San Diego gets green light to limit number of short-term rentals

After years of controversy, San Diego will finally limit the number of short-term rentals in the city after the California Coastal Commission approved the city’s vacation rental law. The commission, which has authority over vacation rental rules for coastal areas, added a caveat that the city must assess the impact of the regulations on coastal access in seven years. The San Diego City Council must approve this provision.

The city’s latest short-term rental law, which was passed in April 2021, was supposed to go into effect on July 1 of this year. In February, however, the City Council delayed the start date pending the Coastal Commission’s certification. Now it will go into effect no later than December.

The short-term rental regulations represent San Diego’s attempt to balance the often competing interests of visitors, short-term rental operators, and residents — issues that have divided the city 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In the fall of 2018, the City Council repealed the new short-term rental law it had just passed a few months before.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, and the council voted to rescind the law rather than allow the question to go to a vote. In 2020, an agreement between major short-term rental marketplaces and the local hospitality labor union paved the way for the current law.

“For a city that gets 35 million tourists, I really feel like you guys got it right, trying to balance all the interests and understanding that it’s going to be an iterative process, it’s going to be a work in progress,” Coastal Commission Chair Donne Brownsey said at the commission vote.

Under the new rules, the total number of whole-home vacation rentals will be capped at 1% of the city’s housing stock, meaning rentals would be limited to around 5,400. In Mission Beach, vacation rentals will be allowed to equal 30% of Mission Beach’s housing stock, with around 1,100 two-year licenses for short -term rentals permitted. A total of around 6,500 vacation rental permits will be available throughout the city, a reduction of 48% from the 12,300 short-term rentals operating now, according to the Coastal Commission.

The license limits and 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-site during their guests’ stays.

The rules allow only one short-term rental permit per person. A proposed lottery for permits would use a point system that would give higher priority to operators who have had no code violations over the past two years.

The ordinance also strengthens enforcement efforts, including hiring new staff and officers. Short-term rental permit fees will help fund enforcement. These fees will range from $100 for hosts who rent out their properties for less than 20 days a year to $1,000 for operators who rent out whole homes for more than 20 days per year.

Currently, short-term rental hosts in San Diego are required to collect transient occupancy tax (TOT) from guests and remit it to the city, unless a short-term rental platform collects the tax on hosts’ behalf. Both Airbnb and Vrbo collect TOT for their San Diego hosts.

MyLodgeTax can help San Diego vacation rental hosts 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.

Cover photo by Canva