Who wins when San Diego adds granny flats and tiny homes? Residents or tourists?

San Diego continues to encourage adding small units to single-family properties in a push to increase the affordable housing stock, but where city officials struggle is in keeping these units from becoming short-term vacation rentals.

Even with the steps they are now taking, they won’t catch those who operate underground and rent in areas where short-term rentals are restricted.

The need for this kind of housing is great. A report last year from the California Housing Partnership says San Diego County needs more than 136,000 affordable rental units — which is considered $1,600 or less a month for one person — to meet the current demand. 

To bridge that gap and increase affordable housing, the city’s elected leaders have made it easier and cheaper for property owners to add granny flats to their lots. In return, the owners who received permits after 2017 have to rent them for 30 days or more. They can’t be used as short-term rentals.

And now, the city is allowing property owners to park a tiny home on wheels in their yards. The City Council voted unanimously this month to legalize these movable tiny homes, and Mayor Kevin Faulconer approved it. As with granny flats, the tiny homes aren’t to become short-term rentals.

An inewsource investigation in January found the city wasn’t doing much of anything to make sure granny flats — officially called accessory dwelling units or companion units — weren’t being rented out on Airbnb, Vrbo and other short-term rental websites. 

Our investigation involved comparing two sets of city data — tax certificates that allow someone to rent a property for less than 30 days and granny flat permits issued after 2017.

What inewsource uncovered was the two departments responsible for keeping this public data weren’t sharing the information with each other, so neither knew that several owners who got financial breaks to build granny flats as new affordable housing had converted them to short-term rentals.

In February, after our story published, the City Treasurer’s Office began sharing a monthly list of addresses that can be rented for less than 30 days with Development Services, which issues granny flat permits. That allows them to catch those who might be violating the rental law.

So far, code enforcement has opened cases against about 30 property owners, city spokesperson Scott Robinson said. The list includes some inewsource identified. 

Code enforcement’s goal is gaining compliance, Robinson said, so staff first tries to work with the property owners. If unsuccessful, they could be assessed daily fines of up to $10,000 for a maximum of $400,000.

Short-term rentals lucrative for owners

This system, however, does little to catch property owners who might be illegally operating short-term rentals, which includes everything from granny flats issued permits since 2017 to some apartment buildings.

As of July, the City Treasurer’s Office maintains a list of 6,669 active tax certificates for properties that are rented for less than 30 days and pay a daily transient occupancy tax — or room tax. These could be a Best Western motel or a granny flat in someone’s backyard.

But nearly 9,200 San Diego addresses were posted on Airbnb with less than 30 days as a minimum stay, according to data collected in mid-June by Inside Airbnb, a tech start-up that gathers information from Airbnb listings.

Although Airbnb collects room taxes from guests and pays the city in a lump sum, the city doesn’t check if those units are allowed to be used as short-term rentals.

Save San Diego Neighborhoods, which lobbies for vacation rental regulations, is skeptical that granny flats and moveable tiny homes will make any sizable difference in the city’s housing shortage. These units will wind up benefitting tourists on vacation more than San Diegans looking for affordable housing, said John Thickstun, a board member with the group.

“If (property owners) can make two or three times as much money renting it out as a short-term vacation rental, that’s what they’re going to do. And when you have a city run by people that don’t enforce the law, this is what happens,” Thickstun said.

Inside Airbnb’s data shows an average night’s stay for a San Diego unit with one bed costs $138, which adds up to $4,140 if the unit is booked every day for a month. That compares to an average monthly rent for a one-bedroom apartment in San Diego of $1,795, according to Zumper, a San Francisco-based apartment listing marketplace.

City Attorney Mara Elliott has said short-term rentals are illegal in San Diego’s residential zones, but city officials don’t enforce that. The City Council also has failed at attempts to impose strict regulations on short-term rentals.

Today, the city sets no restrictions on how long a primary dwelling in a single-family residential zone can be rented, but those in multi-family zones are limited to a minimum of seven days. Meanwhile, granny flats permitted since 2017 and moveable tiny homes on single-family lots have a 30-day minimum.

Caution urged against overregulation

Councilmember Scott Sherman was behind the city allowing tiny homes on wheels and including them with laws regulating granny flats. He also thinks the city can keep them from being turned into short-term rentals.

During the council meeting when the tiny homes were approved, Sherman called them a “small bite of a large elephant” when it comes to increasing the affordable housing stock in San Diego.

Sherman has said the city’s lack of regulation on short-term rentals has made San Diego the “wild, wild West.”

Even so, he told inewsource in an email: “Moveable tiny homes are a great option that naturally increases affordable housing at no cost to taxpayers and I am confident the Mayor and city staff can effectively enforce the ordinance.”

Faulconer declined to comment on what more the city can do to prevent housing intended for San Diegans from becoming rooms for tourists.

Two San Diego real estate experts, Norm Miller and Gary London, say granny flats and tiny homes do provide a benefit by adding to the region’s housing supply. The units also increase affordability — for the property owner with additional income and for the tenant with relatively low rents for small spaces.

But whether people should be allowed to turn them into short-term rentals comes down to property rights, said Miller, a University of San Diego real estate finance professor. People should not be prevented from renting out units on their property just because neighbors object.

“At the same time, we do need more housing, so I can see putting some minimum rental terms on the units,” he said in an email.

London, a real estate analyst with London Moeder Advisors, said he believes the vast majority of people who have these units rent to long-term tenants, so he doesn’t see the need for restrictions on short-term rentals. 

“I think we have to tread very carefully in overregulating (granny flats) for short-term vacation rentals, because there’s a lot of good that comes from them as well,” London said. Vacation platforms like Airbnb and Vrbo benefit the economy and don’t significantly impact the hotel sector, he said.

And unlike apartment developments, London said, adding these types of units to existing lots is rarely seen or felt by neighbors because they’re in people’s backyards.

If there are problems with loud partying or parking violations, he said, “perhaps we need to concentrate our efforts in better enforcing the rules that are already on the books.”

inewsource intern Sofía Mejías-Pascoe contributed to this story.