San Diego’s $12,000 Vacation Rental Tax Is Dead. Here’s What Hosts Need to Know Now.

A proposed tax that would have cost San Diego vacation rental hosts up to $12,000 per property per year is dead. The City Council’s Rules Committee voted 3-2 on January 28 to kill the measure after a five-hour hearing that drew more than 100 speakers. If you’re a San Diego STR host, that’s the headline. But if you stop reading here, you’ll miss the part that matters: the political pressure behind this proposal hasn’t gone anywhere, and a revised version is already headed to the ballot.

I’ve spent the last few weeks pulling apart the legal mechanics of this proposal, the committee vote, and the follow-up legislation. Here’s what actually happened, who voted which way, and what San Diego hosts need to be watching for the rest of 2026.

What the Proposed San Diego Vacation Rental Tax Would Have Done

Councilmember Sean Elo-Rivera introduced the measure as a ballot initiative, meaning it would have gone before San Diego voters in June 2026 if the Rules Committee had advanced it. The tax structure was straightforward, and steep.

Individual property owners operating a short-term rental would have paid a flat $8,000 annual tax per property. Corporate-owned properties (think LLCs and investment entities) faced an additional $4,000 surcharge, bringing their total to $12,000 per year. Properties with repeat code violations could have been hit with even higher penalties, with some estimates reaching $70,000 annually for the worst corporate offenders.

The proposal also targeted vacant second homes that weren’t being rented at all, folding them into the same tax framework. Budget analysts estimated the measure could generate anywhere from $17 million to $100 million annually, a range wide enough to tell you how uncertain the projections were. Only about 2% of San Diego homes would have been subject to the tax.

Picture this: you’re a host running a one-bedroom condo near Pacific Beach, pulling in roughly $54,000 a year in gross revenue (that’s close to the San Diego market average, according to StaySTRA data). An $8,000 annual tax would have eaten about 15% of your gross revenue before you’ve paid your mortgage, cleaning fees, property management, insurance, or the transient occupancy tax you already owe. For smaller operators, that math doesn’t work.

The 3-2 Vote and Who Killed It

The Rules Committee is a five-member body that decides which proposals advance to the full City Council. On January 28, three members voted to reject the measure outright.

Voting against the tax (3):

• Raul Campillo warned that “the city will lose more revenue on this than it can ever hope to gain” and cited concerns about potential legal challenges.
• Kent Lee voted no on this version.
• Vivian Moreno expressed concern about discouraging tourism, calling the plan a potential “tipping point.”

Voting for the tax (2):

• Sean Elo-Rivera (the sponsor)
• Joe LaCava (committee chair, who seconded Elo-Rivera’s motion)

The hearing ran over five hours. More than 100 speakers testified, split between housing advocates pushing for the tax and STR hosts and property owners arguing it would destroy their livelihoods. Airbnb reportedly funded some of the opposition effort, a detail worth noting for anyone wondering why a tech platform cares about municipal tax policy. (Short answer: they care a lot.)

The Housing Pressure Behind the Proposal

The proposal didn’t materialize out of thin air. San Diego faces a genuine housing affordability crisis, and the vacation rental industry sits at one of the pressure points.

The city currently caps whole-home short-term rental licenses at 1% of total housing supply. That cap exists precisely because of the tension between tourism revenue and housing availability. Elo-Rivera’s argument was that properties used as full-time vacation rentals or left vacant by absent owners are contributing to housing scarcity. The tax, in his framing, would either generate revenue for neighborhood infrastructure or push owners to convert properties back to long-term housing.

Housing advocates supported the measure. Labor unions backed it as a revenue source for community needs. On the other side, opponents argued the tax unfairly targeted middle-class property owners who rely on rental income, not wealthy speculators sitting on empty mansions.

Both sides have a point. The challenge (and this is what makes STR regulation so messy in every city that attempts it) is that a flat tax doesn’t distinguish between a retiree renting out a guest house and a corporate entity running 40 units. The blunt instrument problem is what ultimately gave the “no” voters their justification.

San Diego’s Existing Tax Burden on STR Hosts

San Diego hosts aren’t operating in a tax-free environment. Every short-term rental booking in the city is already subject to the transient occupancy tax (TOT), which increased significantly when Measure C took effect in May 2025.

