San Diego Planners Support Licensing of Short-Term Vacation Rentals

Officials Consider Limiting Number of Properties Made Available for Online Bookings

By Lou Hirsh CoStar News

December 3, 2020 | 6:33 P.M.

The Planning Commission in San Diego has recommended that the city institute a four-tiered licensing system for short-term vacation rentals enabled through sites including Airbnb and VRBO. It's the latest bid in a long struggle to balance the rights of property owners to make extra income with those of neighbors fed up with noise and other visitor impacts.

San Diego City Council is expected to take up the proposal in early 2021, as the nation’s eighth most populous city joins others in trying to boost enforcement of standards in a short-term rental industry that was experiencing significant annual growth before the coronavirus pandemic squelched travel nationwide.

The San Diego measure in its current form could also reduce the overall number of units available for short-term vacation rentals by more than 60%, as the city also looks to prevent the current supply of rental housing from becoming further constrained and worsening an already serious problem with housing affordability. Local vacation rentals totaled roughly 16,000 as of mid-2019, according to the city.

Planning commission Vice Chairman James Whalen said officials received well over 200 written comments from the public against new regulations, in addition to several opponents among dozens who called in to this week’s three-hour virtual discussion of the proposal. But the local real estate economy and continuing complaints from neighbors about the rental units make it necessary for the city to act.

“There’s a lot of people who really depend on the income from renting their homes out for short-term vacation rentals,” Whalen said during the meeting. “I think the challenges come in where we have these people who are doing it as a business – where they come in and they buy 10 homes or 20 homes and they start to really affect the world that we live in.”

The Planning Commission voted 7-0 on Dec. 3 to approve a tiered licensing system that was proposed in its present form by a joint effort of Seattle-based Expedia Group, parent of the VRBO and HomeAway short-term rental sites, and the labor union Unite Here, which represents thousands of hotel workers in the San Diego region. Proponents said it is modeled in part on a licensing system already instituted by the city of Denver and represents a way to balance competing interests.

San Francisco-based Airbnb, the nation’s largest provider of short-term vacation rental listings, remains vehemently opposed to new regulations in San Diego and other cities.

“This proposal would dramatically reduce the number of vacation rentals eligible to operate in the city by nearly 70%,” said John Choi, Southern California policy manager for Airbnb, during the Planning Commission meeting. “The city desperately needs to maximize the tourism economy engine to generate revenue for small businesses and the city’s general fund.”

Rather than licensing caps, Choi said San Diego should take rental hosts’ input into consideration to obtain a better regulatory balance and “seek to prioritize hosts that pay their taxes and have a track record of actively hosting without a history of violations.”

Officials said a licensing system is needed to better modulate the growth of the short-term rental industry, while also enforcing existing measures for handling complaints from neighbors about noise, trash and other nuisances created by short-term visitors.

Currently, there are renters who are listing spaces for short-term usage without the permission of property owners, and in many cases law enforcement is unable to reach owners when there are nuisance complaints or emergencies arising at short-term rental properties.

Airbnb, VRBO and other rental site operators have cooperated with cities nationwide in collecting occupancy taxes tied to short-term stays, but the industry and its property-rental hosts have generally opposed significant local regulation in San Diego for the past five years.

The current measure was put forward in general terms by San Diego Councilwoman Jennifer Campbell, whose staff met with community planning groups, property owners, hospitality industry leaders and vacation-rental site operators over the past several weeks.

The system recommended this week by the Planning Commission calls for a four-tiered licensing system in which rental property owners would obtain a license renewable every two years. Tier One includes units rented short-term for 20 or fewer days during a calendar year, and Tier Two is for units rented for more than 20 days annually.

Tier Three would cover whole homes rented out for more than 20 days in all neighborhoods except Mission Beach, a popular tourist destination that for decades has been the city’s largest hub for short-term rentals. Tier Four would cover whole home rentals in Mission Beach.

The system over the long haul is intended to maintain a citywide base of full-home, short-term vacation rental spaces that is no larger than 0.75% of the city’s overall rental housing supply, which is currently at around 500,000 units. The exception is Mission Beach, where the percentage cap would be 30% of total dwelling units.

The city would institute a lottery system for new licenses to ensure that short-term vacation rentals don’t become too heavily clustered in certain neighborhoods. Several planners suggested that City Council also consider a curfew on large gatherings, perhaps 10 p.m., to limit noise and other nuisance complaints being generated citywide by short-term rentals.

In addition to San Diego City Council, planning officials said the proposed licensing system will likely need the approval of the California Coastal Commission, which has advocated for ample short-term vacation rentals to be made available in the state’s beach areas where affordable lodging is often difficult to find.

Like hotels, the online short-term vacation rental industry has taken a major hit during the coronavirus pandemic. According to financial data and education site StockApps.com, industry revenue is expected to plunge by $35 billion globally this year, representing a 42% drop from 2019.

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