San Diego’s citywide cap on vacation rentals should be approved, Coastal Commission planners say

California Coastal Commission planners are recommending approval of San Diego’s planned citywide cap on short-term rentals, despite acknowledging that the new restrictions have the potential to slash the number of such rentals by half.

A commission staff report released this week concluded that San Diego’s long-sought regulations seek to strike a balance between providing access to the coast and preserving long-term housing. Even so, planners are asking the city to add a key provision requiring San Diego to revisit the new regulations in seven years to assess potential fallout from such a dramatic land-use change.

“It is difficult to predict exactly what ramifications such a profound shift will have on the STRO [short-term residential occupancy] market specifically and overnight accommodations in general, and the risk of substantial adverse impacts on coastal access does exist,” according to the report. “Given the long timeline and strong effort needed to bring this amendment forward, it is possible that even if adverse impacts are later identified, the resources and will to address them may not be present if there is not a clear requirement built into the LCP [Local Coastal Program] to allow the city, the public and the commission the opportunity to re-evaluate the program after several years of implementation.”

In March, the full commission will consider the staff’s recommendation to approve the vacation rental regulations, which could go into effect as early as this fall.

Though the ordinance the City Council approved last year originally had an implementation date of July 1, elected leaders agreed this month to delay the start for several months while awaiting the outcome of a required review by the Coastal Commission. Council members also were concerned about starting a new program so close to the approaching summer season, when vacationers typically have booked their rentals months ahead.

“I’m very happy that the staff took into consideration all the work that went into this and they’re agreeable with it,” said Venus Molina, chief of staff for Councilwoman Jennifer Campbell, whose office led the effort to come up with a compromise plan for regulating home-sharing, long a hot-button issue in San Diego. “I think they took into consideration our compromise and how we’re trying to strike a balance between releasing housing stock into the market and providing low-cost accommodations on the coast.”

Campbell’s District 2 includes Ocean Beach and Point Loma.

If the commission approves the regulations next month, Molina said, they could go into effect by October, after the busy summer season.

San Diego’s ordinance aims to cap whole-home rentals citywide at 1 percent of the city’s more than 540,000 housing units, or about 5,400. An exception was made for Mission Beach, which has a long history of vacation rentals. There, the allocation is more generous, with licenses limited to 30 percent of the community’s total dwelling units, or about 1,100.

Together, the 6,500 available licenses would mean a 47 percent reduction in the current estimate of 12,300 vacation rentals.

Based on a survey conducted in September for the city of San Diego, about 39 percent of the short-term rentals citywide were in the coastal zone. Of those, 93 percent were whole-home rentals accommodating an average capacity of 5.8 renters, with an average nightly rate of $306, according to the commission staff report.

The city’s new regulations allow for only one license for individuals renting out their entire residence for more than 20 days out of the year, but an unlimited number of licenses will be permitted for vacation rentals of less than 20 days a year or for home-sharing operations where a host rents out a room or two.

Two-year licenses will be allocated via a lottery system, though priority will be given to longer-tenured rental operators who have no code violations associated with their units over the past two years. To ensure that residents from all communities have the ability to secure a license, the citywide lottery — except for Mission Beach — will tie allotments in each community planning area to the percentage of applications received in each of those areas. That provision is supported by commission staff.

In its report, the agency noted the long-standing tension between providing more affordable access to the coast via short-term rentals and the potential for depleting year-round housing.

On one hand, the city’s proposed limitation on short-term rentals “could be seen as inconsistent with the LUP [land-use plan] policies that strongly support the protection and provision of overnight accommodations,” the report states. “STROs provide a service to coastal visitors looking for a different, and often more affordable, type of overnight accommodations than traditional hotels can provide.”

At the same time, commission staff acknowledged it’s not a given that housing costs would decline if fewer vacation rentals were available.

“It is unclear the extent to which STROs impact housing price or availability,” the report states. “The current estimate of 12,300 STROs represents less than 2.5 percent of the housing stock in the city, and particularly in the coastal zone, most of the houses currently used for STROs would likely not be considered affordable to rent or buy.”