San Diego takes first step toward stricter short-term rental regulations

After years of community contention around vacation rentals, the San Diego City Council has approved a new short-term rental ordinance on first reading.

The measure would cap the total number of whole-home vacation rentals to 1% of the city’s housing stock. Currently, San Diego has approximately 540,000 housing units, so the number of short-term rentals would be limited to about 5,400.

In Mission Beach, where vacation rentals were common even in the pre-Airbnb era, short-term rentals will be allowed to equal 30% of the housing stock. Right now, that means about 1,100 short-term rentals will be permitted.

The caps don’t apply to hosts who rent out their homes for fewer than 20 days each year or who offer hosted rentals where they’re on premises during their guests’ stays.

The law would allow only one short-term rental permit per individual. Permits would be awarded by lottery, but the council agreed to discuss the issue again in the fall and possibly consider a lottery that would reward current hosts who have played by the rules by getting permits and paying lodging taxes. The city will also propose permit fee amounts later in the year.

The ordinance also strengthens enforcement efforts, including hiring code enforcement officers. According to the city’s independent budget analyst, the new law may result in 20% to 30% fewer whole-home vacation rentals within the city.

The bill, which was approved by eight out of nine council members, still needs to be passed in a second reading in order for it to become law. As currently written, it would go into effect January 1, 2022, but would first need to be approved by the California Coastal Commission.

The law is based on a framework created last summer in an agreement between  major short-term rental platforms and the local hospitality labor union. City Council President Jennifer Campbell championed the new rules — and is facing a recall campaign, partially because of controversy over legalizing short-term rentals.

The issue of how to handle vacation rentals has divided San Diego for years. In the fall of 2018, the City Council repealed the new short-term rental law it had just passed a few months before. A referendum seeking to repeal the law received enough signatures to qualify for the ballot, so the council voted to rescind the law rather than allow the question to go to a vote.

Short-term rental hosts in San Diego are required to collect Transient Occupancy Tax (TOT) from guests and remit it to the City Treasurer, unless collected and remitted by a short-term rental platform on their behalf. Both Airbnb and Vrbo collect TOT on behalf of their San Diego hosts.

MyLodgeTax can help short-term rental hosts in San Diego comply with all their TOT obligations. For more on lodging taxes in California, see our state Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.