Councilmembers advance plan for vacation-home tax ballot measure, with some big reservations

A proposed ballot measure that would ask San Diego voters to levy a hefty new tax on many vacation rentals and second homes took a key step forward Wednesday when a council committee voted 3-1 for further analysis.

But the proposal got mixed reviews from local residents and community leaders during a four-hour hearing. And two of the three City Council members who voted in favor said crucial questions remain unanswered.

Supporters say the tax would raise many millions in new revenue for the cash-strapped city, while simultaneously encouraging property owners to help ease the local housing crisis by renting out their second homes long-term.

The proposal, which could appear on the June 2026 ballot, would levy a $5,000 per-bedroom tax on most vacation rentals and on second homes that owners decline to rent out long-term.

Critics say the tax would hurt tourism and the broader local economy, punish locals who rely on vacation rental income and result in an overall drop in city revenue, rather than the jump supporters promise.

Councilmember Sean Elo-Rivera, who is spearheading the proposal, stressed Wednesday that the tax would affect only about 2% of the properties in the city. He also revealed a long list of potential exemptions.

Elo-Rivera characterized the tax as a way to support working San Diegans by forcing corporations like Airbnb to pay their fair share for the city services enjoyed by vacation rental guests.

“San Diego is facing a defining choice about the kind of city that we want to be,” Elo-Rivera said. “Are we going to continue down a path where speculation and greed drive up costs, hollow out neighborhoods and force working families to wonder how much longer they can afford to stay in the city they love, or will we build a San Diego that works for the people who live here?”

Elo-Rivera was joined in support by Council President Joe LaCava and Councilmember Kent Lee, who both said a key reason for their support was the prospect of revenue from the tax stabilizing the city’s shaky finances.

“We need more revenue to provide the services our communities are asking for,” said LaCava, expressing regret for recent budget cuts to libraries and parks. “We can’t continue to under-resource this city.”

But LaCava and Lee said they would need much more information before potentially voting this winter to place the measure on the June 2026 ballot.

Lee said he had six major questions, including on how the new revenue would be spent, the impacts of similar legislation in other cities and estimates of how many property owners it might prompt to decide to shift use of their homes.

He also wants to know how much hotel tax revenue the city could lose if the number of vacation rentals fell, how much of that hotels might recoup if they pick up some of that business and how exemptions for some second homeowners would work.

Councilmember Raul Campillo, who cast the “no” vote, was harshly critical of the proposal, including what he called a lack of adequate analysis and a decision to pursue the June ballot instead of a higher-turnout November vote.

“This proposal will punish San Diegans, weaken the local economy, undermine small business and hamper our ability to deliver services,” Campillo said. “We are going to see significant economic harms and the elimination of jobs.”

Campillo — who spoke for a highly unusual 28 consecutive minutes — said the tax would repel tourists and hurt restaurants, event venues, attractions and businesses that support vacation rentals, such as cleaning companies.

He also said new revenue from the tax would likely be outweighed by reductions in sales tax revenue and hotel tax revenue, which is formally called transient-occupancy tax, or TOT. And he said Elo-Rivera had not analyzed the proposal enough for voters to understand the impact of what they could be asked to consider.

“Without a thorough and comprehensive analysis before putting this to the voters that includes impacts on sales tax revenue and TOT revenue and job losses and property tax impacts, the voters will not have enough information to know if they’re going to be choosing between something that will undermine the local economy and city revenues — or bolster it,” he said.

Campillo said he believes that four out of five vacation rental hosts are local property owners, not out-of-town speculators or corporations. And he said the tax would essentially be a “punishment” because those property owners have chosen to use their property in a way the city dislikes.

“I have no problem with a person who invested in something to try to create wealth, pay for their kids’ college and cover their bills,” he said.

Campillo’s comments mostly echo talking points circulated in recent days by the San Diego Regional Chamber of Commerce.

Dozens of vacation rental operators offered similar sentiments Wednesday.

“It would do more harm than good,” said Carol Weiler, who operates vacation rentals in the city. “It will hurt San Diego families and San Diego tourism, and it will hurt all the support industries we use like cleaning people.”

She said the tax would also damage tourism.

“Hosts will have to raise prices to cover the extra tax expenses,” Weiler said. “It will drive hosts out of business and give tourists fewer choices of places to stay.”

In contrast, many city residents who don’t operate vacation rentals spoke in favor.

“Short-term rentals impose a tremendous cost on our community not imposed by hotel rooms,” said Bob Ottilie, who owns a home in Mission Beach.

Ottilie said such rentals force out families, reduce school enrollment, reduce community participation in civic events and dramatically increase rents.

Elo-Rivera’s tax would apply to as many as 10,644 homes — 5,648 short-term vacation rentals and 4,996 second homes. If the city got $5,000 per year for each of the 26,672 bedrooms at those properties, revenue from the tax would be more than $133 million, he said.

But Elo-Rivera promised a long list of exemptions Wednesday, including for properties that rent to traveling nurses, for families that have owned a property for generations and for multi-family properties where the owner lives in one unit and uses the others as vacation rentals.

The $133 million estimate doesn’t take those exemptions into account.

It also doesn’t account for the many property owners who would be prompted by the new tax to rent their properties as long-term rental homes. It is based on a scenario in which none do.

Analysis by Elo-Rivera’s office found that 57% of the vacation rentals that could be affected by the new tax are in the city’s beach communities — La Jolla, Pacific Beach, Mission Beach, Point Loma and Sunset Cliffs.

The same analysis says 45% of the second homes that could be affected by the new tax are in either downtown, La Jolla, Pacific Beach or Mission Beach.

Wednesday’s 3-1 vote by the council’s Rules Committee directs Elo-Rivera to work with the city’s independent budget analyst on a fiscal and operational analysis of the proposed tax.

A more detailed proposal would likely come back to the Rules Committee in January or February for a second vote. If approved then, it would likely be presented to the full council for final approval just before the March 6 deadline for the council to approve June 2026 ballot measures.

Campillo criticized Elo-Rivera for targeting June instead of higher-turnout November. He stressed that Measure L, which city voters approved in 2016, says ballot measures should be presented to voters in November.

Supporters of a June vote for the proposed tax note that Measure L focused on citizen-sponsored initiatives and referendums, not proposals placed on the ballot by the council.

The new tax would require support from only a simple majority of voters because the money would be used for general city purposes, not a specific city priority.