San Diego’s City Council spent much of 2018 arguing over proposed vacation rental regulations. In July, the City Council passed two ordinances imposing strict limits on “short term residential occupancy” (STRO). Opponents of the ordinances circulated a petition that received enough signatures to put the matter before voters. The City Council repealed the ordinances in October. Arguments for and against the ordinances brought up the interests of homeowners who live among STRO properties, homeowners who use their homes as STROs for income, investors who own STRO properties but do not live in them, and lodging businesses (hotels and motels) that view STROs as competition. Even though the ordinances have been repealed, the issue is currently under debate in Los Angeles, and is likely to come up again in San Diego. California real estate investors should be aware of new developments.
Short-Term Rental, Defined
The city defines STRO as occupancy of a residential-zoned property for less than one month. The ordinances made a distinction between short-term rental of a property by an homeowner who also lives at the property, known as “home sharing,” and “whole home STRO,” in which the owner makes the entire property available for rent and does not reside there. It specifically targeted whole home STRO, declaring it to have the “most negative impacts to neighborhood communities.”
The City Council adopted two ordinances in mid-July, and formalized them on August 2. The first ordinance, O-20977, addressed enforcement STRO restrictions. The second ordinance, O-20978, established the actual restrictions.
Under this ordinance, STRO’s would have been limited to the property owner’s primary residence, as well as one additional dwelling located on the property, such as a duplex. Property owners would have to obtain a “Short Term Residential Occupancy License” from the city for a whole home STRO, which would reportedly cost $950 each year. Other requirements included:
– Obtaining a Transient Occupancy Tax (TOT) certificate;
– Collecting a 10.5 percent TOT from guests;
– Maintaining records on all rentals for at least three years; and
– Complying with the city’s “Good Neighbor” policy.
Many STROs throughout the city would be subject to a three-night minimum stay requirement for guests.
Home share STRO’s would only be required to obtain an STRO license if the property has four or more bedrooms. The property owner would have to register the property with the City Manager as a home share.
Both ordinances passed the City Council by a 6-3 vote in July. In August, a referendary petition sought to put the ordinances to the voters. The petition alleged that the ordinances “undermine private property rights” and negatively impact tourism. It also claimed that they “hurt local residents who rely on home sharing to stay in their communities.”
The petition needed 36,000 signatures to put the issue on the ballot. It received over 62,000. Polling at the time suggested that voters were in favor of allowing STROs to operate relatively freely. Vacation-rental companies like AirBnB weighed in on the issue, and some advocates dropped hints about legal challenges to the ordinances. The California Coastal Commission has also cautioned the city about rental restrictions. On October 22, the City Council voted 8-1 to repeal both ordinances.
San Diego’s government has debated STRO regulations for at least a decade, so it is not going to go away just because of October’s repeal. The one Council member to vote in favor of the regulations in both July and October lost her bid for reelection in November, but the Mayor’s office has reportedly stated that it will revisit STRO regulations in 2019. One major challenge that the city will face comes from the City Attorney, who has reportedly stated that new rules must be “essentially different” from the ones the City Council just repealed.
More Blog Posts:
How the California Coastal Commission Regulates Vacation Rentals, Titles and Deeds, June 23, 2018
How To Find The Perfect Vacation Investment In San Diego, Titles and Deeds, January 3, 2018
Real Estate News: San Diego City Council Considers Vacation Rental Property Regulations, Titles and Deeds, November 28, 2017