Before Measure C, the TOT was a flat 10.5% citywide. Now, the city is divided into three tax zones:

• Zone 1 (closest to the Convention Center): 13.75%
• Zone 2: 12.75%
• Zone 3: 11.75%

This is the tax you already pay on every booking. The proposed $8,000-$12,000 annual tax would have been layered on top of the TOT, not a replacement for it. That stacking effect is part of what made the proposal so aggressive compared to what other cities have attempted.

San Diego STR Market by the Numbers

To understand what this tax would have meant in practice, you need to know the market. StaySTRA data shows San Diego’s short-term rental market is large, active, and performing well relative to national averages.

• Active listings: Over 12,000 (including 10,514 entire-place listings, 1,278 private rooms, and smaller hotel and shared room segments)
• Trailing twelve-month occupancy rate: 71%
• Trailing twelve-month average daily rate (ADR): $291
• Average monthly revenue: $4,540 (approximately $54,480 annualized)
• Peak monthly revenue: $5,737 (June 2025)

At 71% occupancy and a $291 ADR, San Diego is a strong market. But the average annual revenue of roughly $54,000 means an $8,000 tax would have consumed nearly 15% of gross revenue for the typical host. For hosts operating below the average, the percentage would be even higher. Run those numbers through the StaySTRA San Diego Airbnb calculator and you’ll see why hosts showed up to that hearing in force.

What Happened Next: The Empty Homes Tax Pivot

Here’s where San Diego hosts need to pay close attention, because the story didn’t end on January 28.

Less than a month after the Rules Committee killed the vacation rental tax, Elo-Rivera came back with a revised proposal. The key change: he dropped the short-term rental tax entirely. The new measure targets only vacant second homes, defined as properties sitting empty for more than 183 days per year.

The revised tax structure:

• Year 1 (2027): $8,000 per vacant second home; $4,000 surcharge for corporate-owned properties
• Year 2 (2028): $10,000 per vacant second home; $5,000 surcharge for corporate-owned properties

The city’s Independent Budget Analyst estimates the tax would generate $12.1 million to $23.8 million in its first year, and $15.3 million to $30 million in year two. Elo-Rivera’s office projects up to $51 million. Roughly 5,000 properties would be affected, specifically those receiving the city’s vacation home exemption from the rental unit business tax.

The political dynamics shifted dramatically. Council President Pro Tem Kent Lee, who voted against the January proposal, stated that “if someone can afford to own a second home…they can absolutely afford to pay that tax.” Vivian Moreno signaled similar support. On March 4, 2026, the full City Council voted 8-1 to place the empty homes tax on the June 2026 ballot.

If voters approve the measure in June, the tax takes effect in 2027.

What San Diego STR Hosts Should Watch in 2026

The vacation rental tax is dead. The regulatory conversation is not. Here’s what’s worth tracking:

1. The June 2026 ballot measure on empty homes. If it passes, the city establishes the precedent that taxing specific property types to address housing is politically viable. That precedent could be extended to STRs in a future proposal. If it fails, Elo-Rivera and housing advocates lose significant momentum.

2. The 1% license cap. San Diego’s existing cap on whole-home STR licenses is one of the more restrictive in California. Any change to this cap, up or down, directly affects your ability to operate. Watch for council discussions about adjusting the cap as part of broader housing policy.

3. TOT enforcement and zone changes. The three-zone TOT structure from Measure C is still relatively new. The zones and rates could be adjusted, and enforcement is likely to tighten as the city builds out its compliance infrastructure.

4. State-level legislation. California’s SB 346 (the Short-Term Rental Facilitator Act) is already reshaping how platforms share host data with municipalities. More state-level STR legislation is expected in 2026.

5. Re-introduction risk. The STR tax wasn’t killed because the council opposed the concept. It was killed because this version was too broad. A narrower version, targeting only corporate-owned STRs or properties with violations, could find enough votes. Elo-Rivera has shown he’s willing to revise and try again.

This article provides general information and should not be construed as legal advice. Consult a qualified attorney in your jurisdiction for advice specific to your situation.

We do our best to keep our regulatory guides accurate and up to date, but ordinances change and we are only human. Always verify current requirements directly with your local municipality before making business decisions.

Stay Ahead of San Diego STR Regulation Changes

San Diego’s regulatory landscape is shifting. Between the TOT increase, the 1% license cap, and the ongoing push to tax properties that aren’t in the long-term housing supply, hosts who aren’t paying attention are going to get caught off guard. Check your market numbers on the StaySTRA San Diego location page, run your projections through the San Diego Airbnb calculator, and know what your margins actually look like before the next proposal lands.