Danny Haber, 26, and Alon Gutman, 27, first became involved in their communal housing setups last year with a live-work property at 200 12th St. called The Negev Twelfth. The property became a model for at least two other tech-infused dorm-style housing projects in SoMa that have recently sparked a series of investigations and a lawsuit.

The duo started The Negev Sixth at 219 Sixth St. early this year. It has been cited for possible habitability, hotel-conversion ordinance and room-count violations. They also have The Negev Folsom at 1040 Folsom St. that opened this past summer and is facing the same issues along with a lawsuit from displaced tenants.

Haber and Gutman championed The Negev properties as an innovative way of living amid scarce and expensive housing in The City. For $1,250 to $1,500 a month, tenants can rent a spot on a bunk bed in a single-room-occupancy unit or a single unit for about $1,700. Tenants also have access to common areas with a kitchen, games and a fratlike hacker-house atmosphere. The rents — targeted at tech workers and newcomers mostly in their 20s — overall are much higher than the rates at the properties before Haber and Gutman leased the buildings.

To create The Negev Twelfth, Haber and Gutman subleased a live-work space from the owner of an attached restaurant. The restaurant leased the entire building from the Tenderloin Neighborhood Development Corp., a housing and services provider for low-income San Franciscans.

The organization, through a donation from the St. Anthony Foundation in 1996, was gifted the parcel that includes the live-work space, restaurant and 12 units of below-market-rate housing at an adjacent space on Howard Street, which were renovated with a loan from the Mayor’s Office of Housing.

When the organization took over the property, one lease covered the live-work space and restaurant, and it was never separated so the restaurant had to lease the whole thing.

HISTORY OF COMPLAINTS

A complaint filed by a city resident in May about the number of people living at 200 12th St. led Donald Falk, the Tenderloin Neighborhood Development Corp. executive director, to discover what had become of the live-work space.

Brian Fernando, owner of the Sri Lankan restaurant 1601 Bar and Kitchen, had subleased it to Haber and Gutman.

“They pay the rent all the time. I mean, that’s kind of all you want in a tenant,” Fernando said. “They’ve had some issues with the neighbor next door with noise late at night but … apart from that, they’ve been fine.”

The sublease, Falk said, was done “without our permission or knowledge.”

“As soon as we found out, we issued a notice to our tenant to cure or quit,” he added.

The Planning Department launched an investigation in July after receiving complaints that there were a dozen tenants living at the live-work space zoned for only four people, and that the place was being advertised as a short-term rental on Airbnb.

During the summer, Falk said the Tenderloin Neighborhood Development Corp. worked with the Planning Department to rectify violations. He said that Haber — who takes the lead on the business side while Gutman fronts the technical side — was “extremely cooperative in every respect from the moment that we brought the parties together to tell them that the status quo needed to change.”

The Planning Department closed the case Oct. 29 because Haber proved that the remaining tenants were staying more than 30 days, said Gina Simi, spokeswoman for the department.

“A number of people left because their lease was up and it just wasn’t renewed. Some were already leaving. There’s no way to really pinpoint who was doing what, but nobody was evicted,” Simi said of the reports that more people were living at the property than zoning allowed.

Falk said he hired an architect to inspect 200 12th St. to ensure the electrical, plumbing, chemical and physical elements were up to code, and explore what would be required to separate the live-work space from the master lease with the restaurant.

“If we were going to do that, we would have to do some renovation work to make that legal,” he said, adding that he has not heard complaints since the investigation closed.

Rent from the live-work space and restaurant allows the Tenderloin Neighborhood Development Corp. to keep the Howard Street apartments affordable to low- and extremely low-income residents, Falk said.

“It helps us keep the rents lower at the 12 units next door because it’s all one property,” he said. “The money all goes into one pot.”

But on Nov. 6, the Department of Building Inspection received a new complaint that 200 12th St. was being operated as a hostel with up to 15 people, that the makeshift bedrooms had no egress or windows, and plumbing work was done without permits.

Haber could not be reached for comment.

‘AN AWESOME IDEA’

Jared Smith moved to The Negev Twelfth to participate in a coding boot camp and serve as an intern at the payroll company ZenPayroll. He said about 22 people were living there while he stayed from June 2013 to February of this year.

The ground floor was an open space with couches and a kitchen, while the upstairs had a main room with seven bunk beds divided by sheets, a large walk-in closet with two bunk beds separated by a curtain and two more rooms with two bunk beds each, Smith said.

Smith said he found The Negev Twelfth on Airbnb and paid Haber $2,186, which included cleaning and service fees, for 65 nights.

Eventually, Haber stopped using the Airbnb platform to find tenants. Smith said he was charged for the entire month of February while living there only two weeks.

“In the beginning, The Negev was an awesome idea because housing is too expensive and you really meet new friends,” Smith said of the living quarters. “But towards the end, it seemed more like just a way to make money.”

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While that might be true, there is a different side to life behind the bright-red metal gate of The Negev Sixth.

Nearly all tenants in the single-room-occupancy building — mostly in their 20s and newcomers to San Francisco with few if any local acquaintances — pay $1,250 a month for a spot on a bunk bed inside a unit, share couches and a kitchen on the first floor and recreation tables and a mini movie theater in the basement of the tech co-op.

With the makeshift-style amenities come many issues. Several complaints beginning in the summer to The City’s Department of Building Inspection make the place out to be a slum. A complaint by resident Zachary Howitt, 26, on Oct. 9 identified an inoperable heater, faulty electrical wiring, no deadbolts on some doors, a faulty fire escape and smoke detectors, no secure mail receptacle, cockroaches and mice, no hot water, a consistent odor of gas from a broken water heater and 60 people living in a place with a 22-person occupancy limit. To top it off, the complaint alleges, the person behind the operation reportedly refused to fix the issues despite multiple requests.

