Call the housing department(you can find the # through internet) and tell them to come for inspection. By law, she can't rent by rooms, only by apartment(people can share the apartment together but not rent room one by one).
After inspection and any violations, they will receive huge fines day by day($1000/per day + go to court after clear up the violation). At that time, she may beg tenants to co-operate with her.
She is very stupid landlord. The housing law is protect tenant more then landlord.