Is San Diego’s Short-Term Rental Program on Verge of Collapse?

The question has to be asked: given the unexpectedly low numbers of short-term rental applications the city has received, is San Diego’s much-vaunted short-term rental program on the verge of collapse?

We now know that from today’s U-T piece by Lori Weisberg,

“In all, the city received 3,110 whole-home vacation rental applications from throughout the city, excluding Mission Beach, said San Diego Director of Communications Rachel Laing. For whole-home rentals in just Mission Beach, the application submittals totaled 1,291, she said.”

Recall that the city was expected to have to hold a lottery to select only 5,416 applicants for licenses from the deluge of thousands who would be applying. It didn’t work out that way. The city only received 57% of that total. And now the city is holding an additional application period next week for securing a two-year license for hosts.

The problem, of course, is the money. As Weisberg iterates:

Revenue from required license fees, which is $1,000 for a two-year license, will be crucial for funding the administration and enforcement of the new regulations.

City officials had previously estimated that applications for the first round of all types of short-term rentals could generate more than $7 million. That funding could fall short if the city fails to attract significantly more applications.

So, to recap: the city was expecting 5,416 license applicants, at $1,000 a pop, to make more than $7 million to fund the enforcement of the new short-term rental regulations. But it has received less than 60% of the applications whose license fees would fund the program. (Mission Beach is in a special category — see below.)

Right now, without more applicants, the funding for the program looks in jeopardy. Which is why the city is reopening the application period, although officials don’t yet know how long they’ll keep the reopening.

Mission Beach is a “carved-out” exception. The city has 1,100 licenses for that community — 30 percent of the community’s housing units — and received 1,291 applications, so there will be a lottery for Mission Beach.

The city had plans to hire an IT consultant to help it identify unlicensed listings for all home sharing platforms like Airbnb and VRBO. But with the shortfall in fees, perhaps that position will only be part-time, and the city’s enforcement team that was expected to respond to complaints and weed out nuisance properties, may not be as large.

Venus Molina, Campbell’s chief of staff, must be asking herself, ‘Where did all the short-term rental hosts go?’ It was Campbell, under Molina’s initiative, who led in brokering a “compromise” with home-share billionaire companies to establish the program in the first place, much to the chagrin of her constituents.

Naturally, it’s all not over and maybe the city will receive sufficient license applications and fees to run the program. Stay tuned.