The Future of San Diego Short-Term Vacation Rentals

Beginning in 2023, the city of San Diego will implement a 1% cap on short-term vacation rentals, leaving those property owners with a decision – turn their investment into a long-term rental or sell. Could this help open up inventory in San Diego? Time will tell.

The California Coastal Commission recently approved the cap earlier this month with one caveat; the new cap will be reviewed in 2030.

This rental ordinance will apply to non-hosted whole-home units across San Diego. 1% of the current short-term rental properties in San Diego equates to just under 5400 properties. The only exception is the city will be Mission Beach which is limited to a 30% cap (about 1081 short-term rentals).

If a property is hosted, the property will not be subject to the new ordinance, so renting out rooms short-term (less than 20 days) will still be allowed without a license.

With the new ordinance, San Diego’s short-term rentals will be reduced by about 5800 rentals, a 48% reduction city-wide, and a 27% reduction in Mission Beach. Currently, the city of San Diego doesn’t require a license. Once the new ordinance begins in 2023, property owners will need to apply for a license through the city’s lottery system to rent out properties short term. A website will be available to assist owners with this process. The city will give a preference to the top-performing units based on this criteria. 

There will be four types of licenses –

Potential Pros and Cons of this new ordinance:

Pros

• Possibility of an increased inventory of homes to buy or rent out long term.
• Less issues with neighborhood noise from vacationers and less homes sitting empty while not rented.
• Possible increased values in cities outside of San Diego. We see investors moving their investments to other surrounding cities like Oceanside, Carlsbad, Encinitas, Chula Vista, etc. or desirable vacation spots driving distance from San Diego, like Joshua Tree or Palm Springs.

Cons:

• Negative economic impacts to the tourism industry if there are fewer vacation rentals available.
• Increased hotel costs due to lower supply and high demand.
• Less profit for investors because short term rentals typically generate more income than long-term rentals.

For more information about the city’s licensing process, visit there website – Short-Term Residential Occupancy (STRO).