San Diego City Council members were clear when they voted in September 2017 to loosen restrictions on granny flats. They wanted new affordable housing for San Diegans. None of these small units, built on land with existing homes, were to be rented for less than 30 days.

The city gave property owners about a $15,000 price reduction in permits and fees to encourage development of granny flats — and it worked. Since the law changed, about 600 permits have been issued, compared to 20 in all of 2016.

But inewsource has learned the city has no mechanism in place to ensure the new granny flats aren’t rented for less than 30 days. Officials rely on citizen complaints and code enforcement.

Why this matters

How to fix San Diego’s shortage of affordable housing is a problem that has dogged city leaders for years. They eased restrictions on building granny flats as an incentive to build less costly housing for residents.

To determine if the law was being violated, inewsource compared two sets of city data — addresses with new granny flat permits against active tax certificates for short-term rentals. The analysis found the city has allowed at least seven granny flats to rent for less than 30 days. But that only represents the property owners who are paying the transient occupancy tax. The true number of illegally operating granny flat vacation rentals could be much higher.

“I think the city has to do better. These individuals who are renting out these granny flats, it’s illegal. It’s against the law, and it’s embarrassing that the city isn’t enforcing it,” said Councilwoman Barbara Bry, who is running for mayor in the March primary and has advocated for restrictions on short-term rentals.

One of the units inewsource found is in Bry’s district.

Councilwoman Barbara Bry, left, is shown at a San Diego City Council meeting on Nov. 19, 2019.(Zoë Meyers/inewsource)

When the council first met to discuss changing rules to granny flats in July 2017, Bry along with council members Chris Ward and Georgette Gómez, and then-Councilwoman Lorie Zapf, insisted a 30-day minimum stay be added to the law.

This was after members of the public spoke against the law change, warning it would open the door to more short-term rentals for companies such as Airbnb or Vrbo.

Today, the two city departments responsible for regulating these properties — granny flats and short-term vacation rentals — aren’t checking with each other to see if the law is being violated.

“It’s something we can look into,” said Gary Geiler, deputy director of the Development Services Department, which oversees building permits.

“We do have informal discussions if we see there’s an issue with certain things, so I’m glad you brought this to our attention,” he said.

Property owners go through Development Services to obtain granny flat permits. The City Treasurer’s Office issues the tax certificates to rent properties for less than 30 days.

Both departments trust property owners to follow the law. And as long as applications meet all requirements, both departments generally approve them.

But when people apply for a tax certificate to rent their property, the treasurer’s office has no way of knowing what type of property it is, said Nicole LeClair-Miller, the office’s deputy director.

On the application, people just check a box that says “Hotel/Motel/B&B,” “Vacation Rental” or another designation. It could be a hotel or a room inside a home, LeClair-Miller said.

The application doesn’t mention granny flats or that those permitted after September 2017 shouldn’t be rented for less than 30 days.

The office also doesn’t check any other public records or speak to any other city departments before issuing a tax certificate. Property owners can apply online and the city will send documents electronically.

“If you are renting out short term, you must collect tax and remit that tax to the city,” LeClair-Miller said. “And so, from our department’s perspective, that’s our charge and that’s what we’re doing.”

Three of the seven granny flats with a tax certificate are within Ward’s council district. Ward, a Democrat running for state Assembly, declined through a spokesman to be interviewed for this story. Council President Gómez, a Democrat running for Congress, has three of these units in her district. She also declined through a spokeswoman to be interviewed.

Councilman Scott Sherman, a Republican candidate for mayor in the March primary, said it sounds like a simple fix. The two departments need to communicate, and the treasurer’s office should fix the application to make it clear that renting a granny flat permitted after September 2017 for less than 30 days is illegal.

San Diego City Councilman Scott Sherman at a council meeting on June 1, 2015. (Megan Wood/inewsource)

The real problem, Sherman said, is the city has no legislation on short-term vacation rentals. It’s the “wild, wild West,” he said.

A few of those property owners with a short-term rental certificate said they didn’t realize renting the granny flat for less than 30 days was against the law.

Thomas Harrison, who owns a granny flat on Rhode Island Street in University Heights, said he lives in his granny flat and has two rooms in the main house posted on Airbnb. He said he knew the granny flat shouldn’t be rented out for less than 30 days, even though he has a tax certificate to do so.

“I built a studio and it turned out pretty sweet,” he said.

Geiler confirmed Harrison is interpreting the rules correctly. He said the city puts no restrictions on short- or long-term rentals on primary dwellings in single-family zones even if a granny flat has been added since 2017. But those with a companion unit at a property in a mutliple-family zone cannot rent out the primary dwelling for less than seven days.

Cris and Angela Noble said they took out a loan to build a granny flat in their backyard on Highland Avenue in Talmadge. Construction is almost complete and they anticipate the final inspection this week. They obtained the tax certificate and hoped to rent the unit short-term to help pay off the loan, and eventually have a place for their aging parents to live for free.

They didn’t realize their granny flat can’t be rented for less than 30 days. They said they know people are making thousands of dollars on Airbnb rentals while not paying the transient occupancy tax.

“This was a terrible financial investment unless I can do a short-term rental,” Angela Noble said. “So I would never recommend to anyone to build (a granny flat) because I know how much it costs, and they’re never going to make that in rental income if they just have a long-term tenant.”

Philip Maravilla owns a granny flat in Normal Heights on 33rd Street, which he also lists on Airbnb. He said most people he rents to stay for more than 30 days. He said he caters to professionals looking to move into the area who need a place to stay for temporary work assignments or contractors who are working in the area for a few months at a time.

“I try to do everything the right way,” Maravilla said, including the tax certificate. If he’s supposed to only rent for more than 30 days, he said he’s happy to do that.

Dane Crosby is building a granny flat on his property on 26th Street in Golden Hill. He wouldn’t say whether he planned to rent it out for less than 30 days, but he has the tax certificate to do so.

In the College Area, Brad Barnes owns a granny flat on Dayton Street that he said is posted on Furnished Finder, a website for traveling nurses and other professionals. Barnes said the average stay for his renters is about 90 days. He obtained the tax certificate for short-term rentals because he thought it was required, not realizing it was against the law to rent his granny flat for less than 30 days.

“Wouldn’t the city have told me?” Barnes asked.

Two other granny flat owners also hold a tax certificate. Behzad Aalaei did not return messages for comment. Efforts to reach another owner, Ian McCormick, were unsuccessful.

inewsource intern Natallie Rocha contributed to this report.

Correction: Feb. 5, 2020
Because of incorrect information provided by city officials, an earlier version of this story contained inaccurate information about whether a short-term rental ban applies to primary dwellings where a granny flat has been added. City officials now say property owners with a granny flat, permitted after September 2017, have no restrictions on renting the primary dwelling in a single-family zone, while those in a multiple-family zone have to rent for a minimum of seven days.

Cody Dulaney is an investigative reporter at inewsource focusing on social impact and government accountability. Few things excite him more than building spreadsheets and knocking on the door of people who refuse to return his calls. When he’s not ruffling the feathers of some public official,...