San Diego STR hosts won’t have to enter lottery for STR licenses

San Diego has abandoned its plan to hold a lottery for new short-term rental (STR) licenses because the number of applicants doesn’t exceed the city’s cap. The limit of 5,416 licenses throughout the city is equal to around 1% of the city’s total housing stock.

Operators were eligible to apply for licenses starting in October, and as of November 29, the city had only received applications for about half the number of allowed licenses. Applications for whole-home STR licenses closed on November 30, but city officials said they’ll reopen the application process within the next few weeks until the citywide cap is reached.

However, the city will hold a lottery for the Mission Beach area, where STR licenses are limited to 1,100, about 30% of Mission Beach’s housing stock. The city has received more applications than that, so licensees will be chosen by lottery. License 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 license lotteries are part of a new short-term rental law that will finally go into effect on May 1, 2023, after years of controversy and setbacks.

In the fall of 2018, the City Council repealed the new short-term rental law it had just passed a few months before.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 measure 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.

Then, a 2020 agreement between major short-term rental marketplaces and the local hospitality labor union paved the way for the current ordinance, which was passed in April 2021. It was originally scheduled to go into effect in July of this year, but in February, the City Council delayed the start date pending certification by the California Coastal Commission, which has authority over vacation rental rules for coastal areas. The council set the new start date as up to nine months after Coastal Commission approval. 

The Coastal Commission gave the law the green light in the spring of 2022, adding a caveat that the city must assess the impact of the regulations on coastal access in seven years.

In addition to the requirement to have a license, the new ordinance:

• Sets license fees that 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
• Allows only one short-term rental permit per person
• Strengthens enforcement efforts, including hiring new staff and officers, funded by rental permit fees

Short-term rental hosts in San Diego are also 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.