A San Francisco couple paid $2.25 million to settle claims they ran an illegal hotel chain through the vacation-rental service Airbnb, the city attorney announced Monday.

Landlords Darren and Valerie Lee agreed to pay the cash to cover fines and investigation costs after offering 14 apartments as short-term rentals instead of lawfully renting the units to residential tenants, according to City Attorney Dennis Herrera.

The settlement and penalty "sends a clear message to those looking to illegally profit off of San Francisco's housing crisis: Don't try it. We will catch you,"Herrera said in a news release. "Most importantly, we preserved more than 45 housing units to be used as homes, not hotel rooms. We are fighting back against San Francisco's housing crisis."

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Critics say Airbnb drives up rental prices and reduces housing availability in cities including San Francisco and New York City.

The high cost of housing in San Francisco has prompted tighter enforcement of vacation rental laws that took effect earlier this year. Those laws by and large prohibit property owners from offering multiple listings.

Under the court-approved settlement, the Lees can't offer short-term rentals in any of 17 buildings in San Francisco that they own or manage. The couple paid $276,000 to settle a previous case in 2014 in which they evicted tenants to convert a property into short-term rentals.

Airbnb and competitor HomeAway are required to register all vacation-rental listings with the city, which conducts checks to make sure the hosts actually live in the rentals.



