Tough new regulations that will sharply curtail short-term vacation rentals in San Diego will move forward, the City Council decided Wednesday, Aug. 1 despite legal protests lodged this week by the home sharing industry.
Two weeks after approving the new rules, 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 Councilmen David Alvarez and Scott Sherman opposed. Councilman Chris Cate was absent.
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,” Councilwoman 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.”
Still obstacles loom. The regulations, which are to go into effect next July, 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. And even if the new rules are upheld, Councilman Alvarez predicted they will be unenforceable.
“I don’t like to support things that give people a false sense of hope,” he said. “Unless short-term rental hosts who refuse to comply with the new rules are forbidden from advertising their properties on a short-term rental platform, they will continue to operate and dare the city to shut them down.”
Sherman was even more blunt, daring property owners in Mission Beach, which has long been a magnet for vacation rentals, to sue the city.
“People in Mission Beach, sue us, sue us now, we are taking your property with the signature of this thing today.”
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, despite the admonition.
“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.
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.
A letter delivered Wednesday morning to the council from attorney Valentine Hoy previewed some of the legal arguments that may figure in any litigation.
Hoy, who was not present at the council hearing, called the city’s ordinance “overbroad,” claiming that its restrictions would even apply to visiting friends and relatives who are not permanent residents of a dwelling unit.
“The (ordinance) thus is overbroad and, on its face, raises serious Constitutional issues implicating fundamental rights, including the right of association,” Hoy said in his letter. “The STRO in its current form would not withstand the strict scrutiny standard applicable to zoning ordinances implicating fundamental rights.”
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.”
Jonah Mechanic, who leads Share San Diego, a coalition of short-term rental operators that is also being represented by Hoy, would not say Wednesday whether litigation is coming, although he has previously said it remains a possibility.
“People are calling me who are attorneys, and so are people who are paying attention to what is happening,” said Mechanic, owner of SeaBreeze Vacation Rentals. “We’re exploring all options, and we’re not saying yes or no to anything,”
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 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.
During Wednesday’s hearing, one short-term rental host after another pleaded with the council to be more permissive, arguing that the new restrictions will destroy businesses and impede their ability to make ends meet as a result of much reduced income.
“A couple years ago I realized my dream of purchasing my vacation home,” said Randy Coker. “The only way to do that was to rent it out. I didn’t think in a million years anyone would ban short- term rentals in Mission Beach. I’ve invested my retirement money in a dream that you guys are taking away.”
Ronan Gray, president of Save San Diego Neighborhoods, which has long pressed the council to outlaw all vacation rentals, applauded the council for its action two weeks ago.
“I’m sure you’re under a lot of pressure from these professionals and the $30 billion Airbnb and all their lobbyists,” said Gray, a Pacific Beach resident. “Fifty percent or more of San Degans are renters so making these places available to long-term renters is a step in the right direction.”
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.
Meanwhile, the city is expected to take the new regulations to the Coastal Commission later this year. The agency’s staff has warned the city that it will need to make its case for the tougher restrictions, which will require compiling an inventory of San Diego’s existing lodging by type, location and pricing, as well as an assessment of demand for overnight accommodations relative to the supply.
Some cities have been successful in overcoming Coastal Commission objections, while other cities like Santa Monica remain tied up in litigation. In San Diego County, the Del Mar City Council said last month it will go to court to clarify the Coastal Commission’s authority over home-sharing in residential neighborhoods.