Local Government
The Definitive FAQ on San Diego’s Vacation Rental Saga

The Definitive FAQ on San Diego’s Vacation Rental Saga

For more than two years, homeowners and vacation rental operators have decried the lack of clear rules surrounding vacation rentals. Just when it looked like a plan to govern them might be close to the finish line, it got pulled at the last minute. Here’s the latest on the existing rules, the debate over how to regulate them and what’s coming next.

It’s the policy debate that’s paralyzed city government.

For more than a decade, city leaders have wearied over what to do about vacation rentals. Neighborhood activists say problem rentals and operators are dragging down their quality of life; those who rent out homes or rooms say doing so is their right as property owners and that it’s increasingly necessary in a city where the cost of living is high.

After more than two years of tussling over policy proposals, the City Council had been set to vote on a handful of regulatory measures last week. But paralysis struck again.

The meeting was abruptly canceled after a city attorney memo raised legal flags about a couple of proposals, including one that had the backing of at least four city councilmen.

Another vote’s now scheduled for Dec. 12.

All these stops and starts only add to the confusion surrounding vacation rental rules, so we decided to use the latest delay to help you get caught up on the entire saga.

So what’s a short-term vacation rental anyway?

The city doesn’t have any laws that specifically define these. That’s helped fuel the years-long debate about how to handle them.

But they generally host visitors for less than 30 days, and fall into two categories: whole-home rentals and home-sharing operations.

Home-sharing is when someone offers up a room or two in their home but remains on site while their visitors are in town.

The battle over vacation rental regulations – and whether they should be allowed in residential neighborhoods – really centers on whole-home rentals, where visitors have the run of an entire home and a homeowner isn’t on site. Residents in beach communities, in particular, have complained about packed homes and parties in otherwise quiet neighborhoods.

Are vacation rentals legal?

Depends who you ask.

City Attorney Mara Elliott declared they weren’t allowed under current city rules in a March memo.

Previous city attorneys, however, have said city laws just aren’t clear and suggested policymakers would need to approve rules if they wanted to ban or regulate them.

So can you get in trouble for hosting on Airbnb?

Not for now.

After Elliott’s March memo, Mayor Kevin Faulconer decided not to crack down on rentals until city regulations were clarified.

That doesn’t mean there aren’t any rules to follow.

What are the rules for now?

Vacation rental operators must register with the city and pay both annual business taxes and hotel taxes, which are collected monthly.

Those who rents out their home or a room in their home more than six days a year have to collect transient occupancy taxes – otherwise known as hotel taxes – at a rate of 10.5 percent of the rent. Other non-refundable charges, such as cleaning fees, are also considered part of that bill.

Airbnb started collecting hotel taxes for its hosts in 2015, while other sites leave it to operators to calculate their tax bills on their own.

The city’s not just waiting on operators to register, though. It’s cracked down on operators who are not paying those bills and has even gone after some for past unpaid taxes.

What about loud, annoying visitors and bad hosts? Is anyone cracking down on them?

For now, the city’s ability to tackle these problems is limited.

Neighbors can make complaints with police or code enforcement about rowdy guests or other nuisance violations. But code enforcement doesn’t work around the clock, and police are often tied up with higher-priority calls.

New rules are likely to give the city more tools. All proposals floated thus far envision a stepped up, 24-7 response to problem rentals and increased reporting requirements for hosts.

What kind of other new rules are we talking about?

OK, remember that there are two basic rentals: whole-home rentals and home-sharing.

A City Council committee in March decided it was mostly cool with home-sharing. That means the rules going to the City Council aren’t too strict on those operations.

The proposed regulations allow folks to rent out one or two guestrooms without a permit and to follow some basic rules, including posting a notice outside their home with contact information so neighbors or authorities can reach an owner if issues come up. Only those with three or more guestrooms would need to get a permit.

There are more options on the table for whole-home rentals, the operations that have inspired the most heated debate.

But it’s increasingly looking like a ban on whole-home rentals, which some vacation rental opponents had hoped for, won’t be on the table.

What’s being proposed for whole-home rental regulations then?

These are in flux now.

City staff had offered three different proposals. All allowed whole-home rentals if operators obtained annual permits, with varying requirements based on the number of rooms and guests. One had a 90-day cap on visitor stays each year.

Then City Councilmen Chris Ward, Mark Kersey, Scott Sherman and David Alvarez wrote a memo proposing a three-night minimum stay in coastal zones and historic districts and a requirement that a property owner own a home for at least a year before renting it out. It capped the number of permits to three per owner.

City Councilwoman Barbara Bry separately proposed allowing homeowners to seek permits to rent out their primary residences up to 90 days a year. That would bar anyone from renting out a home in a residential neighborhood year-round.

The plan the four councilmen proposed seems most likely to cross the finish line – that is, if they don’t change it significantly by the time the City Council takes up the issue again. City Councilman Chris Cate told Voice of San Diego he had expected to provide the crucial fifth vote to approve that plan.

So why didn’t the Council vote on those plans?

The city attorney’s office issued a bombshell memo ahead of the scheduled Oct. 23 vote. It raised flags about the two Council-driven proposals, suggesting their plans to regulate different types of rental hosts differently might violate the Constitution’s Equal Protection Clause.

Sherman requested the City Council cancel the vote so there’d be time to work through those issues. He also said he hoped city staff would draft language laying out the proposal he and three colleagues pitched so they’d have something to vote on.

A mayor’s office spokeswoman said Faulconer has since directed city staff to incorporate the City Council proposals into the three they’ve already prepared before the December vote.

So are those proposals legal then?

Faulconer’s team has pledged to ensure they are come December.

Elliott said last week she believes the legal issues her office raised in the memo are mostly surmountable. For example, Elliott said, the equal protection concern just requires that the city explain its reasoning for regulating different groups in different ways.

Are there other landmines the city could face?

Yep. The most significant one to watch: the state Coastal Commission.

The regulatory agency has kept close watch over vacation rental rules along the coast, and said that any local regulations need to protect visitors’ access to low-cost rental options in beach communities.

Its position on this matters. The Coastal Commission will need to sign off on any new rental rules that affect rental offerings along the coast.

The Coastal Commission previously raised concerns about a proposal to require minimum 21-day stays in single-family neighborhoods.

The city attorney’s office suggested the four councilmen’s push to require three-day minimum stays in coastal zones might also run afoul of the Coastal Commission.

What’s next?

City staff and attorneys are preparing updated regulations for the Dec. 12 City Council meeting.

Once regulations are approved – if they’re approved – permitting and enforcement plans are likely to come back to the City Council at a later date.

The city also will need to hire some new workers, come up with an expanded tracking plan for vacation rentals and negotiate with one of its unions to allow for the bolstered enforcement described in the city’s current proposals. It will also need to settle on defensible permitting charges, among other tasks.

This all means that even if the City Council approves rules in December, a final resolution will remain a ways off.

Originally posted at Voice of San Diego.

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