San Diego Votes To Limit Airbnb Rentals, Could Portland Be Next?

By Property Management Systems

Airbnb and the short term rental market were dealt a serious blow this week in San Diego, CA when the city council voted to limit short term rental properties to just people who own primary residences.

This means that anyone who owns a short term rental property in the San Diego area will no longer be able to use it as an Airbnb rental property because the city is cracking down on short term rental owners in the hopes that this will bring more rental inventory to the market there.

A Blow To Airbnb

There’s no denying that the San Diego city councils move is a blow to Airbnb in the San Diego area but the big question is could other cities like Portland Oregon outlaw short term rentals here unless they are owned by someone who actually lives in the rental as their primary residence?

The crackdown on Airbnb-style rentals has the potential to affect as many as 80 percent of the city’s more than 11,000 vacation rentals, estimated Elyse Lowe, the mayor’s director of land use and economic development policy.

The action, following a more than six-hour-long, sometimes emotional hearing, marks a striking departure from the centerpiece of a compromise proposal crafted by Mayor Kevin Faulconer’s office over the last several months in response to multiple failed efforts by council members over the last three years to legalize rentals popularized by Airbnb.

His plan would have permitted vacation rental hosts to rent out their primary residences while they are not present for up to six months a year — plus one additional home with no limit on the number of days annually. The council-approved plan, led by Coucilwomen Barbara Bry and Lorie Zapf, would still limit short-term rentals of one’s primary home to six months.

While Faulconer’s effort at a compromise was more restrictive than a proposal floated late last year by four council members, pressure has been increasingly building in recent weeks from the hard hit beach communities, as well as from organized labor and the California hotel lodging industry association, which had lobbied hard to get the city to rein in vacation rentals.

The new regulations, which will govern the renting out of rooms while the host is present, as well as an entire home when the resident is not present, will go into effect by July of 2019.

“I wasn’t elected to serve the interests of out-of-town investors but our District 2 constituents who have spoken for years of abuses of short term rentals in their neighborhoods,” said Zapf, who represents many of the beach communities. “Our neighborhoods should not be treated like a game of Monopoly … while our long-term residents suffer. This is by no means the ideal solution but it’s as close as we’ve gotten to getting some relief.”

In another dramatic change, the council decided to not exempt Mission Beach, long a haven for vacation rentals, from the citywide regulations, as Faulconer had originally proposed. Earlier in the day, the mayor had released a memo saying he no longer favored allowing unlimited rentals in the community but did support grandfathering in existing rentals that had paid the required transient occupancy tax to the city.

According to Lowe, there are about 1,100 short-term rentals in Mission Beach that have registered to pay the city’s room tax. It’s not clear how many of those are primary residences.

Gary Wonacott, Mission Beach Town Council president, was happy with the council vote, having fought for years for tighter regulations.

“It’s pretty emotional, really,” Wonacott said, his voice breaking for a moment. “We get our community back … I think this gives us a chance to get some young families back in.”

While a number of changes were made to Faulconer’s multi-pronged approach to regulating the proliferation of vacation rentals, he said he was pleased that it helped finally yield concrete action from the council.

“I introduced my compromise proposal to help the City Council find enough common ground so they could pass comprehensive short-term rental laws, and with the additional amendments made today we’ve finally achieved that goal,” Faulconer said in a statement. “As I’ve said repeatedly, the most important thing is that we have an established set of rules that protects neighborhood quality of life through increased oversight and enforcement,” Faulconer said in a statement.

Despite the change in who will be allowed to host vacation rentals, several other parts of Faulconer’s framework for regulations remained, including the imposition of three-night minimum stays in the more saturated coastal areas and downtown San Diego. In addition, all short-term rentals of entire homes will be subject to a steep licensing fee of $949 annually — believed to be the highest in the country. The revenues will be used to fund new code enforcement positions in multiple departments, although with fewer short term rentals that would be paying the fee, the calculation may have to be readjusted.

Short-term rental hosts will also have to pay an affordable housing fee of $3.96 for whole-home rentals and $2.73 for those renting out a room in their home while they are present.

In a move to crack down even further on short-term rentals, the council added a provision that will require a more onerous permit process for homes with four or more bedrooms.

The new regulations also are designed to require compliance by the online platforms themselves, who would be subject to stiff penalties for failing to help ensure their hosts are registered.

Councilman Chris Cate, who has long favored a more permissive approach, said after the hearing he is worried about whether it can withstand legal challenge

“I am deeply disappointed in the proposal adopted by the Council relating to short-term rentals,” he said on Twitter. “After nearly four years of debate and discussion, a reasonable compromise was before us that would balance neighborhood protections with our thriving tourism economy. Instead, the Council chose a path that is not only unenforceable and subject to legal challenge, but would drive the activity underground, resulting in the loss in millions of dollars in revenue that funds public safety officers and the repairing of city streets.”

The California Coastal Commission, which has long supported vacation rentals as an affordable alternative to pricier hotel stays along the coast, will also have to weigh in. Last week the commission sent a letter to council members reminding them of the importance of the role such rentals play in ensuring affordable access to the coast.

 

What’s Next For Airbnb In Portland?

Recent studies have shown that Airbnb’s only benefit select neighborhoods in Portland but with Airbnb rentals bringing in more tax revenue for the city it’s likely that we won’t see the last of short term rentals here for some time.

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