Why San Diego Needs Short-Term Rentals

By Gary Shapiro

Boasting beautiful ocean views, historic architecture and a world-class zoo, San Diego is one of the top cities to visit in the U.S. More than 35 million people visit the city each year. And their visits — whether for business or pleasure — benefit the city as a whole. Visitors spend almost $11 billion each year. But despite its history of hospitality, the city is starting to roll up the carpet and reject would-be visitors.

In July, the San Diego City Council voted to ban people who own second homes in the area from renting them out to visitors, imposing a licensing system — with only one license per homeowner — to manage short-term rentals. Short-term stays — such as those offered by Airbnb, VRBO and HomeAway — will be permitted only in residents’ primary properties.

It’s a serious setback to the city’s economy. Short-term rentals are particularly important in San Diego, where tourism is the second-largest traded economy in the area. According to a 2017 economic impact report, short-term home rentals would inject $500 million into the economy and create over 3,000 jobs. And in 2016, Airbnb alone generated $7 million in taxes for the city. When you consider that 80 percent of rentals could be impacted by the ban, according to the San Diego Union-Tribune, the new rule is a crushing blow to homeowners and tourists alike.

Short-term rental companies Airbnb and HomeAway are mobilizing San Diegans, throwing support behind a referendum effort to reverse the ban. Five percent of San Diego’s registered voters must sign their name to a petition within 30 days to initiate a vote — or have the City Council repeal the ordinance.

Proponents of the rule say tourism is the problem: Out-of-town investors buy up property and use it to make money for themselves, preventing locals from accessing affordable housing. But recent research tells a different story.

One study that looked at New York City — which has implemented similar rules — found it would take hundreds of days a year just to pay for the expenses of renting out a second home, and that most property owners rent out their properties only a few dozen days a year. The researchers’ conclusion? Using a second home as a short-term rental is not a viable business strategy as a primary source of income.

Short-term rentals are, however, a great way to help make ends meet — a fact that the San Diego City Council has chosen to ignore. HomeAway, VRBO and Airbnb provide an important source of income for homeowners, helping them pay the mortgage, cover a car payment, pay medical expenses, save for retirement or just buy groceries they need. In fact, the average short-term rental owner in San Diego earns an extra $8,500 a year. And many of these homeowners are older women who can afford to keep their home only through the revenue home sharing creates.

Home sharing owners also bring in extra revenue to the surrounding businesses, with 42 percent of guests spending money in the neighborhoods where they stay. And according to research from the Consumer Technology Association, people who have participated in the sharing economy are supportive (85 percent) of the services and the entrepreneurial owners.

Beyond ignoring the economic impact of the new rule, the legislation behind it just doesn’t make sense. It proposes a tax of $2.73 for renting out a room in your home while you’re staying there — straightforward enough — but it also proposes a tax of $3.96 if you’re renting out a whole home, even though it bans renting out whole homes where the owner is not present for at least six months out of the year.

Confused? So am I — and so, apparently, is the San Diego City Council. Preserving affordable housing for residents is a worthy goal, but muddled legislation that impacts economic growth isn’t the answer.

My hope is that San Diego will return to its history of hospitality — and embrace the innovative digital platforms that made that hospitality more affordable, accessible and personal. Everyone — local and visitor, guest and owner — stands to benefit.