Councilman Sean Elo-Rivera to propose vacant second home tax in committee – NBC 7 San Diego

Councilman Sean Elo-Rivera to propose vacant second home tax in committee – NBC 7 San Diego

Can It Solve Housing Crisis Without Damaging Tourism Economy?

Proposed $135 million annual levy would target empty second homes and short-term rentals, but enforcement costs, tourism impacts, and mixed results elsewhere raise questions about effectiveness

SAN DIEGO — A controversial ballot measure that could fundamentally reshape San Diego's approach to housing affordability is heading to the City Council, sparking an intense debate over whether taxing vacant homes and vacation rentals will help residents or harm the city's vital tourism industry.

Councilman Sean Elo-Rivera is sponsoring the Vacation Home Operation Tax, which would appear before voters in June 2026 if approved by the Rules Committee and full City Council. The measure promises to generate an estimated $135 million annually while encouraging property owners to rent vacant units or pay steep penalties. But critics warn it could damage tourism—San Diego's second-largest traded economy—and punish property owners without solving underlying affordability problems.

The Rules Committee convened Wednesday morning amid dueling rallies outside City Hall, crystallizing a clash between housing advocates who see vacant properties as unconscionable during a housing crisis and property rights defenders who view the tax as government overreach that threatens San Diego's economic vitality.

The Proposal and Its Promise

The measure would not apply to primary residences or long-term rental properties, and Elo-Rivera said there would be additional exemptions for city residents to avoid undue harm. According to his office, the tax aims to address a crisis where "too many families are priced out and too many homes sit empty while thousands of San Diegans sleep on the streets."

Elo-Rivera emphasized that vacation homes represent a key part of the housing shortage problem, noting these properties are neither owner-occupied nor providing long-term housing for tenants.

However, opponents strongly dispute both the tax's potential impact and its fairness. The San Diego Short-Term Rental Alliance estimates the tax would cost approximately $5,000 per affected property and generate roughly $135 million annually for the city's general fund—money they argue won't necessarily be directed toward housing solutions.

"San Diegans are already paying more for everything and this new tax won't build a single new unit of housing or improve affordability—it just raises costs for families and threatens neighborhood jobs," the alliance stated.

Property owner Magdalena Gawlik, who has a disability and relies on her two-bedroom vacation rental as her main source of income, expressed concern about the financial impact: "I want to express what a massive loss it would be if I were to pay $5,000 per-bedroom tax on my one two-bedroom vacation rental."

Tourism at Stake

The debate comes at a critical moment for San Diego's tourism sector. In fiscal year 2024, San Diego welcomed an estimated 32 million visitors who contributed a record $14.6 billion in direct local spending, generating a total economic impact of $22 billion and supporting more than one in eight jobs in the region.

The city achieved an average hotel occupancy rate of 73% in fiscal year 2024, ranking fourth in the nation, with the transient occupancy tax generating $310 million that contributes to essential city services.

But the San Diego Tourism Authority has warned of an expected slowdown in 2025, with Chief Operating Officer Kerri Kapich noting "we are starting to see a slowdown," which is "obviously a concern to all of us working in travel and tourism since we are the second-largest traded economy here in San Diego."

Michael Sharma, a vacation rental operator, emphasized the broader implications: "I mainly provide families of California residents the opportunity to visit San Diego. Without homes that can be rented short term you are pricing out low- and middle-income families that can't afford three hotel rooms for their trip."

The Research on Short-Term Rentals and Housing

Academic research provides mixed signals about short-term rentals' impact on housing affordability, though most studies show some effect on prices and rents.

Research from the University of Massachusetts found that in Boston, a one standard deviation increase in Airbnb listings relative to total housing units in a census tract is associated with an increase in asking rents of 0.4%, with census tracts in the highest decile of Airbnb listings seeing rent increases ranging from 1.3% to 3.1%.

A national study found that at the median owner-occupancy rate, a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices.

Restrictions appear to have measurable effects. Research on Los Angeles County found that cities restricting short-term rentals through Home Sharing Ordinances saw listings reduced and housing prices drop by 2%, with rents also decreasing by 2%.

In Irvine, California, a complete ban on short-term rentals in residential zones led to a 2.7% decrease in long-term rental prices on average, reducing annual total rental spending by $72 million.

However, the relationship may be more complex than supporters of restrictions suggest. A recent case study on New York City found that despite severe restrictions on short-term rentals in late 2023 causing a massive drop in listings, long-term housing supply failed to correspondingly increase, while rental prices grew at a higher rate than comparable U.S. cities.

San Diego's Housing Context

San Diego is grappling with a housing and affordability crisis that experts say is driven largely by underproduction. The city 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.

As of April 2025, the median sale price in San Diego stands at $989,750, reflecting a year-over-year increase of 5.3%, making it one of the most expensive housing markets in California.

Vacancy rates remain low at approximately 4.0%, down from 4.3% in 2024, reflecting healthy demand and limited turnover.

