San Diego Could Soon Get a Vacation From Its Long-Running Rental Showdown

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San Diego Could Soon Get a Vacation From Its Long-Running Rental Showdown

The effort to regulate vacation rentals has so paralyzed City Hall that after one of many potential deals fell apart, one councilman declared the situation proved the Council could no longer govern. Now an end could – maybe, possibly – be in sight.

Illustration by Adriana Heldiz

 

Many American cities – despite their unique geography and circumstances – share the same serious, complex problems: things like homelessness, housing affordability, disaster preparedness and inequality. When we talk about San Diego Specials – a unique brand of problems – we’re not talking about those. Rather, the term refers to solvable, long-running problems that have festered here as a result of a lack of leadership and vision. They’re often challenges other cities took action on long ago, with far less headaches. In this weeklong series, we are examining five San Diego Specials and the factors that have kept solutions out of reach.

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For years, the quest to regulate vacation rentals paralyzed City Hall.

A series of regulatory attempts fell apart after hours-long public hearings. After one of those failed attempts in 2017, City Councilman Chris Cate declared that the situation proved the City Council could not govern. Ten months later, the City Council repealed regulations it had approved, after a successful signature-gathering effort threatened to overturn them at the ballot box.

Now an end could – maybe, possibly – be in sight.

A City Council with several new members voted 8-1 earlier this year to move forward with a regulatory compromise brokered by City Council President Jennifer Campbell that caps whole-home vacation rentals at 1 percent of the city’s housing stock, and creates a licensing process and a bolstered enforcement system allowing the city to issue fines and revoke licenses. The policy would also provide an unlimited number of licenses for home-sharing operations, where the homeowner remains on site, and for both whole-home and home-sharing hosts who welcome guests fewer than 20 days a year.

The city is for now set to enact the new regulations next July – if all goes as planned.

But at least one potential crack has already emerged, and there could be more.

The state Coastal Commission, which signs off on vacation rental restrictions in beach communities, late last month deemed the initial package the city submitted on the policy incomplete and called for more details on multiple aspects of the proposal.

City officials also still need to settle on a lottery system that will determine who gets vacation rental permits, and the City Council has to vote this fall on fees to back implementation and enforcement efforts.

And advocates who have long criticized the city for not cracking down on vacation rentals are lurking on the sidelines. They aren’t ruling out future legal action.

In other words, the city can’t declare an end to its years-long vacation rental regulatory saga yet. But the new rules have managed to get closer to the finish line than many that came before them.

For years, the city’s regulatory attempts were stymied by two vocal groups with sharply opposing views.

Vacation rental opponents hold up banners outside of a City Council meeting. / Photo by Adriana Heldiz

A coalition of coastal residents and some other advocates demanded a dramatic city crackdown and severe restrictions on rentals in single-family neighborhoods. Some even called for a ban in single-family neighborhoods. Most weren’t willing to budge on those demands.

But former Mayor Kevin Faulconer wasn’t willing to proceed with a crackdown, even as a series of City Council members representing coastal communities championed that draconian approach.

Vacation rental platforms and hosts weren’t willing to give, either. They were determined to continue to thrive in a market known for bustling tourism and pointed to growing hotel-tax collections from rental properties to underscore their contribution to the city’s bottom line and the local economy.

A vacation rental supporter attends a City Council meeting. / Photo by Adriana Heldiz

The two sides’ longtime unwillingness to give even a little – and some city officials’ unwillingness to stick to positions likely to come with political consequences from either of those camps – thwarted attempt after attempt to regulate vacation rentals at all.

The rental regulations approved earlier this year differ from past proposals because they followed talks between members of those opposing camps.

Campbell’s office brought hotel union leaders and a vacation rental platform that undermined past regulatory attempts to the table to try to eke out a compromise.

Venus Molina, Campbell’s chief of staff, said the office also met with community groups, including some that had called for a city crackdown on rentals that never came to be.

Molina, who led those policymaking efforts, said she warned stakeholders that Campbell’s office would move on with or without them. The city needed to get regulations on the books after years of frustration and failures.

What resulted, Molina said, is a policy that no one is entirely pleased with.

“I truly believe it is a true compromise because everyone is equally unhappy,” Molina said.

