San Francisco Has a Black Market for Housing… That’s as Bad as It Sounds
27th August 2025
“Black market” is one of those political smears coined by statists who don’t think people ought to be engaging in voluntary private transactions that are unapproved by the government.
The owners of three single-room occupancy (SRO) hotels in San Francisco’s Chinatown recently settled a lawsuit with the city, agreeing to pay a hefty fine of more than $800,000. Among their alleged crimes was that they “illegally converted, combined or added unauthorized housing units” to their properties.
Note the sin: “unauthorized”.
The allegations expose something that should be humiliating for San Francisco: the development of a black market for housing.
The lawsuit was not San Francisco’s only effort to combat the underground housing market. In recent years, to name a few examples, the city sued a man for cramming 15 tenants into a three-bedroom home and fined a developer $1.2 million for constructing an apartment complex with triple the residential units that city planners had approved.
Note the sin: not what “city planners had approved”.
“Unauthorized dwelling units” have proliferated in San Francisco for decades. Unpermitted “in-law suites” attached to single-family homes are so commonplace that locals sometimes call them “outlaw suites.” As far back as 1993, the city faced a scandal after the head of the Bureau of Building Inspection was caught operating two of these outlaw suites for 10 years. A similar story involving a senior building inspector came to light in 2021.
Note the sins: “unauthorized”, “unpermitted”, “outlaw”.