Short-term rental ordinance affirmed in second reading by San Diego City Council

Tough new regulations that will sharply curtail short-term vacation rentals in San Diego will move forward, the City Council decided Aug. 1, despite legal protests lodged this week by the home sharing industry.

Two weeks after approving the new rules (6-3 on July 16), which will limit short-term stays to one’s primary residence only, the Council reaffirmed its decision in a second reading of an ordinance that will now legalize home sharing. The vote was 6-2, with Council members David Alvarez and Scott Sherman opposed. Council member Chris Cate, who also voted against the regulations in July, was absent.

Under the new rules, individuals will be able to rent out their primary residences while they are not present for up to six months a year as long as they apply for a permit and pay an annual fee of $949. Three-night minimum stays in the more saturated coastal areas and downtown San Diego will also be imposed.

Mayor Kevin Faulconer had originally proposed a compromise plan that would have allowed up to two short-term rental permits for San Diego residents and one for out-of-towners, but a Council majority rejected that idea.

The Council did make one exception to the primary residence-only restriction. San Diegans who have an additional unit on the same property as their residence, as in a duplex, will be able to get a license for a second vacation rental.

The action came following a five-hour hearing during which vacation rental hosts appealed to the Council to reconsider its action while critics of unregulated rentals urged elected leaders to stand firm and protect residential neighborhoods.

“This respects the original spirit of the sharing economy. It is a true compromise and it preserves our precious housing stock,” Council member Barbara Bry said of the new regulations. “This is only the first chapter. It will be up to us to craft an enforcement mechanism that will go into effect next year. We will need all your cooperation and help in making sure this works.”

The regulations, which are to go into effect by Aug. 1, 2019, will still have to pass muster with the California Coastal Commission, which generally favors vacation rentals as an affordable alternative to hotel stays on the coast.

The meeting itself got off to a rocky start when City Attorney Mara Elliott advised the Council that it might want to consider delaying Wednesday’s hearing because a mistake was made in a written description of the regulations, which could be interpreted as a violation of the Brown Act. The description erroneously said that the Mission Beach community would be exempted from the new rules.

“I can imagine there could be a resident of Mission Beach who read today’s notice and was under the impression that the original ordinance containing the Mission Beach exclusion was still under consideration. For that reason, we may wish to consider rescheduling today’s hearing,” Elliott told the Council.

While the Council initially considered rescheduling the meeting for one week, it ultimately decided to proceed, largely due to the volume of people that had signed up to give public testimony on both sides of the issue.

“I have a real problem being part of a meeting that I was advised was in violation of the Brown Act,” said Sherman, who was on the losing side of a motion to continue the hearing.

Local testimony

Although much of the discussion was centered on Mission Beach, some La Jolla and Pacific Beach speakers testified in favor and against the ordinance.

Among the early speakers was La Jollan Mike Costello, who presented a multi-slide presentation showing how houses his Bird Rock neighborhood had been converted to short- term rentals.

He compared short-term rental situation to Godzilla “destroying” neighborhoods, and thanked the Council for their earlier action, but argued for enforcing the current San Diego Municipal Code, which states renting a house for less than 30 days is not permitted in single-family zones.

Mission Beach business owner Matthew Gardener claimed the number of unit reductions associated with the primary-residence-only requirement would “devastate” the Mission Beach business economy.

La Jolla resident Cy Pilkington operates two units that are listed on Airbnb in his apartment complex. “There is a lot of money that comes in through tourism and I think the vote is short-sighted, and would kill 80 percent of rentals to stop a few bad apples. Why worsen the deficit instead of putting in steps to manage it?”

Several renters explained their offerings that are less expensive than hotels, and include kitchen and beach equipment in a way that provides more cost effective options. Others said the ordinance would encourage the renters to list their property on the black market

The Pacific Beach (PB) Town Council spoke as a collective, and its president Greg Daunoras said, “Residents of PB have asked for help since 2007. 11 years later, you have responded with an ordinance that will … overall improve the quality of life.” The PB board previous had voted to oppose the Mayor’s original proposal.

“Our position stands that we oppose investor-owned whole-house short term rental,” Daunoras said, and asked that enforcement be made as soon as possible.

The opposition responds

While opponents of the Council action will not say for sure how they will proceed now that the City’s new ordinance is a reality, litigation is likely.

An attorney for Airbnb and HomeAway hinted as much in two letters he sent the Council this week warning of possible legal violations involving regulations that will have the effect of outlawing the short-term rental of second homes and investor properties.

HomeAway issued a statement immediately following the hearing, calling the Council action an effective ban.

“HomeAway is disappointed in the Council’s decision to hang up the ‘not welcome’ sign to millions of short-term rental travelers and the San Diego community of rental homeowners and managers, the home-sharing platform said. “HomeAway will explore all our options in light of this broken process and flawed policy.”

The crackdown on rentals popularized by home-sharing sites like Airbnb has the potential to affect as many as 80 percent of the City’s more than 11,000 vacation rentals, according to the Mayor’s office.

Although Airbnb has had a presence in San Diego for about a decade, the Council had been facing increasing pressure over the last three years to take some regulatory action in the face of growing complaints from residents that rotating cycles of vacationers are disrupting their quiet neighborhoods and depleting the supply of long-term housing.

The Mayor’s office had originally projected yearly revenues of $3.5 million to fund up to 16 new positions in multiple departments, including the police, to enforce the new regulations. But that was based on a larger number of rentals than would now be allowed under the more stringent rules.

— Ashley Mackin-Solomon contributed to this report.