Welcome to San Diego Blog | October 21, 2017

Vacation Rentals and City Council

Image result for neighborhoods are for neighborsOn Monday October 23rd the San Diego City Council will come to a decision on a recent hot-topic: short term vacation rentals (STVRs). Earlier this year City Attorney Mara Elliott said “The municipal code is very clear and does not allow short-term vacation rentals. Under my leadership, we will enforce the municipal code,” but so far these short term rentals have been allowed to continue operating unregulated. There has been some push-back from the community that has lead to the founding of groups such as Save San Diego Neighborhoods and signs in front lawns saying “Neighborhoods are for neighbors, NOT VACATION RENTALS.” In an attempt to bring harmony to this new situation the city council is working on a solution to this problem. There are two proposals that would allow the continued operation of STVRs and attempt to regulate the process; one from Barbara Bry and the other from City Councilmember Christopher Ward, Council President Pro Tem Mark Kersey, Councilmember Scott Sherman, and Councilmember David Alvarez. Both offer suggestions on regulations for these vacation rentals and the ways that they could be enforced if they are allowed to continue.  

The first of these plans, and the one with a lower probability for approval, was released by City Councilmember Barbara Bry. In summary, the ordinance defines “short-term occupancy” as “any rented or leased residence for any time period of less than 30 days,” imposes a 90-day maximum on short-term rentals (per year); requires renters (in this case the property owners) to apply for a permit, pay a fee, and inform their neighbors that their property is available for short-term rentals.

The second proposal, and the more likely winner, was released by the team of Council members’ and provides recommendations as well on how enforcement of these policies may be achieved. Here are the recommendations provided by the 4 council members:

  • define short term rentals (STRs) as any stays if 29 days or fewer;
  • require a three-night minimum stay within the coastal and historical districts;
  • provide occupancy standards for STRs consistent with California’s “two-by-two” standard of two adult occupants per bedroom, plus two in the home;
  • requires renters provide each tenant with a “good neighborhood code of conduct” that defines the parameters of the stay, and subsequent fines and penalties for non-compliance.”
  • the memorandum calls on the City to create a “comprehensive online permitting and enforcement process for whole-house STVRs and require a permit for all STR” and suggests a fee (of an unannounced amount) to obtain a STVR permit. “A portion of these fees should be dedicated to paying Code Enforcement officers to work nights and weekends,”
  • It also recommends citations and fees for homeowners and renters over noise and other verified nuisances — and a de-facto three-strike policy. After the first verified offense, both the renter and the property owner would be fined $1,000, escalating to $2,500 to the renter for a second offense and $5,000 for a third offense. After the third verified offense in a one-year period, the rental permit would be revoked.
  • It also states that no STVR permit shall be issued to an applicant with outstanding Code violations.

Both of these plans would require substantial investment into a regulatory board, lots of dedication to enforcement, and unfortunately leave far too many ways to cheat the system. It also takes housing away from a market that is already lacking inventory by turning potential long term housing into short term vacation rentals. This is almost always motivated by owner greed, and hurts the community in the long term by turning homes and apartments into “mini-hotels.” Barbara Bry agrees and had this to say: “It is not possible to advocate for the creation of more housing for San Diegans while at the same time allowing existing units to be taken off the market and used as short-term rental properties,” she said in a statement. “While my proposal to regulate short-term rentals protects the rights of those who wish to rent out their entire primary residence on a short-term basis for up to 90 days per year, it is the only proposal that prohibits investors from converting homes in our residential neighborhoods into permanent mini-hotels.” Another issue that all investors (homeowners) should be concerned with is their property value. Being near a very popular AirBnB can actually drive down the value of a property! A “good neighbor” policy in the memorandum says it will curtail this, but enforcement would be difficult. This is essentially the exact same situation as it is currently, so of course AirBnB is happy. Clearly, AirBnB does not care at all about the local community, only their bottom line.

AirBnB has come out in favor of the proposal authored by the 4 council members and has this to say, “We are reviewing this proposal and are glad to see that Council members Ward, Alvarez, Sherman and Kersey are working toward comprehensive regulations that better define short term rentals in San Diego. Vacation rentals and home-sharing are a time-honored tradition in San Diego and we agree that strong policies need to be enacted. We believe that regulations should define short-term rentals, establish good neighbor standards, provide funding for real enforcement and create a registration and permitting process. We look forward to continued work with the San Diego City Council in the coming weeks to find the best solution for San Diego.” According to AirBnB, they are pleased with this plan as nothing will change!”

As an owner, it may seem like running a STVR is worth it even with all these regulations, but there are still more reasons to we wary! Some operators have found out that their mortgage company does not allow vacation rentals and have had their mortgage called due at the time of this discovery. This means you would have to pay your entire mortgage at once! Another scary thing to consider is the fact that most homeowner’s insurance policies do not cover renting out a home either, meaning you are completely reliant on AirBnB to secure you and your investment, again a scary prospect that AirBnB does not make clear, again showing that they do not care at all about a local market, only their bottom line.

A much more established way to turn your property into an income producer is to turn to the long term rental market. Not only will you give someone a home and not a vacation spot to destroy for a weekend, but you will have monthly income coming in, not sporadic income based on travel season, weather, etc. And depending on the level of management you choose, you may end up doing little to no work and making the same amount! There is also essentially zero chance that the city declares rentals illegal anytime soon.

The council is meeting on Monday October 23rd at 2pm on the 12th Floor of the City Administration Building located if you would like to go and voice your opinion to the people who matter, I know I will see you there!


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