REGION — As San Diego prepares to implement its newly-approved 1% cap on short-term vacation rentals by the beginning of next year, many rental owners will face a choice of either renting out their units long-term, selling their units and cutting their losses, or looking to other cities without limits to start their business fresh.
Now that the California Coastal Commission has approved the cap — with the exception the cap is reviewed after seven years — the plan is for the city to implement the cap nine months following the commission’s March 9 decision.
The new ordinance will cap non-hosted, whole-home units citywide at 1% of San Diego’s homes, which will limit nearly the entire city to about 5,364 short-term vacation rentals. Due to its long history of vacation rentals, Mission Beach is the only exception. The city is implementing a 30% cap on the community or roughly 1,081 short-term rentals, leaving San Diego with about 6,445 short-term rentals altogether.
The cap will not apply to hosted units where the renter lives in the home and rents out a room.
There are an estimated 12,300 short-term rentals currently in San Diego. With the caps, the city will see a 48% reduction in short-term rentals city-wide and a 27% decrease in Mission Beach specifically.
The 1% cap is a substantial change for San Diego, which currently doesn’t require permits or licenses for short-term vacation rentals, let alone a cap on how many are allowed. With the new cap, renters will need to get permits to operate their units through a lottery system. Units with a history of top performance will be chosen first.
Many residents throughout San Diego have been waiting for this cap for a long time.
“The city doesn’t like the sheer amount of short-term vacation rentals because they can create problems like attracting loud partiers in the summer and leaving homes empty in the winter, creating these abandoned-looking neighborhoods,” said Carmel Valley realtor Megan Eskey. “As the number of short-term rentals increase, the livability of a town goes down.”
Eskey noted that with the number of short-term rentals dropping out of the market, many of those units would most likely be up for rent or sale. That many homes going back to the market is significant, she said.
“The numbers are so low per city in terms of how many houses go on market per month,” she said. “If you suddenly or gradually bring thousands more properties forward for long-term rentals or homeowners, that would make a difference.”
Still, Coastal Commission staff recognized that it is currently unclear how the cap will affect the city’s housing stock considering that whole-home short-term rentals only take up about 2.5% of the city’s overall housing stock. It was also noted that many homes, particularly those in the coastal areas, would not be considered affordable to rent or buy.
Simon Dang, who lives in Pacific Beach and rents out five units as short-term vacation rentals in neighboring Mission Beach, is skeptical about San Diego’s new regulations actually working. Instead, he foresees the cap creating negative economic impacts.
“South Mission Beach is thriving because of short-term rentals,” he said. “If they implement this cap, we’re not going to have as many people visiting, we’re not going to have as many people frequenting the businesses here.”
Dang said he will likely only be able to continue renting out one of his five units as a short-term rental with the new cap and rent out the rest as long-term rentals. He noted this means he will have to cut his cleaning staff’s hours as well.
With so many short-term rentals being forced out of San Diego, Eskey believes they will likely either sell their homes, rent them out long-term or consider moving to other nearby, desirable coastal cities. They may look to move to North County, where none of the coastal cities currently have a short-term rental cap.
Former Oceanside City Council member Shari Mackin is worried about the possibility of short-term rentals flooding the city following the cap’s implementation, though she applauds the city of San Diego for finally moving forward with it.
Mackin said Oceanside has a long history of vacation rentals too, but things have changed over the years with more and more short-term rentals coming into town and seemingly taking over the coastal neighborhoods. Short-term rentals currently take up almost 2% of Oceanside’s housing stock.
Unlike San Diego however, Oceanside has been regulating short-term rentals since 2019. Though there isn’t a cap, the city requires permits for all non-hosted units. The city also has a code enforcement officer specifically designated to short-term rental rule enforcement, which Deputy City Manager Jonathan Borrego said has proven very effective for the city.
Still, Mackin and others believe Oceanside’s short-term rental regulations aren’t enough.
“What we’re lacking is a cap,” Mackin said. “Balance is key, and the only way to find balance is by putting a cap on it.”
As the city continues to monitor the growth of short-term rentals and deliver biannual reports on the number of rentals, complaints and other updates on the program to the Oceanside City Council, Borrego said staff would revisit potentially implementing a cap if there is a significant increase in short-term rentals.
“We haven’t really seen exponential growth in short-term rentals since the ordinance was adopted,” Borrego said. “From the staff’s perspective, we’re pretty content with the program and the way it’s been operating.”
Mackin also wants to see deed restrictions placed on units along the city’s transit corridors where more affordable housing is to be built. Earlier this year, City Council directed staff to bring forward a code amendment that would prohibit affordable housing projects from being used as short-term rentals.
Though San Diego’s northern coastal cities may appeal to those short-term vacation renters who are forced out of San Diego, Eskey suggests they look at higher elevations rather than the coastline for new business.
San Diego County is now home to two of only 34 designated International Dark Sky Communities – Borrego Springs and Julian. According to Eskey, more short-term vacation rentals may be welcomed in Julian where astrotourism and stargazing can grow in popularity.
Renters could also make more in Julian during the winter months because of astrotourism’s year-round season. Eskey also noted there would be fewer complaints from residents there due to space and less likelihood of rowdy parties.