A Redwood City couple is accused of unlawfully renting out an affordable housing unit in San Francisco as they lived in a $2.8 million home in Redwood City’s Emerald Hills neighborhood, according to a lawsuit filed by the San Francisco City Attorney’s Office.
Today, San Francisco City Attorney Dennis Herrera announced he’s filed the lawsuit against the investment advisors amid a broader series of investigations into affordable housing fraud in his city.
In 1999, according to the lawsuit, Caroline Novak lied on her initial application to obtain the below market unit at 300 Beale Street #316. She purchased the unit as part of the San Francisco Inclusionary Affordable Housing Program, which requires developers to set aside a certain number of units to be sold to low or middle-income households at below market rates. Such programs aim to provide housing options for residents of all incomes in an expensive city.
To be eligible for the program, applicants must qualify as low or moderate income, be a first-time homebuyer, and occupy the property as their primary residence, meaning they could not rent it out without the city’s approval.
The lawsuit said Novak falsely claimed on her application that she did not already own real property, when in fact she had a home in San Mateo.
After paying $178,500 for the unit, Novak, along with her husband Igor Lotsvin, allegedly rented out the studio, leveraging the unit as security for over $1.5 million in loans and lines of credit to build their own personal wealth, according to the City Attorney’s Office. Since 2015, the couple have kept the unit while living in their Emerald Hills home.
“It’s unconscionable that this couple would cheat an eligible San Franciscan out of an affordable home, just so they can keep an investment property and a pied-à-terre,” Herrera said in a statement. “Those days are over.”
Herrera is requesting a court order preventing the couple from owning the unit and requiring them to sell the property to a qualified owner. He is also seeking “civil penalties of up to $2,500 per violation of the state’s unfair competition law and up to $1,000 per violation of the Planning Code, including every day they owned the unit, among other relief,” the City Attorney’s Office said.
It’s the 22nd case thus far linked to Herrera’s investigation into affordable housing fraud in San Francisco.
Photo of City Attorney Dennis Herrera courtesy of the San Francisco City Attorney’s Office.