San Diego officials kill proposed vacation home tax, denying voters a chance to weigh in

San Diego’s proposed $8,000 tax on vacant second homes and full-time vacation rentals led to four hours of heated public debate on Wednesday.

More than 100 San Diegans from all walks of life — labor unions and business owners to property owners and tenants — descended on City Hall to raise their concerns. Tears fell, tempers flared and accusations about paid opposition flew.

Some described the tax proposal as an attack on hard-working retirees who rely on these housing investments to ride out their final years. Others said it’s a righteous response to a crisis created by greed.

In the end, the city’s Rules Committee voted 2-3, rejecting a proposal that could have ultimately placed the question on the June ballot and allowed San Diego voters to decide. Councilmembers Raul Campillo, Vivian Moreno and Kent Lee voted no. It’s unclear whether officials will reshape the measure and try again.

The proposal, which had been amended since it was last presented in October and again moments before the vote, calls for an annual $8,000 flat tax, plus a $4,000 surcharge for corporate-owned properties and properties with repeat code violations. If approved, it could mean corporate owners with repeat code violations could pay as much as $70,000 a year, records show, which includes existing taxes and fees for such businesses.

“The elegance of this measure is that it causes one of two outcomes,” said Michael Zucchet, general manager of the San Diego Municipal Employees Association. “Either those units, many of which are owned by corporations, will pay their fair share — revenue will come to the city that will help our neighborhoods and services and infrastructure and your ability to produce housing — or a behavior will be changed where that housing becomes available for San Diego residents.”

Only 2% of homes in San Diego would be subject to the tax, according to city records. But budget analysts have projected it could generate as much as $100 million, or as little as $17 million, depending mostly on how property owners respond. If half of the city’s short-term rentals returned to the housing market, a budget analyst said, “the city would not gain any net revenue since the tax base would have shrunk so much that it couldn’t offset the losses” from other revenue collected.

The proposal was rejected at a time when San Diego, like many other cities across the state, is grappling with a housing and affordability crisis that experts say is driven largely by underproduction. San Diego is falling short of new housing construction for all income levels, and half of the city’s current housing supply consists of rental units that are nearly full, which drives up rents.

The city already regulates short-term vacation rentals and caps the number of licenses it issues for whole-home rentals at 1% of the city’s total housing supply — or 30% for rentals in Mission Beach.

Councilmember Sean Elo-Rivera, who brought the ballot proposal forward, said it aims to accomplish four goals: make housing more affordable, protect San Diegans from displacement, protect neighborhoods and make vacation property investors pay their fair share.

Elo-Rivera kicked off the meeting by thanking those in attendance — packed into the Council Chambers and overflow rooms. Many wore matching baby blue shirts, indicating their opposition to the measure.

“My understanding is that there were many folks who were recruited to participate today, for the first time, who were paid to be here by organizations that said your voice is important,” Elo-Rivera said without offering evidence. “That recruitment was done by entities that believe people should be able to charge as much as they possibly can for rent, people who oppose paying people a living wage and people who support for-profit prisons.”

That laid the groundwork for a meeting that was punctuated by boos, jeering and insults, as well as several interjections and pleas by the committee’s chair, Councilmember Joe LaCava, to keep the peace. 

“OK, knock it off,” LaCava said, admonishing hecklers against a woman who opposed the tax. “She had some good points to make. You may violently disagree. Let her make her points because no matter what side of the conversation you’re on, everybody deserves to be heard.”

One short-term rental operator said this proposal would take money out of his pocket. Another threatened to sue. Still another accused the city of piling on, saying “We’re being taxed and fee’d to death.”

While crying and visibly trembling, a 66-year-old woman said, “I can’t afford this tax — I’m not a big business, it’s me. … You’re just going to take away my income and their ability to have a vacation. This is such a bad plan.”

On the other hand, several tenants expressed abject shock over the reaction from people who own an empty second home or full-time vacation rental, while they struggle to pay rent.

“People who own more than one home and complain about that,” one speaker said. “It’s like saying your lobster is too juicy or your steak has too much butter.”

The powder blue shirts — and whether those who wore them were paid to oppose the proposal — was a regular topic of discussion. One speaker said they represented solidarity with the elite rich, suggesting that they should “ditch the blue shirts and get a red cap instead,” referring to President Trump’s signature Make America Great Again merchandise. Many promised they had not been paid. 

After public comment, LaCava reflected on everything that had transpired, saying they had all just received “extraordinary insight of who we are as a city.”

Some are fortunate enough to have intergenerational wealth, where property is passed onto children, and LaCava said he counts himself among them.

“Then you have another group of individuals, who no matter how hard they work or how smart they are, who do not have that intergenerational wealth to lean on, who struggle to find their way in a very expensive city,” he said.

He said groups have been pumping misinformation into communities to scare people about what the proposal is all about.

On the other hand, Councilmember Campillo said the proposal unfairly crushes middle-class San Diegans who are just trying to get by on their investments. 

“For the vast majority of people owning a short-term vacation rental, a home that they rent out, it’s not a luxury side hustle, it’s how they get by,” Campillo said, adding that long-term and short-term housing providers have different interests.

“Short-term rental folks are trying to maximize their income; long-term rentals are trying to reduce the amount of risk by having someone who’s there for a whole year,” he said, adding that many long-term rentals have moved to short-term after bad experiences with tenants.

“That’s totally appropriate for a business owner to decide this is the way I want to allocate my risk,” Campillo said.

Councilmember Moreno told a story about the time her daughter experienced a medical emergency while staying at a short-term rental in Colombia.

“Without hesitation the local host, Omar, drove us to the nearest hospital at 4:45 in the morning,” she said. “At that moment, we weren’t guests checking into a hotel at the front desk, we were a family in crisis. And it was this kind of situation where human connection matters more than a reservation number.”

She said the reason for all of this is fundamentally to plug holes in the city’s budget. 

Councilmember Kent Lee raised concerns over a perceived bait and switch playing out. When this first came up, he said he, too, was under the impression this was about raising revenue and fixing the budget.

“The comments we’ve heard today suggest that the primary objective of the measure has shifted to being an opportunity to return up to 11,000 units of housing stock,” Lee said.

In a fruitless last ditch effort to save the proposal before the vote, Elo-Rivera offered an amendment that would narrow the focus on short-term rentals, focusing specifically on corporate giants. The measure was still rejected.

Elo-Rivera said in a statement after the meeting he was disgusted by his opponents in the lead up to the meeting, and vowed to continue the fight. 

“The decision to recruit and pay low-income members of the public for fake ‘community engagement’ is an insult to the democratic process,” Elo-Rivera said in the statement. “And the hundreds of thousands of dollars spent on deceptive advertising was another example of unscrupulous billionaires scaring working-class people who are being harmed by corporate greed.”

Airbnb, the San Diego Regional Chamber of Commerce and other groups did not respond to questions about whether they had paid people to attend the meeting. 

Justin Wesson, the senior public policy manager for Airbnb, thanked residents for showing up en masse to share their personal experiences, and thanked city officials for hearing their concerns.

“Thousands of local hosts have been voicing their concerns to the City Council for weeks about this egregious proposal,” Wesson said in a statement. “San Diegans are deeply concerned about another hefty tax and we are proud to see the incredible turnout at City Hall today from people in person and calling in to show their solidarity and advocate for real solutions to affordability. It’s clear to anyone watching today’s hearing that the opposition to this tax came squarely from the San Diegans impacted.”