Deadline nears for short-term residential occupancy license applications

Time is running out for hosts seeking to rent an entire home as a short-term residential occupancy, otherwise known as a short-term vacation rental, as the application period to apply for Tier 3 and 4 license types closes Wednesday, Nov. 30, at 5 p.m.

Licenses will be required to operate an STRO dwelling unit in the City of San Diego starting May 1, 2023, when enforcement will begin.

The STRO Ordinance, approved by the San Diego City Council and California Coastal Commission, provides guidelines for short-term rentals of less than one month. These guidelines include a requirement for hosts to obtain a license and establish a cap on the number of licenses granted for whole-home rentals operating more than 20 days per year.
“If you are planning to use your property as a short-term vacation rental next year in the City, now is the time to obtain an STRO license,” said Development Services Department director Elyse W. Lowe. “Don’t delay; the City has staff available to support applicants. After the Tier 3 and Tier 4 license application period closes this month, you won’t be able to get a license next year and non-complying properties will be subject to strict enforcement.”

Once the Nov. 30 deadline for STROs ends, what happens then?

“If the total number of Tier 3 and/or Tier 4 applications received is greater than the number of licenses available, applications will be chosen via a random lottery for license issuance,” said City senior spokesperson Racquel Vasquez, referencing a response from the Office of the Treasurer. “Good actors will be prioritized based on a weighted scale with points assigned based on if the host meets the criteria of a Good Actor as defined in Tier 3 and Tier 4 Good Actor Prioritization Clarification memo issued July 13, 2022. If the total number of Tier 3 and/or Tier 4 applications received is less than the number of licenses available, all hosts that submitted a complete and accurate application will receive an STRO license, unless they have a pending enforcement action.”

Vasquez said there are no caps for Tier 1 (part-time) or Tier 2 (home sharing) licenses, while the total number of Tier 3 licenses issued shall not exceed 1% of the total housing units in the City of San Diego, excluding the total housing units with the Mission Beach Community Planning Area.

Regarding Mission Beach, Vasquez noted the total number of Tier 4 licenses issued shall not exceed 30% of the total housing units in the Mission Beach Community Planning Area. “Based on the most recent demographic and socioeconomic housing estimates, there are 5,416 Tier 3 licenses and 1,081 Tier 4 licenses available,” Vasquez said adding, “All Tier 1 and Tier 2 applicants that submit a complete and accurate application will receive an STRO license.”

Vasquez said the City’s decision on who is granted STRO licenses is final. “The ordinance does not outline an administrative appeal process available for a person who is not selected for a license,” she said.

Before beginning the application process for any of the four STRO licenses being issued, hosts must possess an active Transient Occupancy Tax (TOT) certificate and ensure all Rental Unit Business Taxes are in active paid status.

To ensure compliance, enforcement measures for STRO licenses under the City’s new ordinance may include Administrative Citation Warnings, Administrative Citations of up to $1,000, and Civil Penalties of up to $10,000 per violation. Unpaid penalties or continuing violations may also result in a property lien with the County of San Diego.

SHORT-TERM RENTAL OCCUPANCY LICENSES

Starting May 1, 2023, rental hosts must have a license to use properties within the City as short-term rentals. Tier 1 and Tier 2 licenses can be obtained at any time, while the application period for Tier 3 and 4 licenses closes on Nov. 30.

There are four different STRO licenses:

Tier 1 licenses for short-term rentals totaling 20 or fewer days per year.
Tier 2 licenses for renting a room or rooms in the home more than 20 days per year so long as the owner or permanent resident resides onsite.
Tier 3 licenses for whole-home rentals outside Mission Beach exceed 20 days in a year where the owner or permanent resident does not reside on site.
Tier 4 licenses for whole-home rentals within Mission Beach exceed 20 days in a year where the owner or permanent resident does not reside on site.

STRO License Lottery System

Tier 3 and Tier 4 license issuance will be done via computer-generated randomization and will be conducted by a third party or department independent of the Office of the City Treasurer.
Tier 4 license issuance will be based on simple randomization; all license recipients will be selected at random

Tier 3 license issuance will be performed via a stratified lottery. Stratification of the applicant pool will be completed based on the Community Planning Area in which the STRO property is located. The license recipients will still be selected at random within each CPA. The percentage of licenses issued in each CPA will be proportionate to the percentage of applications received for STRO properties in each CPA. For more information, to view a license application video and review frequently asked questions about STRO, visit sandiego.gov/stro.