The latest inspection came Wednesday. City Housing Inspector Luis Barahona found that debris and personal items that were blocking the fire escape were removed, light fixtures were repaired, a shower door was fixed, some work was done on electrical outlets and deadbolts were installed on several rooms.

However, the people running the property neglected to address six violations — failure to provide identified caretakers for the building, repair all windows and latches, fix self-closing doors, move garbage receptacles to an open area, provide heat to all units and have an installation permit for a hot-water tank. For all its problems, Barahona did say other single-room-occupancy buildings in San Francisco are worse off than The Negev Sixth. But he added that during the inspection, the number of units appeared to exceed the 19 residential rooms stated in the building’s certificate for use.

“I counted more than 19 rooms,” Barahona said. “I don’t know for sure. I think there are about 22 to 25 rooms, but some of them aren’t labeled.”

Today, The Negev Properties LLC, run by Danny Haber, 26, and Alon Gutman, 27, is expected to take part in an audit of records for the past two years so the department’s housing division can determine whether the company is complying with its designation of residential units. According to San Francisco’s hotel conversion ordinance, units with a residential designation must be occupied for more than 30 days, whereas tourist units — which The Negev Sixth has none of — are for stays of fewer than 30 days.

The department will be looking into whether construction work was done without proper permits.

“It looks like they have too many rooms, so that could be the main point of contention,” said Jamie Sanbonmatsu, acting senior housing inspector for the department. “Work without a permit is a life-safety issue.”

On Thursday, the department served another notice of violation to the property for electrical, plumbing and mechanical work done without permits and requests to replace a gas stove with an electrical stove and relocate mailboxes so they do not block the exit. A Department of Building Inspection hearing on the living conditions is scheduled for Dec. 4.

Should violations remain outstanding at The Negev Sixth, the operators will be penalized and tenants are eligible to go to the San Francisco Rent Board for rent reductions. Tenants found to be living in illegally converted units could be evicted, but it would take more to shutter the entire building.

“When you’re talking about shutting down an operation, you’re talking about a lot of people without homes and making a lot of people homeless is something we try to avoid,” Sanbonmatsu said.

Prior to becoming The Negev Sixth, 219 Sixth St. was the San Francisco Gospel Mission, a nonprofit, Baptist-based mission for homeless people. Joann Knight said she sold the building in August 2013 after the death of her husband, who ran the mission that housed people until the 1989 Loma Prieta earthquake.

“We had three different people bidding at $1.5 million,” Knight said, adding that it was sold to a party that “paid all cash.”

Beyond the building issues documented on paper, some tenants at The Negev Sixth have had relational problems with Haberand Gutman.

According to Superior Court records obtained by The San Francisco Examiner, The Negev Properties filed an unlawful detainer summons, the first step in an eviction proceedings, Sept. 30 against Howitt, claiming he owed $625 in unpaid rent.

Howitt said the eviction was retaliatory and, following legal advice, he complied with a law allowing him to deposit the rent into an escrow account instead, because of concerns over the legality and habitability of the building. These violations included heating, electrical and sanitary deficiencies. A judge on Oct. 21 dismissed the complaint after she agreed that Howitt had no opportunity to respond because he was never served with the complaint in the first place. According to court documents, Gutman signed that he allegedly served the complaint.

Haber and Gutman also run The Negev Folsom at 1040 Folsom St., which was the subject of a lawsuit filed Nov. 12 from tenants displaced by a fire there who claim they were not offered their units back at their former rent rate, as required by the San Francisco rent-control ordinance. Before opening The Negev Sixth, Haber and Gutman started The Negev Twelfth at 200 12th St., which is an open room stocked with bunk beds.

Other tenants say Haber, who leased 219 Sixth St. from Howard Six Bros LLC, intimidates residents into making repairs themselves or kicks them out of buildings if they consistently complain about living conditions.

Dewaine Torregroza, 28, moved into The Negev Sixth in February and paid $1,000 per month for a shared bunk-bed room. He said Haber then tried to increase rent to $1,250 for everyone paying $1,000. Since the rent-control ordinance applies to the building, the maximum allowable rent increase this year is only 1 percent.

Haber also assigned director roles to tenants, Torregroza said. As director of the basement, Torregroza was expected to revamp the dingy basement on his own time and with his own money.

“He was kind of preying on the weak in a lot of ways,” Torregroza said of Haber. “A lot of people moved in from different parts of the world without any experience in California or San Francisco as far as tenants’ rights. As far as they were concerned, things were going OK.”

The final straw for Torregroza — he moved out in early October — was when construction workers entered his unit without notification and drilled holes through his closet for water heater piping.

Group housing like The Negev seems to be popular among younger residents, said neighborhood Supervisor Jane Kim, but the company needs to clean up its act.

“The limited facts that we’ve gotten do not reflect well on this company,” she said. “It seems to be a company that is willing to break the law and exploit residents in order to make a profit, and we do not support that type of behavior.”

Haber refused to comment on The Negev Properties’ operations.

If run right, the communal type of living behind The Negev “would be brilliant,” Torregroza said.

“It really is a beautiful thing and I’m hopeful that someone, some tech entrepreneur can figure this out legally and do it right,” he said. “Because I really feel that I grew a lot there and there are friends I still have there because it’s an awesome community. At the heart of it, everyone wants to be a part of something.”

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