The Lingering, Unresolved Battle Over Short-Term Rentals in One California City

San Diego, California

San Diego, California Byrd Photography/Shutterstock

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Almost a year after San Diego first passed restrictions on rentals marketed on Airbnb and other platforms, only to rescind them months later, the issue is still unsettled. Now, it has moved to the state Legislature.

In San Diego, like other California cities, affordable homes are in scarce supply, with some in the city placing part of the blame on the abundance of short-term vacation rentals marketed on websites like Airbnb. After a decade-long debate over how to regulate vacation rentals, the San Diego City Council passed a sweeping new ordinance last July. Supporters of vacation rentals—a longstanding sector for this coastal community—called the law a de-facto ban, but similar ordinances later followed in Los Angeles and Washington, DC. The law’s backers heralded it as a major success—and then it wasn’t.

Just four months later, the San Diego City Council voted 8-1 to repeal the ordinance that the same council members had passed, in response to a successful petition to put the law on the 2020 ballot, delaying it until voters could weigh in. At the moment, the fight has moved to the state Legislature, where a bill would limit platforms advertising vacation rentals to 30 days a year for residentially-zoned properties in the coastal zone. The measure would only apply to San Diego county. The State Assembly passed the bill in late May and it is now before the State Senate, although its prospects there remain uncertain as some lawmakers say they are hesitant about preempting local governments with state-level legislation.

It’s worth asking how the vacation rental issue became so intractable. It wasn’t bogged down in partisan gridlock—members of both parties have found themselves on both sides of the issue. While dysfunctional government has sometimes been a problem for San Diego, this doesn’t appear to fit into that trend. State Assembly member and mayoral candidate Todd Gloria, a Democrat, coined the term “San Diego special” for a situation in which “obvious solutions to long-running problems die for lack of vision, leadership, and action.” But the Airbnb battles don’t look like a San Diego Special: there was no shortage of legislative proposals, and lawmakers came together to take action (and then undo it).

Instead, it seems the back-and-forth stems from the trouble of balancing a hospitable environment for tourists, which is long baked into communities and economies, with a different vision for the city’s future and California’s continuing struggle with housing costs. Proponents of restrictions say it is about not just the lack of affordable housing, but also creating an environment where people create a community surrounded by permanent neighbors, not just transient visitors. But opposition to restrictions on short-term rentals is coming from hosts in beach towns who say they count on that income, while some see platforms like Airbnb and HomeAway as a way for other neighborhoods to benefit from tourism dollars. A poll by the San Diego Union-Tribune in 2018, after the restrictions were initially passed, found that a majority of residents supported allowing people to rent out a second home to short-term visitors..

Although short-term rental operators are quick to point out that in under 30 days, 62,000 voters signed the petition to put San Diego’s rental ordinance on the 2020 ballot, the campaign also received significant financial backing from Airbnb. According to reporting from Wired, Airbnb donated $1.1 million to a political action committee which spent $300,000 on signature gathering for the petition, as well as $276,358 to another group. Airbnb said in response to that article that the petition was successful because the new restrictions “would have devastated the local economy, impacted property rights in every San Diego neighborhood, and cost the city millions annually in tax revenue.” In a statement to Route Fifty, Airbnb said that the company is “committed to working toward a solution that allows visitors to continue affordably accessing the California Coast, protect private property rights and ensure San Diegans can benefit from tourism too.”

Council member Barbara Bry, who is running for Democratic mayoral nomination in the 2020 election, authored the measure passed—and then rescinded—by the San Diego City Council. “The core issue for me is loss of housing stock,” Bry said, “what our ordinance prohibited was investors buying up homes in single-family neighborhoods and turning them into mini-hotels.”

The economic logic here is fairly simple: whole-home vacation rentals cannot be used by long-term residents, so they decrease the supply of long-term housing, ostensibly raising the price of housing. The data on this problem, however, is conflicting, and both sides point out statistics that support their own case. In one of the papers that vacation rental opponents cite as the strongest evidence for their views, Airbnb listings were responsible for only $27 of increase in the average rent studied. Another study, in New York City, put the effect at 1.4%.

San Diego City Council member Chris Cate, a Republican, agrees that housing costs are a serious problem, but said that more restrictions on vacation rentals are not the way to fix it. “The only way to address the housing shortage we have is to build more units. That goes for not only San Diego, but for every city up and down the state of California,” he said.

Instead, Cate had a different proposal for regulating vacation rentals, which would have allowed whole-home rentals with a permit, and to use permit fees to pay for more code enforcement teams to ensure that hosts and guests follow the law. Cate says his proposal was designed to “provide clear rules for individuals who live next door, who don’t want a 30-person bachelor party on a Wednesday ... to disrupt their evening.” He focuses on the potential revenues that tourists bring to San Diego, and argues that vacation rentals have boosted the city’s tourism industry and its ability to pay for public services like roads and schools.

