STRO Permit Schedule Announced: San Diego Introduces New Rules and Caps For Short-Term Rentals

San Diego City Council has recently approved a short-term rental ordinance, a move that caps the number of short-term rentals at 1% of the city’s total 540,00 housing units. On September 2, 2022, the San Diego Association of Governments (SANDAG) confirmed the dates on which short-term rental regulations will take effect.

The state of rentals in San Diego

It’s estimated that there are currently 12,300 short-term rentals in San Diego, which means the new caps will see a 48% reduction in short-term rentals across the city (and a 27% decrease in Mission Beach). 

In total, around 6,500 STRO licenses will be available to homeowners under a lottery scheme. The only neighborhood exempt from this ruling is Mission Beach, which has a larger cap of 30% (or 1,1080 short-term rentals for the area). 

For any San Diego homeowners currently using their property for short-term vacation rental, now is a great time to assess alternative options in case you choose not to apply for a license or miss out in the lottery draw in 2023. 

Why is San Diego capping short-term rentals?

From the beautiful Balboa Park and the vibrant downtown to the world renowned Zoo and the amazing restaurants, San Diego is a hot tourist destination. But it’s also a great place for families to call home. When homeowners choose to put their property on the vacation rental market, it gives plenty of opportunities for holiday makers — but it puts the squeeze on the availability of single-family homes and condos for local residents. 

There is also the growing issue of ‘party houses’ that disrupt local neighborhoods. Having regulations, an application process, and permits can help with enforcement to ensure that traditional vacation rentals are available for families and holiday makers while weeding out the bad actors. 

Under the new rules, thousands of homes will come back onto the market to support renters and buyers. This provides a great opportunity for local residents, particularly in the long-term rental market where demand is often far higher than the supply.

How & when do I apply for a short-term rental license in San Diego?

If you reside in your San Diego home and wish to rent out a room as a ‘hosted rental’, you won’t need to apply for a license. There will be no caps on hosted rentals, only whole-home rentals. 

If you have your heart set on keeping your entire property as a short-term vacation rental, you will need to wait until late 2022 to submit an application for an STRO license. On October 4, 2022, short-term rental applications open. The application process for Tier 3 and 4 properties (standard, non-shared homes) will close on November 30, 2022. On December 16, 2022, the lottery will be announced and permit holders will be notified.

It’s never too early to start considering alternative solutions to cash flow for your short-term rental. Airbnb and VRBO are strong investments, but because asset values are so high in San Diego, holding your home asset for appreciation and using a long-term rental opportunity to maintain cash flow is incredibly lucrative.

Don’t wait until December to start lining up your future investment!

Can I rent out an Accessory Dwelling Unit as a short-term rental?

No, the San Diego Municipal Code prohibits using ADUs (such as a granny flat on your property) for short-term rental and will result in a Code violation. This also applies to alternative accommodation options such as a treehouse or teepee outdoors and sleeping quarters added in a garage without proper permits. 

The regulations state that only permitted companion units in existence before the September 2017 prohibition may be used as an STRO.

You can learn more about the new regulations and restrictions on STROs at San Diego’s Office of the City Treasurer.

What should I do if I can’t get an STRO license for my San Diego home?

Thousands of homes will go back onto the market in San Diego when these regulations come into effect in 2023. If you own a home in San Diego, there are plenty of great options to continue earning income without needing an STRO. 

There is the option to sell. However, if you have locked in a low-interest rate on your mortgage, now is a great time to hold property and benefit from the huge demand on the rental market. 

San Diego ranks as one of the best places to raise a family, making it a popular rental market for single-family homes with strong demand year-round. There are many benefits to owning a long-term rental home in San Diego, even in tourist areas like Mission Beach. 

Homeowners can benefit from a steady income for 12 months and generous tax benefits that don’t apply to short-term rentals or homes used part-time by friends and family. You’ll also have significantly less turnover and reduce the cost of wear and tear on your property from having the same residents in place for a year or more. 

While there are obvious pros and cons to a long-term or short-term rental property, locking in the right resident into a long-term rental can be a lucrative and genuinely passive investment for years to come.

Read More: 12 Signs That Owning a Long-Term Rental Is Right for You

How should I price a long-term rental in San Diego?

There is a big difference between how much you can charge per week for a short-term vs long-term rental. But your costs will also be considerably lower too, as you won’t be dealing with frequent turnover, cleaning and maintenance bills, and high management fees. 

To maximize the return on your investment when switching from a vacation rental to the long-term market, Belong can help. With a unique approach and live insights from the San Diego rental market, Belong addresses the complexities and shifts in the rental market to determine exactly what high-quality, long-term residents are looking for and what they are ready to pay, right now. 

The result is fewer vacancies, great people caring for your home, profitable rental income, and no tricks or compromises that could devalue your home as a rental investment.

Read More: Forget the News: This is How You Should Price San Diego Rental Homes

Find out why San Diego loves Belong

If you work with Belong to look after your home, you won’t have to lift a finger. We’ll prepare your home for the market, get the best price for a long-term rental, choose a great resident, provide 24/7 in-house maintenance support and guarantee rent for the entirety of a 12-month lease (even if it’s not paid on time). 

If you own a single-family home or condo in “America’s Finest City”, find out if you’re eligible for Belong here.