• San Diego council approves yearly cap on short-term rentals.

S.D. City Council approves regulations for yearly cap, set to start in July 2022

The San Diego City Council Tuesday formally affirmed its decision in February to impose a yearly cap on whole-home vacation rentals that could potentially cut the volume by as much as 30 percent.

To enact the new regulations governing Airbnb-style rentals, the council was required to approve a second reading of the ordinance it approved following a six-hour hearing on Feb. 23. The new rules will not go into effect until July of next year. Councilman Joe LaCava, whose district includes La Jolla, cast the lone dissenting vote, as he did in February.

Under the new plan, whole-home rentals that are available for more than 20 days in a year will be capped at 1 percent of the city’s more than 540,000 housing units, or about 5,400. An exception, however, was made for Mission Beach, which has a long history of vacation rentals that predates the rise of online homesharing platforms like Airbnb and VRBO. For that community, the allocation is much more generous, limited to 30 percent of the community’s total dwelling units, or about 1,100.

According to an analysis by the city’s Independent Budget Analyst based on home-sharing activity before the pandemic, the yearly cap could mean anywhere from 1,650 to nearly 2,800 fewer whole-home rental listings that would be allowed to operate more than 20 days out of the year. That equates to about a 20 percent to 30 percent reduction in such rentals. For those vacation rentals subject to the annual cap, a minimum two-night stay will be required.

One issue that remains undecided is how the limited number of short-term rental licenses will be allocated. The council has already agreed to return in October to consider a lottery system that would prioritize what it called existing, “good actor” hosts who have been paying required taxes and have operated responsibly. Only one license per individual will be allowed.

The new rules, as they relate to the city’s beach communities, still need signoff from the California Coastal Commission.

The cap will not apply to those hosts who rent out an entire home for no more than 20 days out of the year. Similarly, there will be no limits for individuals who rent out a room or two in their home while they are residing there.

Still unknown is how much it will cost to secure short-term rental licenses. City officials expect to return

to the council later this year with a set of proposed fees. An early version of a proposal crafted by Council President Jennifer Campbell’s office had suggested a fee range of as little as $50 for someone renting out his or her home for less than 20 days a year to $1,000 for hosts renting out their entire homes for more than 20 days a year.

The city treasurer’s office estimates an initial startup cost of $1.7 million, plus ongoing costs of $2.4 million to administer the licensing effort.

Tuesday’s vote caps a yearslong process that up until now failed to gain any control over the mushrooming growth of vacation rentals. It’s been 2 1⁄2 years since Airbnb and Expedia, the parent company of HomeAway and VRBO, successfully mounted a referendum drive that killed far tougher restrictions approved by the council that would have barred the rental of second homes for short-term stays.

The approved regulations endorsed Tuesday grew out of a compromise plan from Campbell’s office that won the support of Airbnb and other large home-sharing platforms, as well as the local hotel workers union. Critics of the new regulations say they remain concerned about an activity that they say has overrun their once-peaceful neighborhoods.