Following hours of public comment, the San Diego City Council's Rules Committee rejected a proposed ballot measure that would have taxed empty second homes and short-term vacation rentals in the city, despite a last-minute amendment to save it.
By a 3-2 vote on Wednesday, the committee denied the advance of the proposed tax, which would have advanced to the full City Council with a yes vote. From there, if passed again, it would have landed on the June ballot.
"If someone can afford to own a second home and not use it, they absolutely can afford to pay that tax, and should," Council President Pro Tem Kent Lee said. "But I've noticed the shifting purpose of this measure from generating revenue to returning housing stock to the market. One takes away from the other."
The proposal, put forward by Councilmember Sean Elo-Rivera, would have taxed empty second (or third, fourth, etc.) homes and short-term rental homes $8,000 annually. Currently, there are 5,115 empty homes in the city and 5,741 vacation rentals — 45% of which are in La Jolla, Downtown, Pacific Beach and Mission Beach.
According to preliminary numbers from the city's Independent Budget Analyst's Office, a tax on empty homes could have generated between $17 million and $27 million annually, depending on changes in the market. Taxing short-term rentals could generate another $15 million. However, if just 48% of the 5,741 vacation rentals were taken off the market, the city would break even due to lost transient occupancy tax revenue.
"I will not say for a second this would solve San Diego's housing unaffordability issue," Elo-Rivera said. "This proposal is not about the money, it is about the homes. I want to make it clear our intent is to return homes to San Diegans."
Nearly 200 people spoke at Wednesday's committee meeting. Many expressed support for the measure, saying it would free up housing and make the market more equitable. Others strongly opposed it, saying their livings are based on rent collected from their short-term rentals.
"This proposal does nothing to realistically address housing costs for San Diegans," said Chris Cate, president and CEO of the San Diego Regional Chamber of Commerce and a former city council member. "It doesn't create a single new home, and there is no requirement that the money collected be used for housing at all since it will go straight into the city's general fund.
"By forcing vacation rentals offline, the city risks losing significant tourism tax revenue that supports our police, fire, libraries and parks. The result is fewer visitors, fewer jobs, less revenue, and a policy that ultimately makes San Diego's affordability challenges worse, not better," Cate added.
The proposal also would have hit corporate-owned homes with another $4,000, and repeat violators of municipal code with another $4,000. Elo-Rivera's office said it would tax fewer than 2% of homes, 1% of San Diegans and absolutely zero people who lived in their homes. Other exemptions included those dealing with disaster, military service, empty accessory dwelling units when the main unit is occupied and homes being rented long-term.
Councilmember Raul Campillo was not moved by this argument.
"I'm here to advocate for the middle class San Diegans who run small businesses, who know this tax will undermine their life's work," he said. "The city would lose more revenue from this than it ever stands to gain."
He said many owners of short-term rentals had tried long-term before, only to get burned by "bad tenants." He also described it as "legally tenuous," but the City Attorney's Office said it had drafted the language to be "as legally defensible as possible."
Councilmember Vivian Moreno said the proposal would have disproportionately impacted San Diegans, who own more than 70% of short-term rental properties.
"We need to demonstrate strong fiscal responsibility," she said, encouraging city leaders to "look inward" before proposing additional taxes.
Moreno did support the empty second home tax. She, Lee and Campillo voted against the measure.
Council President Joe LaCava joined Elo-Rivera in voting for the measure to move forward. He encouraged San Diegans of all political leanings to be thoughtful about city proposals.
"There's a lot of gaslighting in this conversation," he said.
Several of Wednesday's public speakers came from organized labor.
"The council's decision recognized that not all housing-related challenges should be addressed with the same tool, and that policy solutions must be targeted, practical and fair," said Valentine Macedo, the business manager of Laborers Local 89. "Our position is that any discussion of new revenue must be deliberate, transparent, and tied to clearly defined public benefits — including potential voter-led solutions that dedicate funding specifically to infrastructure improvements and public safety."
Business For Good, a progressive business-focused nonprofit, supported the ballot measure.
"A local economy only works if local people can afford to live here. I know our success is tied to the well-being of our community," said Emily Renda, the group's board chair. "San Diego's housing shortage forces residents to compete with short-term vacation rentals for homes, driving up costs and leaving people with less to spend at local businesses.
"A short-term vacation rental tax ensures that tourists help invest in the housing and infrastructure that keep our city livable, because residents aren't just our neighbors, they're our workers, our regular customers, and the future owners of the businesses that make San Diego thrive."
Nicole Lillie, executive director of Our Time to Act United, a youth empowering nonprofit, supported the ballot measure as she said more and more young San Diegans are forced to leave the area due to costs.
"The stress of finding and maintaining housing is relentless, and the cost, uncertainty, and instability of housing is debilitating," Lillie said.
"Housing is a human right. When homes are used instead for profit, as tools for corporate greed, sitting empty or used as vacation rentals, students suffer," she added. "San Diegans suffer. We are forced further and further away from our school, jobs, and community until we can't afford to stay in our home at all. If we want a city where youth can stay, contribute, and thrive, we must put homes back in the hands of people who live here."
Elo-Rivera attempted to reconfigure the proposal to differentiate between corporate-owned and locally owned properties, but it failed to move the needle.
