San Diego Lottery for Vacation Rental Licenses will not be required as applications are below city cap

In a surprising turn of events, applications for San Diego’s first vacation rental licenses have not reached the city’s new cap, meaning a scheduled lottery will no longer be necessary.

That won’t be the case for Mission Beach, however, a longtime magnet for short-term rentals. A separate cap of nearly 1,100 licenses was imposed for the beach community, and city officials reported Wednesday that the number of applications received had exceeded that limit. These candidates will learn the result of their lottery no later than December 16.

The license application deadline for hosts intending to rent their entire home short-term for more than 20 days a year was 5 p.m. Wednesday. City officials were unable to provide the final tally of applications submitted for whole-home rentals across the city as of late afternoon. However, a city spokesperson said as of 5 p.m. Tuesday the number was less than half the maximum number of licenses allowed – 5,416, which is 1% of the city’s more than 540,000 homes.

In light of the shortfall, the city, within the next two weeks, will reopen the application process until the city’s cap is reached, city spokesman Scott Robinson said.

Starting May 1, all short-term rental hosts will need a license to legally operate in the city of San Diego under the the new city regulations, approved last year by the city council.

“I’m shocked and a bit concerned as well because I wanted to make sure the people running these companies didn’t miss out on this opportunity,” said Venus Molina, chief of staff to adviser Jennifer Campbell, whose office helped originally negotiating a compromise plan to regulate short stays after multiple stumbles in the past. “I think maybe a lot of people haven’t applied or maybe people just don’t want to deal with this and may just want to rent (their homes) full time.”

There are several theories as to why the city hasn’t been inundated with requests from home-sharing hosts after years of complaints from residents across the city that vacation rentals were outpacing their once-peaceful single-family neighborhoods. One hypothesis is that the city may have relied on data that overstated the true number of short-term rentals operating in San Diego.

Estimates have varied greatly over the years. In a report released more than two years ago, the city’s Office of the Independent Budget Analyst acknowledged that there was little publicly available information documenting short-term rental activity in the city, but attempted to reach a reliable figure. Based on his research at the time, he concluded that in 2019 there were 7,000 to 8,000 whole-home rentals operating in the city, outside of Mission Beach, for more than 20 days a year. .

Anticipating that the new regulations would trigger a surge in demand for two-year vacation rental licenses, elected city leaders gave much thought to a lottery system that would give the highest priority to longer-term rental operators who don’t have no code violations associated with their units in the past two years. Points were to be awarded on a weighted scale that would not necessarily guarantee such people a license, but the system would improve the likelihood of “good actors” getting a license, the city said. This priority system will remain in place for Mission Beach applicants.

Only one license is allowed for people renting their entire residence for more than 20 days. An unlimited number of licenses will be allowed for vacation rentals of less than 20 days per year or for colocation operations where hosts rent out part of their listing while they reside in the listing.

“Thinking about current home-sharing trends, it seems like the shine has carried the entire Airbnb experience,” speculated Matt Valenti, a member of Save San Diego Neighborhoods, who has long argued that short-term rentals should be prohibited in residential areas. “And now they have all these additional regulations to deal with, and this order is quite complex and confusing. I imagine there’s a certain segment of rental landlords who think, I’m going to keep operating like I did and see what happens and they’ll test the city’s resolve to actually enforce the ordinance.

San Diego real estate agent Brett Dickinson said several of his clients had applied for short-term rental licenses but felt the city was overestimating the number of such listings in the city.

“They’re all expecting and pretty happy that it’s not an overabundant number,” said Dickinson of real estate brokerage Compass. “We also had several clients who called us to say that I no longer wanted to do vacation rentals, I wanted to sell, there was too much uncertainty. Some wondered how the city would enforce this and some people felt it wasn’t worth it and would do a long term rental instead.

Airdna, a company that has long tracked short-term rentals posted on Airbnb and VRBO — two of the biggest platforms — estimates that there are currently 4,600 full-home listings in the city of San Diego, not including Mission Beach, for rentals that are operated more than 20 days per year.

Jamie Lane, vice president of research for Airdna who provided the estimate Wednesday for the Union-Tribune, said there are another 1,500 such rental listings in Mission Beach. San Diego’s peak year for home sharing was 2019, he said, and while listings dipped in the first year of the pandemic, today’s numbers are approaching. 2019 levels.

Jonah Mechanic, who led a coalition of short-term rental operators, believes the strong emotions of those in favor of the vacation rental ban helped to distort perceptions about the strength of the industry in San Diego.

“While other factors such as a small percentage of homeowners selling their homes at peak house prices and the post-COVID shift in the economy played a minor role in the lack of submitted permits, the majority of the reason is due to the failure of certain politicians who had a personal interest in banning short-term rentals to properly research existing short-term rental inventory in a neutral and unbiased manner,” said Mechanic, who previously owned a company vacation rental.

Revenue from the required license fee, which amounts to $1,000 for a two-year license, will be crucial to fund the administration and enforcement of the new regulations. City officials previously estimated that applications for the first round of all types of short-term rentals could generate more than $7 million. This funding may now be insufficient.

“We’ll have to look at that — the funding for code enforcement,” Molina said. “We may have to go back to the drawing board, but at the end of the day it happens, we’re going to do it and enforcement starts May 1. By then, we’ll figure out all this other stuff out there.”