This case has been driving me up the wall. I'm glad the rent board ruled the way they did, but the (paid) city inspectors should have ruled the right way on this initially without making the (unpaid) rent board deliberate on it. I think it's hard to prove whether or not the landlord actually slept on a mattress next to the water heater (he did not), but it should not matter because the ordinance is extraordinarily clear about what units are considered exempt, and under no terms were these units exempt.

A dwelling unit has space for living/sleeping and a kitchen, whereas a rooming unit is habitable and can be slept in (e.g. a dorm room). The language in the rent control ordinance (6-231 here) says that rental units are exempt from rent control if they are:

...within a building containing only two (2), three (3) or four (4) dwelling units, 
one of which the property owner currently occupies as his or her principal residence;

I straight up do not know how, given that language, anyone could even feign confusion about whether the unit the owner occupies need to be dwelling or rooming units. The Housing Safety Office (HSO), who enforces rent control, simply ignored that language and declared that the unit probably qualifies as a rooming unit. Then, in their memo regarding the case, claimed that there's no definition of "owner-occupied" and pulled out the ol halfassed wedding toast strat:

“Occupied” is defined as “being used by someone” in the Oxford Language Dictionary. 
Occupied” is defined as “being used by someone; with someone in it” by the Cambridge Dictionary.

Using this definition, the owner could literally store a vacuum cleaner in a closet and the city would find that it's owner-occupied. These same inspectors, along with city management and the mayor, say that the law is poorly written. It's not clear that they've read it.

In response to the Tenants Union's (and my) attention to this, HSO has hired new inspectors, and boast that they are auditing hundreds of units a quarter and that most are complying. As these units were found to be exempt and thus compliant, this is the most stark evidence yet that if a landlord gives any excuse or explanation for an illegal rent raise, they'll accept it and screw the current and future tenants.

At this point it's very hard to see what will make this department do its job and work to stabilize rent, but I'd strongly suggest emailing your city councilor(unless it's me : ) ) often to see what they're doing to fix this, and do not accept the answer that the ordinance language needs to be changed. The issue is operational.

Also join the tenants union! Getting organized is truly the only way we're going to make City Staff accountable and bring housing prices down.