Vacation rental platforms and operators are – at least on paper – set to be reined in after years of benefiting from a booming rental market. Those who argue the city shouldn’t have whole-home vacation rentals or should have far fewer of them, meanwhile, were forced to accept that they would continue to exist.

Jonah Mechanic, whose San Diego company manages vacation rentals and has years advocated for rental operators, said earlier this year that an ordinance requirement that the policy and its impacts be reviewed annually helped make it palatable for those on opposing sides. The ordinance could change as the city gets more data and sees what works – and what doesn’t.

“No ordinance is perfect when it first comes out,” Mechanic said.

There’s still much work to do before the regulations are set to take effect in summer 2022.

The lottery system the city will set up to choose who gets rental permits is likely to be controversial. After all, not every rental operator can be a winner.

City staff, rather than the City Council, will decide on that system.

Elyse Lowe, who leads the city’s development services department, wrote in an email to Voice of San Diego that the city has established an internal working group to plan, evaluate and later administer the lottery.

The City Council is expected to vote in October to establish fees for the lottery winners.

A 2018 draft ordinance that was never enacted called for license holders to pay a $949 fee to rent out their whole home. If inflation is any indication, the fee is likely to be higher in 2022.

Then there’s the need to get Coastal Commission approval to implement the new regulations in the beach communities where frustration with vacation rentals has been most acute.

Over the past several years, the Coastal Commission has aggressively asserted that tourists should have affordable options to stay on the coast. As a result, the agency has been critical of vacation rental bans and regulations it believes lessen affordable options. The agency has also urged access to affordable housing.

In a July 30 letter, Coastal Commission analyst Alexander Llerandi laid out a series of requests to allow the agency to dig further into the city’s proposal to formally amend the local coastal program, a document similar to a community plan, so vacation rental regulations can go into effect in the city’s coastal areas.

“In order to be able to properly evaluate the impact of the proposed amendment in the greater context of the city’s overnight options, Coastal Commission staff needs to understand how potential changes to the city’s short term rental regulations will affect both the supply and range of affordability in visitor accommodations while also considering long-term housing needs,” Llerandi wrote.

Among his requests were a list of all overnight accommodations in the city’s coastal zone, more details on the city’s coastal housing inventory and a breakdown of the city’s planned lottery system and how it might address cost and geographic distribution of rentals.

Llerandi also cited concerns being raised in vacation rental mecca Mission Beach, where the new regulations call for a carveout allowing whole-home rental licenses for the equivalent of 30 percent of the neighborhood’s housing.

“One assertion is that the allocation of short-term rental capacity to Mission Beach is too high and such high capacity is resulting in a reduced long-term residential base for the community, as well as fewer traditional housing options,” Llerandi wrote. “Please provide the city’s response to this argument, including both federal and local census counts and an explanation of how the city determined that a 30 percent allocation of permits was appropriate for Mission Beach.”

City spokesman Scott Robinson said the city expects to submit its response to the Coastal Commission by the end of the year.

Once Coastal Commission staff review the city’s more detailed proposal, they will make a recommendation to commissioners. Then the Coastal Commission will vote on whether to allow the city’s proposed rules to go forward in the beach communities.

John Thickstun of Save San Diego Neighborhoods, which has for years lobbied the city to ban vacation rentals in residential areas, said his group is also watching closely to see what happens next.

An attorney representing the group sent a letter to the City Council before its required second vote on the ordinance this spring, arguing the proposed regulations were in violation of state environmental law and inconsistent with the city’s general plan, Pacific Beach and Mission Beach community plans and its local coastal program.

Thickstun wouldn’t rule out the possibility of a future lawsuit against the city.

“Save San Diego Neighborhoods will do something,” Thickstun said. “We will take action, but we do want to wait.”

The group is waiting, Thickstun said, to see how the Coastal Commission views the proposal and the city’s plan to enact the new rules. He doesn’t believe the city or the ordinance have the resources or teeth to effectively police rentals, including how many nights per year they operate.

“We think that it’s unenforceable,” Thickstun said. “It’s too complicated and economically prohibitive to enforce this.”

Regardless of what might come next, Molina said Campbell’s office is determined to work with stakeholders, the city and the mayor’s office to make the regulations stick after years of failures. Molina said she and mayor’s office officials want to ensure the city’s enforcement can meet residents’ expectations and that the lottery system is considered fair.

“We need to make this work,” Molina said.

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