SAN FRANCISCO—The city of San Francisco and the Academy of Art University settled a
lawsuit on Monday, December 19. The Academy of Art University will pay a landmark settlement worth $60 million to help alleviate the city’s housing crisis.

San Francisco City Attorney Dennis Herrera filed a lawsuit against the university alleging the school purposefully violated state and local laws for 9 years to obtain multiple properties throughout the city of San Francisco for student housing and classrooms.

“This was a case where the Academy, a privately held for-profit company, amassed a real estate empire while thumbing its nose for a decade at the planning and building department code requirements. These are requirements that every San Francisco property owner must follow,” Herrera said.

Thirty-three of the forty properties owned by the Academy failed to comply with permit, entitlement or authorization requirements. This negatively impacted the city housing crisis by removing hundreds of affordable units in San Francisco’s Northeastern corner, Herrera’s office indicated.

“For too long, some in the city turned a blind eye to these egregious violations, which have exacerbated our citywide housing crisis, particularly in District 3,” said Board of Supervisor Aaron Peskin in a statement.

The Academy’s attorney, James Brosnahan, said the university has worked with the planning department since 2007 in an attempt to comply with housing and building codes. Bresnahan says the school made three settlement officers before Herrera filed the lawsuit in May 2016.

According to Herrera, the $60 million settlement is the largest the city has ever received in a code enforcement case.

The Academy of Art University agreed to provide 160 units for affordable housing in San Francisco’s Nob Hill neighborhood around Pine Street.

The Academy will build new affordable housing units and upgrade the other property. They will also maintain these properties as affordable housing for people who earn half of the area’s median income for 66 years.

This part of the settlement was drafted to compensate for the unauthorized properties the university accumulated during the city’s housing shortage. This part of the settlement is valued at $40 million, Herrera noted.

“This [university] has agreed to be part of the solution rather than a major contributor to the problem,” Brosnahan said.

The Academy will also pay another $20 million for penalty payments, fees, and a contributions to programs that help low income tenants.

Over $7 million of the $20 million will be awarded to city loan groups like housing nonprofit organizations, which will allow smaller rent controlled apartment buildings.

Another $6 million will go to unfair completion penalties and $4.7 million to pay for development impact fees.

Around $1.3 million will reimburse the city’s enforcement cost and $1 million will pay for planning codes penalties.

“[The] Academy of Art University and its real estate affiliates behaved for more than a decade like they were above the law. We’ve ensured those days are over. After years of meeting our good faith with bad faith, the academy has finally agreed to do right by the people of San Francisco. I look forward to the academy taking this new path, one where they follow the rules and are a positive influence in their hometown,” said Herrera during a press conference held at City Hall.

City Attorney Dennis Herrea
City Attorney Dennis Herrea

The Academy filed for an application for a development agreement yesterday, and now the Planning Commission and the San Francisco Board of Supervisors must approved the plans.

“We’re very pleased with the result of the resolution because it allows the academy to concentrate on its main mission, which is to educate art students in the city,” Brosnahan said.

The Academy of Art University was founded 1929 in San Francisco and currently has over 8,700 students studying topics like fashion, filmmaking, journalism, animation, art education, advertising and architecture.