Both Cate and Bry connect the debate on vacation rentals to a larger debate over competing visions for the future. Cate represents a district that is outside of the established coastal areas that have long been the center of San Diego’s tourist economy, and vacation rentals have allowed tourists to stay in areas like his district, rather than the beach communities. “One thing we’ve tried to go after as a city and as a region is really promoting our neighborhoods and what occurs in our neighborhoods,” Cate said, “So I think if we look at tourism as a whole, it’s not just the coastal areas that we’re looking to promote, but it’s all the neighborhoods throughout San Diego because they all have their own individual stories, and as visitors begin to evolve with Airbnb or Yelp or other platforms, [they] are really leading visitors to want to feel like they’re from that area and move away from the common tourist destinations.” Vacation rentals clearly have a place in this vision, even on the coast: the coastal neighborhood of Mission Beach, which according one estimate has about 2,000 vacation rentals, has only about three hotels, depending on how the neighborhood’s borders are defined.

In addition to spreading tourism and tourist dollars across a wider area, some vacation rental proponents and operators argue that the rentals democratize tourism for visitors as well as hosts. In San Diego’s beach communities, a vacation rental is often less expensive than a hotel stay. The California Coastal Commission, a government agency which manages land use in coastal regions, has sided with vacation rental operators under some circumstances in Santa Barbara, Laguna Beach and elsewhere, in part on the grounds that vacation rentals open up coastal tourism to people who would otherwise find it prohibitively expensive.  

Bry and other critics of the vacation rentals argue that the real beneficiaries from short-term vacation rentals are not San Diegans or a more inclusive tourism, but out-of-town investors. There isn’t data on how prevalent this practice is, and rental supporters say that some people labelled as investors bought property for their own vacations or retirement, rather than for business purposes alone. Still, the idea that many of the Airbnb hosts operating in San Diego are out-of-town investors was an important factor for Bry. “Who do you value most in your city, do you value your residents the most or do you value tourists the most? And I’m clear, I value my residents the most,” she said. Bry emphasized that her regulations were meant to be one part of a portfolio of policies aimed at remedying San Diego’s housing shortage, but nonetheless an important step toward providing more affordable housing.

Bry also voiced a concern that many short-rental opponents have stated: that vacation rentals prevent homes from being occupied long-term, by neighbors who can be a part of the neighborhood. In an op-ed, she wrote that “residents are concerned about the character of their neighborhoods and quality of life. When you purchase a home in a residential neighborhood, you are not signing up to live next to a Marriott.” This argument has been an especially important one for activists outside government, but while Bry portrayed the housing issue as central to her proposal, it was connected to the broader vision of San Diego’s neighborhoods being spaces for local homeowners rather than open to business or investment interests.

On paper, San Diego’s vacation rental debates could be a simple question of finding the appropriate cost of the rentals to society more generally, in terms of housing or social services such as law enforcement or trash pickup, then levying fees on vacation rentals to make up for the shortfall. Admittedly, this is a complicated issue: a study funded by San Diego’s government found that vacation rentals’ impacts vary widely across different areas. But at least in theory, a solution could be reached that reflects the regulate-and-tax approach that cities have taken to other issues, such as legal marijuana.

Bry had discussed making another push toward an ordinance, but right now, the vacation rental policy proposal in her mayoral platform mirrors last year’s law and she is not expected to propose a new one until at least a year after the previous law’s repeal. For now, eyes will be on the state legislature, where Assembly member Tasha Boerner Horvath, a Democrat from Encinitas, an independent city within San Diego County, is pushing AB 1731, which would prohibit rental platforms from advertising properties in the residential and coastal zone of San Diego County for more than 30 days in a year unless the owner also lives on site.  This would cover much of the city of San Diego, Imperial Beach and other coastal communities.

In the Assembly, that measure too divided members of the local delegation. Boerner Horvath called her measure a pilot program, currently amended to three years, during an interview with the Union-Tribune, saying the results could then be studied to see if it helped with housing constraints. “My bill brings up the often forgotten point that you can build all the housing in the world, but if you’re removing housing stock you’ll never meet the goals to address our housing crisis, and I think that really resonates with people,” she said. The bill has passed the Assembly and the State Senate Judiciary Committee, and it is on the agenda for the Senate Natural Resources and Water Committee’s hearing on July 9.

After the Assembly vote, Nick Serrano, a spokesman for Gloria, one of the mayoral contenders and a former council member, told the Voice of San Diego he voted against the measure because it just needs to be resolved at the local level. “He’s lived through all of these discussions related to short-term vacation rentals and what we realize is there’s really no replacement for local action on this issue,” Serrano said.

David Hervey, a San Diego native, is a Policy Fellow with National Journal.

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