A study found a new permitting ordinance won't be freeing up as many housing units in San Diego as originally thought.
The Impacts of Proposed Short-term Residential Occupancy (STRO) Regulations on Transient Occupancy Tax (TOT) Revenue study found that the city council’s Short Term Rental Ordinance (STRO) would only lead to a 20% to 30% reduction in whole-home rentals.
“But that's just in the whole home rental, which is Tier 3,” said Venus Moline, chief of staff for the San Diego City Council.
“It will put out about 50% of the stock back into the housing market because if you're capping the number of short-term vacation rentals, you're reducing them to 1%. It actually puts out about 50% back into the housing market.”
As previously reported, the San Diego City Council has approved the first reading of its STRO, which requires all Airbnb hosts in San Diego to be permitted, however, the number of licenses issued under the new law will be limited depending on the type.
“With an ordinance like this, you're not going to please everyone and it's not going to be perfect and, because of that, we actually included in the ordinance an annual review,” Moline said. “This will be reviewed every year by the city council to make all the tweaks and changes that are needed. As good as I think we are, it's not perfect.”
There were 11,302 whole-home listings based on 2019 data from Inside Airbnb, a website that tracks Airbnb listings, according to the study, which was co-authored by Baku Patel, the city of San Diego’s independent fiscal and policy analyst.
“This will have an opportunity to grow every year because the percentage is actually tied to the housing index,” Moline said. “As the housing units increase, the number of licenses will increase as well and so the compromise with all of the platforms, the unions, and everyone was a 1% cap.”
According to the Southern California Rental Housing Association, rising prices and an increase in population have put a strain on the overall Southern California housing market.
The study further found that regulating short-term rentals would likely lead to a shortfall in TOT, which is a hotel tax.
“The first year will be a little rough because it's a startup year and there's a lot of first-time costs but there are variables that we don't know until we actually get this started,” Moline said.
The city receives more than $200 million in revenue from TOT and short-term rentals contributed $31.5 million in 2019, according to the study.
“I think it will reduce the revenue but I just don't think it's going to be a huge cut,” Moline said.
The first reading of the ordinance was approved on Feb. 23 and is scheduled to be effective in 2022.
“We have a second reading, which most likely will be approved, and then the ordinance goes to the Coastal Commission around June,” she said. “In the meantime, the administration will work on admin regulations.”