City of San Diego Finally Enacts its Short-Term Rental Laws

After many years of attempts to regulate short term rentals, and after going back and forth with the California Coastal Commission, on August 10, 2022, the City of San Diego enacted its Short-Term Residential Occupancy and Hosting Platforms Law.  This law created a 4 Tier licensing system. Tier 1 licenses are for whole home rentals for less than 20 days per year.  Tier 2 licenses are for renting a room in your primary residence for more than 20 days per year (this also includes a duplex where the owner lives in one unit full time). Tier 3 licenses are for whole home rentals for more than 20 days per year in the City of San Diego, but excludes rentals in the Mission Beach area. Tier 4 licenses are for whole home rentals for more than 20 days per year in the Mission Beach area.  Licenses in Tier 3 category were capped at 1% of all City of San Diego housing units, and Tier 4 were capped at 30% of all Mission Beach rental properties.  As of the date of this article, the number of applications for Tier 4 licenses exceeded the number of licenses allowed, so a lottery system was established to grant the licenses, and “good actors” with no prior violations were granted priority. 

It is important to point out that in the City of San Diego Municipal Code, transient occupancy is defined as occupancy for less than one month. This is different from most cities in California that define short term rentals as periods of 30 days or less. Under the SDMC, “one month” is defined as the “period of consecutive days from the first calendar day of occupancy in any month to the same calendar day in the next month following, or the last day of the next month following if no corresponding calendar day exists.” For example, if you have a rental for a property that goes from July 1 to July 31, that is a period deemed to be less than one month, and you would owe transient occupancy taxes to the City on the rental income received for that period.  In order to comply, your rental agreement would need to state the lease period goes from July 1 to August 1, which would be more than a month rental and transient occupancy taxes would be owed.  Many owners in San Diego are receiving letters from the City claiming that they owe transient occupancy taxes for properties they believed were month-to-month rentals, so be very careful in drafting your leases for any month-to-month tenants to avoid unexpected taxes. 

This article is for informational purposes only and does not constitute legal advice. It is specific to the laws of the State of California. For specific questions related to this article, please contact the Law Office of Ashley M. Peterson.