Understanding short term rentals in San Diego (pt III): Residential rental of less than 30 days ruled illegal without permit1
August 11, 2015 by Omar Passons
For those unfamiliar with the issues, you can read part I and part II of this story, also on this site. For everyone else, let’s just get right into it. The issue in my client’s case is not whether you agree with renting rooms in your home for less than 30 days in residential neighborhoods, that is a separate policy issue. The issue is whether the City’s current law makes that type of rental illegal and adequately tells people it is illegal.
Recently the Administrative Law Judge provided her answer: yes. The judge handling my client’s Airbnb appeal agreed with the City of San Diego that renting rooms in your home – regardless of the frequency – for less than 30 days in residential zones is illegal unless you first obtain a Neighborhood or Conditional Use Permit. These permits start at $5,000 and frequently exceed $10,000. The details are worth discussing.As a quick note, many think all short term rental in residential neighborhoods in the city of San Diego are made illegal by the visitor accommodation definition in the Municipal Code. That definition requires that the lodging be “primarily for visitors and tourists.” My client had ONE couple in November, TWO couples in October, ONE couple in September, and SEVEN couples in August. That was the penalty period for her case. Does renting out one room in a four bedroom house less than 20% of the time constitute “primarily for visitors and tourists?” I don’t think that is the plain language meaning of a home’s “primary” use, but you can draw your own conclusions. I limited the above to the period of the City’s penalty because that’s what is at issue in my client’s case, but for those who might see this as splitting hairs, in the rest of 2014 there was only one couple each in January, February and May, and three couples in March and April. June and July were similar to August (though less). These numbers come from the official Airbnb records that were made part of the public record in city’s exhibit C-39, not from rumors, innuendo or guesswork.
Again, this is not about what the law should be, it’s about what actually happened in this instance.
Specifics of the ruling
The first thing to note is that the Judge ruled the following
As a refresher, here is what that law actually says
If you aren’t sure how the judge concluded that this law tells you that renting rooms for less than 30 days is a commercial bed and breakfast, you are not alone.
The judge also concluded that the Civil Penalty Notice and Order (CPNO) explained to my client what the City wanted her to do. Said the judge:
If you concede that the law is clear about what “operating a commercial bed and breakfast” actually is, then you don’t have a problem with the judge’s statement above. The issue here isn’t whether my client agreed with the City’s interpretation, it’s whether that interpretation is even fairly plausible from the written words of the ordinance. The question, in a nutshell, is whether there is any written law that actually tells you what it means to be “operating a bed and breakfast.” Here’s what the CPNO actually included:
Of course, there is nothing written in the law that indicates what it means to operate a commercial bed and breakfast. Similarly, there is no reference to stays of less than 30 days, nor anything that indicates that this law applies no matter how rare or frequently you do it. In fact, it wasn’t until nearly May of 2015 that the City actually put in writing that what they meant by “stop operating a commercial bed and breakfast” was “stop renting rooms for less than 30 days out of your primary home without the expensive permit.” Remember, there’s no problem if many of those guests had stayed more than 30 days – something the City never bothered to mention. And there’s no problem if the residence isn’t the person’s primary home – also something the City did not mention.
Given that the length of stay (more or less than 30 days) and the status of ownership (owner occupied versus not) defined whether this was a commercial bed and breakfast and neither of those things are written in the law, it is unclear how the judge reached the conclusion that the CPNO “clearly” explained what my client was supposed to do.
Question: If you rented to military service people in town for two-week stays before deployment or an occasional couple on vacation, would you have any reason to suspect this law applies to you and that you need a $10,000 permit?
Among the most bizarre aspects of the City’s interpretation – adopted by this judge’s ruling – is that a single rental of a room in your home after a Super Bowl party turns it into a commercial bed and breakfast for which you need to have public disclosure and a permitting process before you rent. Here’s the excerpt:
Unlike the Superior Court (our state court system), the Administrative Law Judge’s ruling is limited to whether a law was broken. Although it is within an Administrative officer’s authority to conclude that what my client was doing did not fairly fit the definition written in the local ordinance, in reality these decisions are usually left for state courts. Given the expense of this process, in practice it means that few challenges to agency interpretations like this one rarely get appealed.
A decision has not yet been made about whether to appeal the ruling at this time.
Among the big questions for the City is whether any City of San Diego officials will communicate directly to the citizens of San Diego that this interpretation is the law across the City (including residential zones in the coastal communities) and that every residential rental less than 30 days without an expensive permit is punishable by thousands of dollars in fines. Whether you agree with short term rental in residential neighborhoods or don’t, the real question in this case is what obligation does your city have to provide an adequately clear law before going after people?
For now, though, this ruling means that if you are renting rooms in your home for less than 30 days – or renting your home out when you take a vacation or engaging in home swaps or letting anyone stay who pays money – you are breaking the law unless you have already obtained the costly permits. Speaking of those costly permits, below is the cover page of the current City of San Diego fee schedule and the highlighted costs for a Conditional Use Permit and Neighborhood Use Permit.
And to be clear about the source of the permit cost estimates, this:
It’s anyone’s guess whether Airbnb will be required under its new tax deal with the City to remit payment for Airbnb hosts the City here claims are doing it illegally.