San Diego Mulls $5,000-per-Bedroom Tax on Short-Term Rentals—Critics Warn It Will Do More Harm Than Good

A battle is brewing in San Diego over a ballot proposal that would impose a $5,000-per-bedroom annual tax on short-term rentals and vacation homes, with opponents arguing the measure could put hosts out of business and cripple the city’s tourism industry. 

The proposed Vacation Home Operation Tax would apply to roughly 10,644 properties, half of which are used as full-time short-term rentals and the other half are unoccupied second homes.

Supporters of the proposed tax argue that it could bring in as much as $135 million a year for the city, while freeing up San Diego’s scarce housing supply for local residents to rent long-term or purchase.  

Last week, San Diego City Council’s Rules Committee voted 3-1 to advance the proposal, but it will not go before voters until next summer, pending approval from the full City Council in March 2026.

The first vote followed a two-hour public debate, during which the backers and detractors of the tax had a chance to make their cases, according to inewsource.org.

"We’d like to stop investors, especially foreign and out-of-state investors, and short-term rentals from pushing working families out of their neighborhoods," Councilmember Sean Elo-Rivera, who proposed the tax, said during the meeting. "Ninety-nine percent of San Diegans would not pay this tax."

But Councilmember Raul Campillo, who cast the lone no vote, insists that it's a misguided view. While the tax will be paid by 1% of San Diegans, its effects will be felt citywide, he explains.

"The tax impacts every other component of the economy, and that means 100% of us would be affected by it," he tells Realtor.com®.

The short-term rental industry in San Diego supports about 18,000 jobs, he adds.

In an interview with the Times of San Diego, Elo-Rivera elaborated on his position, saying that the tax is designed to benefit local residents, "not just those who vacation here and profit from us. That starts with San Diegans being able to afford housing here."

He contended that too many homes sit empty or function as vacation rentals, "while families struggle to find a place to live."

Realtor.com reached out to Elo-Rivera for comment on his proposal, but he did not immediately respond.

Unintended consequences

Critics say that if it's adopted, the measure could carry negative consequences that outweigh any potential gains.

"It's going to make running affordable short-term rentals pretty much impossible," Bram Gallagher, director of economics at AirDNA, a short-term rental data provider, tells Realtor.com.

Gallagher adds that, contrary to Elo-Rivera's argument, short-term rental ownership in San Diego is mostly local, with only a third of the properties being professionally managed, which could potentially indicate investor involvement.

According to the latest available figures, San Diego has roughly 14,400 monthly short-term listings, less than half of which are available full time, or at least 180 nights out of the year. 

In 2024, the short-term occupancy rate in San Diego was about 65%, meaning that the typical host advertising their property on online platforms such as Airbnb or Vrbo rented out a room two-thirds of the time, or about 117 days out of the year.

According to Gallagher, in the best-case scenario, a short-term rental owner in San Diego who rented out a room for 117 days out of the year at an average daily rate of $210 would earn about $24,500 in revenue—before accounting for mortgage payments, utilities, home insurance, and cleaning fees.  

Gallagher argues that if the new $5,000 tax is added on top of those expenses, "you may take it from being a profitable enterprise to one that is losing money."

The AirDNA economist forecasts that the tax is going to "eradicate" the lower-end, "mom and pop" short-term rentals while driving rates up on the remaining, higher-end properties to make it worthwhile for the hosts.

"You're going to want to try to aim for the highest market segment you can, because you know that you're already behind $5,000 per bedroom," explains Gallagher. "So you got to make each one of those bedrooms as fancy and as luxurious, as expensive as possible."

The economist also points out that not all short-term rentals are used for tourism: Some provide temporary housing for traveling nurses, construction and seasonal agricultural workers, as well as digital nomads.

Based on AirDNA's data, nearly 40% of San Diego's Airbnb-type rentals have a minimum stay of 28 nights, placing them in the medium-term market and generally outside the typical tourism segment.

San Diego host shares his fears

Justin Barlow, a long-term Airbnb host in San Diego, tells Realtor.com that if voters approve the new tax, it could push him out of San Diego.

Barlow, who works in technology sales, and his wife, a local real estate agent, have been renting out part of their San Diego home for the past 10 years to help cover their mortgage.

"We’re not investors," he notes, adding that his only goal is to try to stay in San Diego, where the median list price last month was just under $950,000, among the highest in the U.S., according to the latest monthly housing market trends report from Realtor.com.

"If this $5,000-per-bedroom tax passes, we’ll have to shut down—and so will most small hosts like us," says Barlow. "I worry that the owners will simply convert them to student housing and bring more noise to our neighborhood."

San Diego already has a transient occupancy tax (TOT) requirement ranging from 11.75% to 13.75%, depending on the rental property’s location. The guest pays the tax, which the host then hands over to the local government.

Barlow says a typical two-bedroom short-term rental currently pays $10,500 in TOT per year. He predicts that if a host were required to pony up an additional $10,000 annually in new taxes—at $5,000 per bedroom—they would have no reason to stay in business, considering that the revenue margin is just under $10,000 after all the expenses.

Instead of boosting the city's deficit-riddled budget, the veteran Airbnb host says, San Diego could end up losing money while dealing a blow to the city's tourism industry.

"Less tourism also means less sales tax revenue since tourists always spend more than residents," notes Barlow.  

Councilmember Campillo also believes that the tax proposal could do more harm than good across the board, but says its true effects won't be clear unless the city conducts a comprehensive economic analysis with multiyear projections—something that is not currently planned.

"My inclination is that it's going to hurt our local economy," says Campillo. "It's going to cause us to lose jobs. And the key fact that very few people in the public know is that 4 out of 5 short-term vacation rentals in the city of San Diego are owned by San Diegans. They're not owned by outside corporations or investors from other cities."

Echoing Barlow and Gallagher's arguments, Campillo predicts that the proposed levy could deprive short-term rental hosts of income and drive away visitors without adding to San Diego’s housing supply in any meaningful way. 

"We had dozens upon dozens of people show up to City Hall and explain that their second property is how they make ends meet in San Diego," the politician explains. "So by hurting the 5,000 or so people who have a full-home short-term vacation rental who rely on that, we're going to be telling San Diegans that because they don't use their property in the way that the City Council wants them to, their livelihood doesn't matter."

Contrary to popular belief, Campillo says, locals currently own 80% of the city's stock of second homes, meaning that the money generated from those properties stays in San Diego—but the new tax could change all that.

"If a short-term vacation rental host decides to sell because the market collapses, I fear that most of those homes are going to be bought by outside investors, people from other cities," says the councilmember. "And even if they do turn them into long-term rentals ... that's money that's going to be sent out of the city. And ultimately, most of those homes aren't going to be affordable anyway."

Additionally, Campillo says that based on the available data, more than half of short-term rental owners use revenue from properties to help pay their bills.

"If they can't pay their bills in San Diego, they're also going to have to move out of San Diego," says the councilmember. "So someone's going to have to explain to me how this is going to make it cheaper to live in San Diego."

Gallagher agrees, saying of the proposal: "I don't think it's going to achieve its goals of generating a lot of revenue and freeing up a lot of houses."