The Academy of Art University has tentatively agreed to the terms of a “$60 million settlement” with the City of San Francisco to resolve allegations that the institution has systematically schemed to violate state and local laws in its acquisition and use of real estate holdings in San Francisco over the years.

As we first reported earlier this year, over 80 percent of the University’s 40 properties in San Francisco are operating illegally, including nine buildings and over 250 units of housing which are ineligible to be permitted or even legalized for student use without legislative amendments to San Francisco’s existing Planning Code, 160 of which the AAU has illegally converted from affordable housing into dorms for its students.

Per the terms of the proposed settlement, the AAU will pay $20 million in penalties and fees, $7 million of which is earmarked to fund the City’s Small Sites Program which provides loans for the purchase and maintenance of small rent-controlled buildings at risk of being emptied via the Ellis Act.

The other $40 million of the settlement is the estimated value of 160 apartments that the academy will have to provide at below market rates to households earning up to 50 percent of the Area Median Income for a period of 66 years.

The 160 affordable apartments are to be comprised of 80 existing units at 1055 Pine Street, units which are currently student occupied and will need to be emptied and renovated within 18 months, and 80 new units to be built within six years on the underdeveloped 1069/71 Pine Street parcel next door, upon which a one-story gym currently sits as pictured above.

The proposed settlement also includes an agreement that the academy will withdraw its requests to legalize its illegal uses of its building at 2340 Stockton, 2295 Taylor and 700 Montgomery Street; an injunction covering any other properties the academy may use in the future to ensure compliance with the Planning Code; and a consent judgment allowing the court to enforce all aspects of the settlement.

And if approved and ratified, the Academy of Art University would be given a clean bill of health with respect to all city land-use rules, according to the City Attorney’s Office.

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Comments from “Plugged-In” Readers

  1. Posted by roa

    Managers and owning family members should have been prosecuted and jailed under RICO laws for stealing from every san francisco and california resident for decades.

    thieves. plain and simple. rot in hell.

    • Posted by Conifer

      “stealing from every san francisco and california resident”

      I am no apologist for the so-called “university,” but what did they steal from you or me? It strikes me that this is a typical real-estate deal, struck by a city and an investor.

  2. Posted by Elitist Pig

    $60M sounds like a slap on the wrist here…

  3. Posted by Adam

    So part of the solution to their improper removal of rental units from the market is the construction of a new building sometime in the next six years? And I don’t understand the illegal use issue- if they are being required to withdraw their request to legalize their use of those properties does that mean they will simply be grandfathered in until such time as those properties are ever sold, at which point they revert to their original zoning?

  4. Posted by SFRealist

    This sounds like a lot less than $60M to me. I hope the Supervisors scrutinize it closely (HA!)

    What happens if (when) the AAU starts violating our various statues and ordinances all over again?

  5. Posted by SFRealist

    (Full disclosure: I’m biased against the Academy of Art University. Has anyone actually done more to remove existing low income housing from our market than the AAU?)

  6. Posted by Orland

    Their payment of the $60 Mill. is kind of what got Luther so riled up.

    • Posted by TheNewGuy

      Award for best comment!!
      Now where did I hide my 95 theses? And do you have a spare hammer and a bunch of nails?

  7. Posted by Amewsed

    The City has $7 Million to purchase smaller rent controlled properties in danger of being Ellis Acted. I have two properties which I am willing to part with for a combined $3 Million. Where does one make the pitch?

  8. Posted by DrElefun

    As part of their defense, it’s surprising that the Academy didn’t play the “A card.” The artist card.

    In a society where the victim mentality is so prevalent, every whiny group has their card.

    The artist card is currently getting ragged from being played by every unsafe flophouse for slackers, so why not one more play in this case?

    • Posted by Amewsed

      AA would make a less sympathetic witness/player of the A card because it has made a substantial profit from the school. This deal here would nullify the City’s need to air out its own decades long culpability or lax standards in selectively enforcing building codes and zoning laws. The City could take prior neglect and spin it now to say we’ve added 160 new housing units for the vulnerable and other monies and AA caps the amount of penalties, resolves all outstanding notices of violations, limits attorney fees and litigation threats.

  9. Posted by Just My Opinion

    I will say it is hard to judge unless I was in the room, but it does seem like this was systematic, repetitive deception aimed at defrauding the City and enriching themselves. These for-profit, privately owned “universities” are highly problematic. Should there not have been a punitive part of the award just for their criminal behavior?

  10. Posted by Anon123

    I think the Academy can play the A card to some degree, or the student card. They use(d) the apartments for student housing, usually not the most affluent group. So while they broke the regulations it was in a less profitable way than market rent housing or condo conversions would have been. And while this isn’t mentioned anywhere, I am sure that it was part of the consideration.

