What Happened at the San Diego City Council Hearing on Vacation Rentals and What It All Means?

In Golden Hall, Photo by Al Warnke

The following is a composite from what several observers sent us and from media reports about the long, long hearing yesterday (Dec. 12th) before the City Council on short term vacation rentals – one of the most controversial and divisive issues in present-day San Diego.  This is written in hopes of trying to sort out just what did happen during the 10 hour meeting and what it all means.

In a nutshell, after about 5 hours of public testimony, Council members turned and tried to fashion a 5-vote majority on one of the two major proposals before them or some kind of compromise. But in the end, in a dramatic turn-about by Councilmember David Alvarez, no majority was found and Council President Myrtle Cole gaveled the hearing to a close without a decision and without a future date to revisit the issue.

Here are observations from OBceans:

The meeting started at 10 a.m. Tuesday inside Golden Hall at the Civic Center and there were quick presentations of two proposed ordinances .  The audience appeared to be split with 60% supporting short-term rentals in green shirts and about 40% opposing it, wearing red shirts.  Both proposals would allow for homesharing and had similar fee and enforcement mechanisms to deal with nuisance complaints.

Proposal 1 was authored by Councilmember Barbara Bry with the support of Councilmember Lori Zapf representing the coastal areas.  It would restrict whole-home vacation rentals to primary residences for 90 days per year.

Proposal 2 was authored by Councilmembers Chris Ward, Scott Sherman, Mark Kersey and Alvarez.  It would allow up to 3 vacation rentals per applicant, and require a 3-day minimum in the coastal overlay zone.

Some of the stats used for proposal 1 included these: 50% of the San Diego’s renters cannot find affordable housing.  Current rental rates have increased by 7.2% over last year.  The current vacancy rate throughout San Diego is 3.3%, far under the national average of 7.2%.  60% of people cannot afford to own in San Diego.  And short-term vacation rentals increase housing costs everywhere, particularly in coastal areas.

At some point, four critics of short-term rentals asked Councilman Sherman to recuse himself from the vote as – reportedly – public records indicated that he and his family own more than 63 rentals along the San Diego Pacific Coast.

By Al Warnke

Meanwhile, more than 260 speakers signed up to speak and many bundled their times.

About 5 hours of public testimony followed, alternating between supporters of each proposal, with a balanced number of speakers for each side.

Option 1 commenters frequently complained about disturbances from “mini hotels” and the loss of community and desire to prioritize housing for long term residents over tourists.   Some also supported “Option zero” – that both proposals were bad for neighborhoods and that the existing code should be enforced.

Option 2 commenters generally discussed the benefits of income and ability to keep a 2nd home they otherwise couldn’t afford, property rights, and tourist benefits to the economy.  Both sides had organized presentations with graphs and data supporting their cause.

When deliberations started, Bry presented her case for Proposal 1.  Zapf proposed a minor amendment to make it more restrictive.  Some of the other councilmembers also made comments.  Gomez honed in on clarifying rules preventing companion units from becoming STVRs.  It was voted on and failed 4-5.

Bry then immediately reached out to Alvarez for anything that would make the proposal more palatable.  Alvarez entertained this and asked for requirements to obtain listing data from hosting websites, additional housing impact fees, stronger enforcement mechanisms, and perhaps allowing 2nd units such as a duplex situation to operate as a STVR.

It appeared to be on the verge of a 2nd vote when deliberations with Ward weakened the proposal and added confusion about who could own the 2nd unit and whether they had to live in San Diego. The 2nd proposal was brought to the table.  Comments from council members followed expectations, with detractors saying the proposal opened the door to out-of-town investors.  When it came Alvarez’s turn, he began to waver from the proposal he originally signed onto and he voted against it.  Proposal 2 failed 4-5 with Alvarez now voting against both proposals.

This set the crowd and council into turmoil.

Proposal 1 was brought back up and a drawn out effort was made to incorporate portions of Proposal 2 to allow for a “1+1” policy – to allow a primary resident to rent out their home plus 1 additional home.

Confusion ensued on how to define a primary resident, primary residence, and how to restrict the proposal to cut out investor operators while still complying with equal-protection concerns previously raised by the City Attorney.  The proposal was being rewritten on the fly, with input and scrutiny from all councilmembers, and at times swayed very close to Ward/Sherman’s proposal but with a restriction of 1 STVR per applicant.

One of the biggest sticking points was regarding the permits. Many during open discussion argued that 3 was too many permits.  A family of four could ultimately obtain 12 permits in one building.  Many critics of short-term vacation rentals argued that this ordinance basically allows for the promoting of mini-hotels.

The council recessed for short breaks to huddle and discuss legalities with the city attorney’s office, staffers.  Lobbyists and audience members even participated.  The definition of “person” was put in the spotlight, and how it actually includes business entities.

Photo by Ally Graf

During the lunch-time recess, pro-vacation rentals folks were treated to a free box lunch, provided by something called “Share”. One report said the lunches each cost $8 and were being provided by a company that services the Convention Center.

At the beginning of the hearing, organizers of “We Support Short Term Rentals” handed out green shirts and signs for their people. One OB observer sat next to a man in a green shirt who fell asleep and spilled his coffee; the guy turned to our contact and told him he was being paid for being there but how boring it all was.

