San Diego City Council approves strict new Airbnb rules

The San Diego City Council has voted to create strict regulations for short-term vacation rentals. Starting in July of 2019, short-term rentals will only be allowed in owners’ primary residences, and both short-term rental operators and online rental platforms such as Airbnb, VRBO, and HomeAway will have to abide by several new requirements. The city also plans to step up its enforcement of short-term vacation rentals.

Before the new law was approved, San Diego did not regulate short-term rentals, although the council had debated the issue for years. According to data analytics firm Host Compliance, San Diego now has 11,000 short-term vacation rentals, most of which are whole homes. The new regulations will have a big impact on short-term rental owners; the city estimated that approximately 80 percent of San Diego short-term vacation rentals will be affected.

Rules for hosts

Although Mayor Kevin Faulconer had originally endorsed a plan that would allow homeowners to offer short-term rentals in both their primary residence and one other home, the council took a more restrictive route. Owners will only be able to rent out the residence where they primarily live, and only for six months of each year. However, owners who have a second unit on their property, as in a duplex, can apply for a second short-term rental license.

Under the new regulations, all short-term rental operators will be required to apply for a short-term rental license and pay a yearly fee of $949, believed to be the most expensive in the country. Hosts who want to offer homes with four or more bedrooms for short-term rentals must apply for a different type of permit with a more extensive process. Hosts must include their license number on all ads.

Short-term rental hosts will also be required to pay a fee of $3.96 for whole-home rentals or $2.73 for room rentals that will go toward affordable housing in San Diego. Hosts must also collect and maintain detailed records on each short-term rental transaction for three years.

The city will also require three-night minimum stays for popular coastal areas and downtown.

The mayor’s original plan also included an exception from the new rules for existing short-term rental operators in Mission Beach who were already paying transient occupancy tax. However, the council declined to approve the exemption, so Mission Beach hosts will have to follow the same rules as all other hosts. It’s estimated that 44 percent of the housing stock in Mission Beach is currently short-term rentals, and owners of about 1,100 short-term rentals in Mission Beach have registered to pay lodging tax.

While “granny flats” are barred from being used for short-term rentals under the new rules, council members said they’d like to revisit the issue.

Rules for rental platforms

The new law holds online rental platforms such as Airbnb, VRBO, and HomeAway responsible for helping to enforce the rules. Platforms must:

• Notify hosts of permit and tax requirements
• Collect lodging taxes and affordable housing fees when rentals are paid for
• Ensure that all hosts using the platform are legally registered
• Collect and maintain detailed records on each short-term rental transaction for three years

Tax obligations

Under the new law, short-term rental hosts must also get a transient occupancy tax (TOT) certificate, collect the tax from guests, and remit it to the city. The tax is currently 10.5 percent.

If hosts use an online platform such as Airbnb, HomeAway, or VRBO, the platform will be required to collect the taxes and affordable housing fees on their behalf. Currently, Airbnb is the only platform that collects the TOT for hosts.

MyLodgeTax can help short-term rental hosts in San Diego comply with all their TOT obligations.

Enforcement

The new short-term rental licensing fees paid by hosts will go toward funding enforcement efforts, including a new team of police and officers to deal with short-term rental issues, the creation of a license and registration system, and a new complaint hotline or app.

Under enforcement rules, a first notice of violation will be considered a warning, a second violation may result in citation, and a third notice within a 12-month period can result in the operator’s short-term rental license being revoked.

A bumpy road ahead?

The new short-term rental law could still face challenges. The California Coastal Commission — which last week sent a letter to San Diego City Council members reminding them of how important rentals are in ensuring affordable access to the coast — will have to review the new rules. And former San Diego City Attorney Jan Goldsmith, who is now working for Airbnb and HomeAway, warned that legal challenges could follow.