation assistance and to report back on unmet demand for legal services.
Meeting Transcript
Will come to order. Uh welcome to the Thursday, March 18th, uh 2021 meeting of the Government Audit and Oversight Committee. I am Supervisor Dean Preston, the chair of this committee, and I am joined by Vice Chair Connie Chan and committee member uh supervisor Rafael Mandelman. Uh thank you to uh the committee's clerk, John Carroll, and to SFCO TV for staffing this meeting. Mr. Clark, do you have any announcements? Yes, thank you, Mr. Chair. In order to protect the public, board members, and city employees during the COVID 19 health emergency. The Board of Supervisors Legislative Chamber and Committee Room are closed. This precaution is taken pursuant to all various local state and federal orders, declarations, and directives. Committee members are attending this meeting through video conference and will participate in the meeting to the same extent as if they are physically present. Public comment will be available for each item on this agenda. Both San Francisco Cable Channel 26 and SFgovTV.org are streaming a public comment call in number across your screen. Your opportunity to speak and provide your public comment during any of the public comment periods will be available to you via phone by calling 415-65501. Once you're connected and prompted, enter the meeting ID for today's meeting, which is 187-33371. Then press pound twice to be connected to the meeting. When connected, you will hear the meeting discussions, but you will be muted and in listening mode only. When your item of interest comes up, dial star followed by three to be added to the speaker line. Assistant prompt will indicate that you have raised your hand. Please wait until the system indicates you've been unmuted and you may then begin your comments. Best practices are to call from a quiet location, speak clearly and slowly, and to turn down your television, your radio, or your streaming device. Everyone must account for potential time delays and speaking discrepancies that we may encounter between live coverage and streaming of the meeting. Alternatively, you may submit your public comment in either of the following ways. You may email me. My name is John Carroll, and I'm the clerk of the government audit and oversight committee. My email address is J-O-H-N period C A R R O L L at SFGO V dot or G. If you submit your public comment via email, it will be included in the legislative file as part of the matter. Our address is one Dr. Carlton B Goodlit Place, room two forty-four, San Francisco, California, nine four one zero two. One additional issue, Mr. Chair. We have today interpreter assistance provided from OCA for a public comment line in Spanish and in Chinese.org stand transmitted number que de Marlena Pantalla. Cada orador tendrá permitido solo dos minutos para expresarse. John Carroll, arroba SFGOVE.org. Thank you. Thank you, Arturo. Arturo, I'm gonna just once real quick mention the meeting ID number one more time. Could you uh could you interpret after I've provided it? The meeting ID is one eight seven three three three nine four seven one. Could you repeat that? Um sure. Hold on a second. Let me write that down. What did you say? 1873 9471. 9471. Sorry, I had the wrong number. Um thank you. Quiero ser una correction para dar su comentario, por favor marque el telefono que es 14156501, seguido por el código de la reunion, el cual is 187-3331.
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