In the end, Alvarez was concerned with the equal protection issue and the amended proposal failed 4-5.

Lori Weisberg of the San Diego Union-Tribune reported:

Alvarez later backed away from a compromise proposal he and three of his colleagues had crafted in September that would have allowed up to three vacation rentals per owner but would have imposed a minimum three-night stay in coastal communities.

Councilwoman Barbara Bry, who had originally sought to limit rentals popularized by the online platform Airbnb to just an individual’s primary home and for no more than 90 days a year, compromised and agreed to unlimited use throughout the year but wanted tough limits on the number of whole-home rentals. Where she would not budge was on slightly more permissive proposals suggested by other council members Tuesday that she said would open up the door to more investors converting long-term housing into vacation rentals.

Without limits on no more than two homes, including one’s primary residence, investors would continue “to buy homes and turn them into mini hotels,” she said.

And while it appeared Alvarez supported the limits Bry was seeking, he and the rest of the council could not agree on how to define who could and could not rent out homes on a short-term basis.  The council was in agreement that whatever proposal was adopted, stepped-up enforcement of short-term rentals is needed via a fee to raise revenues to pay for added code enforcement officers. But without adopted regulations, there was no vote on that issue.

Here’s how Lisa Halverstadt at Voice of San Diego saw it:

Alvarez raised a series of demands and concerns as Bry and others tried to cobble together last-minute deals. Over and over, votes failed. Nobody could get Alvarez to yes.  Alvarez blames his change of heart on feedback he got from constituents and folks on both sides of the issue who visited his office. He claims labor’s recent entrée into the vacation-rental scene wasn’t a factor.

Alvarez stated:

“You can’t cook stuff up behind closed doors. You have to listen to the public. You have to take into consideration their testimony, and you need to listen to your colleagues’ deliberations and that’s how you make your decisions, not based on something that you just … some people can just stick to whatever position on anything and not move from it.”

Alvarez said that if the vote had happened a year ago, “this issue of affordable housing and units that are becoming short-term vacation rentals by potential investors or other types of ownership may not have been an issue. They’re an issue today.”

Alvarez also said the growing conversation about the city’s housing stock – which had been under way well before the September memo – convinced him that more accountability and fees were required. Other issues, including a lack of data from vacation rental companies and language that didn’t clarify whether rentals were allowed in duplexes, also concerned him.

Halverstadt also reported:

In one instance, Alvarez called for an affordable housing fee already baked into his compromise deal to kick off immediately when the ordinance went into effect, rather than after a fee study that could be months away. Fellow Council members were ready to hammer out a deal with Alvarez.

Alvarez said he appreciated those efforts, particularly by Bry, to try to win his vote. He said he tried to compromise rather than vote no. But ultimately he couldn’t be persuaded. “I think we were really close,” Alvarez said.

Exhausted and frustrated, and with a crowd thinned out to the most ardent supporters on each side, Bry tried to craft a proposal on just passing something to cover home shares, but even that broke down.

Ultimately nothing was passed, but the positions of each council member became more clear.  They all wanted to pass something but ultimately there were too many amendments and legal concerns to digest, especially with a shortage of independent information on STVRs and impacts.

Bry and Alvarez clearly controlled the ball throughout the meeting, and it’s clear they will be working hard to find some agreeable and enforceable policy.  The meeting finally adjourned at approximately 7:00pm.

Blake Herrschaft, vice-chair of the OB Planning Board wrote us:

While I was sincerely hoping smart regulations would be passed to protect our precious housing stock, we consider it a win that the ordinance written by Scott Sherman and AirBnB’s paid land use attorneys was not forced through.

I am grateful for the courage of David Alvarez to stick up for the people of San Diego in the face of what appears to be a multi-million dollar campaign by the STVR lobby. I’m especially impressed by our four female city councilmembers, Lori Zapf, Barbara Bry, Myrtle Cole and Georgette Gomez, who were all clearly on the side of people over profits. Maybe it’s time for another woman to be mayor of this town?

Later Zapf issued this statement:

I am deeply disappointed that the council was unable to come to an agreement to protect San Diego’s neighborhoods. Along, with my colleagues that are equally as concerned about our quality of life and housing shortage in our city, I will redouble my efforts to develop a workable solution that protects residential neighborhoods. We haven’t failed – we just haven’t succeeded. The fight isn’t over!  

What Does It All Mean?

Alvarez’s break with the pro-Airbnb council faction is significant. His attempts to construct a compromise with Bry spells promise for the future. He is very sensitive to the concerns of labor and housing advocates and we wouldn’t be surprised to see him and the coastal reps come up with something they all could agree on in the near future. And the fact that the other Democrats (Cole, Gomez) didn’t saddle up to the Ward-Sherman-Kersey-Cates clique either is telling and also holds promise.

Perhaps the progressive Dems and the coastal reps can still come together on this. Some of us trying to save the beach communities would rather have no new policy than a bad policy. And that’s what happened.

When the City Council decides to take it all up again is anybody’s guess, but we’ll certainly be there and let you know.

Thanks to Kevin, Mick, Ally, Brett for their input.