San Diego City Wire

Now that the city council has approved the first reading of its Short Term Rental Ordinance (STRO), all Airbnb hosts in San Diego will be required to be permitted, however, the number of licenses issued under the new law will be limited depending on type.

“Anyone renting for less than 20 days would still require a license, but that type of license, would not be limited in any capacity,” Baku Patel, city of San Diego’s independent fiscal and policy analyst, said. “It would be unlimited to whoever wants one.”

A shortage of long-term residential housing is an ongoing issue for the city.

According to the Southern California Rental Housing Association, rising prices and an increase in population have put a strain on the overall Southern California housing market.

As previously reported by the Voice of San Diego, city council member Jennifer Campbell introduced the STRO, which is designed to decrease the number of whole-home rentals in the city by creating a lottery system for licensing. Campbell estimates the plan would cut the number of whole-home rentals by two-thirds. The first reading of the ordinance was approved Feb. 23 and it will go into effect in 2022.

“There are four different types of licenses,” Patel told San Diego City Wire. “Two of them relate to whole homes more than 20 days that are differentiated depending on where they're located, one type is specific to the mission beach community, and then the other type is everywhere else. The other two licenses – one is if you're renting for less than 20 days, no matter what type whole home or share, and the last type is a home share more than 20 days.”

Patel is one of the authors of a study called Impacts of Proposed Short-term Residential Occupancy (STRO) Regulations on Transient Occupancy Tax (TOT) Revenue, which found the ordinance wouldn’t free up as many housing units as originally thought.

“There's a number of components,” Patel said in an interview. “One would be that this ordinance will hopefully bring some of the housing that is currently used for short-term rentals back into the city's housing supply.”

There were 11,302 whole-home listings based on 2019 data from Inside Airbnb, a website that tracks Airbnb listings, according to the study.

“In terms of our analysis, we found that [the ordinance] would lead to a 20% to 30% reduction in whole-home rentals,” Patel said.

The study further found that regulating short-term rentals would likely lead to a shortfall in TOT, which is a hotel tax.

“It will need to be addressed during the budget development cycle,” Patel said. “As a city, we are required to have our budgeted expenditures meet our budget revenues and if revenues are projected to be lower as a result of this, then during the budget development process, we would just ensure that our expenditures match what available revenue is projected.”

The city receives more than $200 million in revenue from TOT and short-term rentals contributed $31.5 million in 2019, according to the study.

"We don't have complete data on short-term rental activity in the city but it's our expectation through our analysis that there would be an impact to TOT revenue," Patel said.

Despite the findings, the city council approved Campbell’s ordinance, which Patel said is because of a desire to regulate conduct.

“Members of the public have said that some of these short-term rentals are a nuisance in some of their neighborhoods so the intent here is to create an enforcement mechanism to hopefully deter people from not acting well,” Patel said. “This creates a mechanism to hopefully prevent that and if necessary penalize and take their licenses back so that they aren't able to operate in that capacity.”