San Diego OKs regulations that could cut number of short-term vacation rentals by up to 30%
ByLori Weisburg, February 23, 2020

New ordinance would cap Airbnb-style rentals at 1 percent of city’s housing stock, except in Mission Beach where a more generous allocation of listings will be permitted.

Following years of failed attempts to regulate the proliferation of Airbnb-style rentals, the San Diego City Council on Tuesday endorsed a yearly cap that could cut the volume of more active vacation rentals by as much as 30 percent.

The new regulations, which still need a second vote of the council before becoming law, grew out of a compromise plan that won the support of Airbnb and other large home-sharing platforms, as well as the local hotel workers union. Shepherded by Council President Jennifer Campbell, whose district includes several of the city’s beach communities, the regulatory plan calls for an overall cap on the number of whole-home rentals that are available for more than 20 days in a year.

For all but Mission Beach, such rentals will be capped at 1 percent of the city’s more than 540,000 housing units, or about 5,400. In Mission Beach, which has a long history of vacation rentals that predates the rise of online home-sharing platforms, the allocation would be much more generous, limited to 30 percent of the community’s total dwelling units, or about 1,100.

Only one license will be allowed per individual, and the regulations will not take effect until July 1 of 2022 to give the city time to transition to the new licensing system that will require the hiring of additional personnel.

“San Diego’s past efforts to regulate short-term rentals have ended in failure,” Campbell said. “Our neighborhoods have suffered from this failure, but we have learned from that failure and now have a compromise that is the best way forward.”

Campbell, who is facing a recall campaign launched in part by critics who believe short-term rentals should not be legalized, ticked off the ordinance’s benefits, among them “a cap on uncontrolled whole-home rentals,” “strong regulation and enforcement,” and, she added, “bad actors will lose their licenses.”

Mayor Todd Gloria, noting the milestone moment, released a statement affirming his commitment to implementing and enforcing the new regulations, which still need the blessing of the California Coastal Commission as they relate to the city’s beach-area communities.

“I applaud the City Council for taking the first step toward finally putting common-sense regulations of short-term vacation rentals on the books,” he said. “I want to thank Council President Campbell for her leadership and building consensus on an issue that previous San Diego officials were unwilling or unable to resolve.”

San Diego City Attorney Mara Elliott, who had previously opined that San Diego’s municipal code does not allow short-term vacation rentals, tweeted her praise of the council’s action.

“Thanks to the City Council and the leadership of Council President @CMJenCampbell, San Diego is finally on its way to having enforceable short term rental regulations,” her tweet said. “It’s been a long time coming and it’s what neighborhoods deserve.”

Just as the contentious issue of vacation rentals has divided the city in past public hearings, it did so again on Tuesday, as more than 130 people addressed the council during a nearly six-hour virtual session. While the compromise plan is notable for its support among many longtime home-sharing operators, a number of them characterized as unfair a lottery system that would be used for distributing licenses. Existing, responsible operators who have paid their transient occupancy taxes should be favored, they argued.

“We support Council President Campbell’s good neighbor STR ordinance, not because it’s a big win for local managers or hosts but because it’s a fair compromise that takes into consideration concerns of both sides of this very vigorous debate,” said Jonah Mechanic, owner of SeaBreeze Vacation Rentals and leader of a coalition of vacation rental operators. “Also important to us is that we figure out a way to prioritize responsible short-term rental owners who have paid their taxes, don’t have outstanding violations and are being good actors so they can continue to operate and earn income to provide for their families.”

Toward that end, the council agreed to return in October to consider some kind of lottery system that would prioritize “good actor” hosts who have been paying required taxes and have operated responsibly.

The council action comes 2 1/2 years after Airbnb and Expedia, the parent company of HomeAway and VRBO, successfully mounted a referendum drive that killed far tougher restrictions approved by the council that would have barred the rental of second homes for short-term stays. The city’s effort to gain control over the mushrooming growth in home-sharing has been going on for at least five years, as proponents and critics squared off in multiple hours-long hearings.

Hosts have argued that vacation rentals provide them much-needed revenue to supplement their incomes, while opponents have complained that short-term renters have overrun their once-peaceful neighborhoods and turned homes into unruly party houses.

The Campbell proposal was supported by eight of the nine council members, with Councilman Joe LaCava the lone dissenting vote. LaCava, who said he “remained unwavering” in his stance that short-term rentals should be prohibited, offered up suggestions for strengthening the proposed ordinance. He failed, however, to win support for his suggested amendments, including a provision that would have restricted licenses to a maximum six years. He also sought approval of an affordable housing fee that Campbell rejected as an amendment to her original motion.

Like a few other council members, he also pressed for stronger wording designed to ensure accountability by the home-sharing platforms in those instances where they continue to allow unregulated rentals on their sites.

Save San Diego Neighborhoods, which has long insisted that short-term rentals should be outlawed, did not make a presentation at Tuesday’s hearing but had sent a letter to the council this week from its attorney who argued that the Campbell ordinance was inconsistent with the city’s General Plan and the state Coastal Act.

Just how far-reaching an impact the ordinance will have on the future volume of short-term rentals remains open to debate given the difficulty in calculating just how many of the more frequently listed whole-home rentals were operating before the pandemic dramatically curbed travel.

A detailed report by the city’s Independent Budget Analyst analyzed multiple sources of home-sharing data as of 2019 and concluded that the proposed cap could mean anywhere from 1,650 to nearly 2,800 fewer whole-home rental listings that would be allowed to operate more than 20 days out of the year. That translates to about a 20 percent to 30 percent reduction in such rentals that would be subject to the cap, estimates fiscal policy analyst Baku Patel, who helped draft the Independent Budget Analyst’s report.

Not all home-sharing activity will be limited by the new regulations. The cap would not apply to those hosts — whether they’re an owner or a tenant — who rent out a home for no more than 20 days out of the year. Similarly, there would be no limits for individuals who rent out a room or two in their home while they are residing there.

Key to the new ordinance is stepped-up enforcement aimed at weeding out problematic hosts who violate public nuisance regulations. Campbell’s office proposes hiring four code enforcement officers whose salaries would presumably be funded through still undetermined licensing fees.

City officials expect to return to the council later this year with a set of proposed fees. An early version of Campbell’s proposal had suggested a fee range of as little as $50 for someone renting out his or her home for less than 20 days a year to $1,000 for hosts renting out their entire homes for more than 20 days a year.

The city treasurer’s office estimates an initial start-up cost of $1.7 million, plus ongoing costs of $2.4 million to administer the licensing effort.

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