Mayor Todd Gloria signs short-term rental ordinance into law, limiting supply in San Diego

SAN DIEGO (KUSI) – Mayor Todd Gloria Wednesday signed into law an ordinance capping short-term vacation rentals at 1% of the city’s housing supply and prioritizing “good actors” in a lottery to determine who gets to offer properties for whole-home vacation rentals.

The San Diego City Council passed the ordinance 8-1 on April 6. Gloria’s signature sets in motion a city effort to finalize the lottery process for people renting out their properties.

This means the City of San Diego government will choose which landlords can continue renting their properties, and which ones can’t. A highly controversial style of governance that many San Diegans believe is overreaching.

“These regulations should have been put in place long ago,” Gloria said. “Thanks to the leadership of Council President Jennifer Campbell, who worked closely with me to get the job done, San Diego finally has a clear set of rules governing short-term vacation rentals. Now, the work turns to thoughtful implementation, faithful enforcement and careful monitoring to enhance the quality of life in our neighborhoods.”

The question of how the city would handle short-term rentals amid low housing supply and quality of life concerns for residents has been an issue for years. Gloria and Campbell hope this law puts that question to rest.

“I’m grateful to the mayor for signing this ordinance, which will end the uncontrolled growth of short-term rentals, return homes back to San Diego’s housing market and bring peace and tranquility back to our neighborhoods,” Campbell said.

But the ordinance, which Campbell called a compromise between property owners and corporate rental services such as VRBO and Airbnb, has drawn its own controversy — mainly from landlords concerned about the fairness and equitability of the forthcoming lottery system.

One Mission Bay resident described the lottery at a February hearing as inherently unfair because she had used her property in a “strict” manner and didn’t allow large parties or gatherings. She said people who have abided by city laws in renting homes should receive priority in receiving a license under the new ordinance.

Councilman Raul Campillo agreed. He successfully amended the ordinance to prioritize “good actors” when licensing begins later this year.

The sole dissenting vote was cast by Councilman Joe LaCava, who proposed four amendments which would have been much stricter than the version which passed. He was concerned with equity in the ordinance and how to hold rental platforms accountable.

The ordinance places short-term rentals into four categories: part- time rentals rented 20 days a year; home-sharing rentals; whole-home rentals; and whole-home rentals in Mission Beach. The latter two are the subject of the ordinance’s most strict restrictions.

Main parts of the ordinance include:

— capping whole-home short-term rentals at 1% of the city’s housing stock per the San Diego Planning Commission, which presently equates to 5,400;

— reducing whole-home short-term rentals based on the city auditor’s estimation that more than 14,700 short-term rentals exist, including 1,667 in Mission Beach;

— not limiting home-sharing short-term rentals;

— allowing part-time short-term rental operators to obtain a license at lower annual fees to accommodate high visitor events;

— yearly assessment of the program to determine if it is equitable and effective;

— requiring a local contact be able to respond to disturbances at the property in one hour or less;

— allowing short-term rental owners a maximum of one license, per person; and

— creating a detailed Good Neighbor Policy along with strict enforcement guidelines, a fine structure for violations, and a license revocation standard.

The reduced number of short-term rentals will reduce the city’s Transient Occupancy Tax — essentially a hotel tax — from $4.4 million to $7.3 million annually, according to a report from the Office of the Independent Budget Analyst.

Now that the ordinance has been signed into law, city staff will work to bring in front of the City Council sensible rental license fees and a lottery process for an initial allocation of limited licenses. Staff is also working to establish the systems, personnel and protocol needed to effectively enforce the new regulations.

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