    • Posted by SFRealist

      From what I’ve read, their students are quite affluent.

      • Posted by pablito

        Hmm. And you believe everything you read? What an interesting world you must inhabit. In the world the rest of us live in – most art students are anything but affluent. Housing for students is pretty much considered de facto affordable.

        • Posted by LikeItIs

          While it might be true that ‘most’ art students are not affluent, the published tuition for AAU is $20,000 per year. Add the cost of housing in SF to the cost of tuition, and you’re looking at approximately $40,000 per year of school, which rivals the cost of top schools in the US. So,YES, you do need to be affluent to pursue this kind of art degree and take on that much debt. I don’t live in a world where $40k per year is a ‘cheap’ degree.

        • Posted by SFRealist

          I don’t believe everything I read, but I do weigh evidence. What evidence do you have, pablito?

          • Posted by pablito

            Evidence that most art students aren’t rich? I dunno – 2,000 years of recorded history. You want to make money you go into Tech. Maybe they are looking at $40k per year for this art school. Most of them are borrowing it from Uncle Sam on no-qual loans and not paying it back. That was the subject of another much bigger AAU lawsuit only 3 years ago.

          • Posted by SFRealist

            AAU students are not the norm for art students. That’s long established fact.

    • Posted by Neighborhood Activist

      Most of AAU’s students are rich foreigners (or, perhaps more accurately, foreigners with rich parents.) AAU is basically an immigration scam, where young adults from other countries (and rich parents) can live in San Francisco for several years by going to “school.”

      I’m sure there must be people who built a great career off of their AAU “education” but I don’t believe I’ve ever met one. All those I’ve known have eventually gone back to their home countries (often when Mommy and Daddy’s money, or patience, ran out) and secured important jobs like department store clerk.

      • Posted by Just My Opinion

        WOW. Ironic name. There is nothing “neighborhood” about what you have written here. Who are you to judge whether a department store clerk’s job is important or not. So rude. Think what you will about AAU, but the rest is just awful.

        • Posted by Gus

          My wife got an education at AAU and became a graphic designer for a well-known design company. Few of the classmate friends seemed “rich”. I agree that parts of the school seem more geared toward profit vs. doing the best they can for their students, but that doesn’t mean there aren’t talented and passionate people at work there. So, I believe there is a kernel of truth to what you’re saying, but please be careful about your sweeping, ignorant generalizations.

        • Posted by Neighborhood Activist

          I apologize for the “department store clerk” reference, it was insensitive and inappropriate. There is nothing wrong with being a department store clerk (there’s nothing wrong with any gainful employment.) My intent was to reference a job that didn’t use or require any of the so-called “education” received at AAU, and I put my foot in my mouth.

  11. Posted by bachman_erlich_overdrive

    “Bad actor” pilloried for taking away affordable housing is forced to provide affordable housing. Reaction? Much hand-wringing.

    Crowded unsafe warehouse burns to the ground killing dozens. Reaction? Much hand-wringing about what will happen to the communities of artists who won’t be allowed to live in death traps any more.

    David Campos is called Donald Trump for wanting to keep out a major housing development in his district. Project cancelled! (Could have tweeted it!)

    Urine soaked movie theater structure “saved” so that we can have a pool, in a cave in the Richmond! At least all of the pee will be chlorinated.

    What a wonderful season of San Franciscanity we celebrate!

  12. Posted by mimi

    Need proof they are overcharging for housing? Look at the Academy of Art website for what they charge the students.

    • Posted by Wai Yip Tung

      Rents range from $1000 per month in a 4 person shared room to $2000 for a studio with kitchen. Welcome to San Francisco!

      • Posted by Neighborhood Activist

        Of course they do. AAU is a real estate racket, they’re in the business of monetizing their real estate holdings above anything else.

      • Posted by pablito

        That’s what UCB charges for housing….

    • Posted by curmudgeon

      And it can all be handily added on to your student loan. I knew a young guy at another for profit university who got trapped in the same scam. He was paying more to live in a dorm than he would have as a roommate in private market housing (with more privacy), but he was trapped because the college would take the loan proceeds and he didn’t have any cash. AAU gets their students coming and going.

  13. Posted by Harambe

    They charge their students market price. ~$2000/month for a studio.

    • Posted by mimi

      A semester at Academy of Art University is 3 months. A private studio with kitchen, per their website, is $7,826 a semester plus fees making a studio approximately $2,600 per month. So indeed they are charging above market.

  14. Posted by Chris

    The median rent for a one-bedroom apartment in San Francisco is approximately $3,600. You are not going to pay $1,600 less for the median studio. Yes, you can find a studio for $2,000 a month in some places in the city, but many studios in the same neighborhood as 1055 Pine are going for $2,500-$2,800 a month, or more. So, no, the school is not charging market rent–they are charging less than market rate.

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