San Diego already regulates short-term vacation rentals and caps the number of licenses issued for whole-home rentals at 1% of the city's total housing supply—or 30% for rentals in Mission Beach. Since implementing licensing requirements, the city has removed over 7,000 illegal listings from online platforms.

Mixed Results from Other Cities

San Francisco, Berkeley, and Vancouver, Canada, have all approved taxes on vacant properties in recent years, though San Diego would be unique in applying a single tax to both vacant properties and vacation rental properties.

Vancouver shows the most promising results. The city's Empty Homes Tax, initially at 1% of assessed value and increased to 3% in 2021, reported in its 2023 annual report that "the number of vacant properties decreased by 54%."

However, Vancouver officials found that there were fewer vacant units than initially expected and the tax did not have an impact on housing costs.

Oakland's tax, approved in 2018, levies an annual tax of up to $3,000 per vacant home and $6,000 per parcel. As of June 2024, Oakland had collected an average of $5.53 million per year in revenue, but it has not resulted in a decrease in vacant properties since 2019.

San Francisco's Empty Homes Tax, approved by voters in 2022 with 54% support, has been held up in litigation. In November 2024, a California trial court prohibited enforcement of the measure.

The Enforcement Challenge

One of the most significant questions is how the tax would be enforced—and at what cost.

Vancouver's system requires all property owners to submit annual declarations of their property's occupancy status. All declarations are potentially subject to audit for up to two years, using sampling methodologies in line with provincial and federal tax programs.

In 2020, Vancouver audited approximately 4.8% of all properties, conducting about 9,310 audits. Of those audited, around 7.8% were found non-compliant.

The city's 2023 statement showed it collected $43.3 million in empty homes tax revenue, with 21 people employed in the vacancy tax branch, including 11 compliance analysts and two supervisors.

The process can be invasive. Evidence reviews can involve documents from BC Assessment notices, homeowner's insurance and cell phone bills to vehicle registration, utility bills and sworn affidavits. Kareem Allam, former chief of staff to Vancouver's mayor, publicly criticized the audit process as "an intrusion of privacy."

Oakland estimated its tax would cost $425,000 annually to administer, plus $100,000 in one-time startup costs, against revenues estimated at up to $10 million annually.

For San Diego, with estimated revenues of $135 million annually, enforcement costs might reasonably consume 2-5% of revenues—potentially $2.7 million to $6.75 million per year—based on ratios observed elsewhere.

Housing experts emphasize that proper enforcement is crucial to effectiveness. Cities that underinvest in enforcement, like Washington D.C. and Melbourne, have seen little-to-no change in vacant housing stock and below-forecast revenue collection.

The Councilman Behind the Proposal

Sean Elo-Rivera has served on the San Diego City Council since 2020, representing District 9, which includes Kensington, Normal Heights, East San Diego, City Heights, and San Diego State University. He served as council president from 2021 to 2024.

District 9 is comprised of mostly low-income residents. As a law school student, Elo-Rivera did volunteer work that made him aware of inequities experienced by San Diego residents south of Interstate 8, and he decided to become a community organizer instead of an attorney to help change city policies.

Elo-Rivera has established himself as a leading progressive voice on housing. He spearheaded the Residential Tenant Protections ordinance, which passed the City Council 8-1 in April 2023 and banned no-fault evictions with some exceptions.

In explaining his motivation, Elo-Rivera pointed to seniors on fixed incomes whose landlords told them "yes, you haven't done anything wrong, but I can make a lot more money with somebody else."

The vacant home tax fits within his broader agenda. Elo-Rivera has argued that resources to fund affordable housing projects "are stretched thin and do not meet the current and growing need," making supplemental revenue sources necessary.

The Hotel Industry Question

While Elo-Rivera has framed the tax as addressing housing affordability and budget challenges, the proposal would inevitably benefit San Diego's traditional hotel industry by reducing competition from short-term rentals.

Paul Becker, founder of Blue Water Vacation Homes and member of the San Diego Short-Term Rental Alliance, suggested that San Diego's existing 1% cap on short-term rentals "was introduced to appease our opponents and maybe the hotel lobby and for competition purposes." He added that "hotels would love" to see short-term rentals banned altogether.

Neither Elo-Rivera nor his supporters have publicly highlighted potential benefits to the hotel industry as a motivation. Yet the San Diego Regional Chamber of Commerce, which counts numerous hotels among its members, has positioned itself against the measure—a stance that may reflect concerns about the broader precedent of increased taxation rather than competition dynamics.

What Happens Next

The Rules Committee faces two paths: requesting additional information from city departments, or forwarding the proposal to the City Attorney's office to begin drafting the formal ballot measure. If the committee chooses the latter, the measure would return for final approval before advancing to the full City Council and ultimately to voters in June 2026.

The proposal would require only a simple majority to pass because the money would go to the general fund rather than being earmarked for housing programs—a point drawing criticism from opponents who argue it lacks accountability.

The outcome will test whether San Diego voters are willing to experiment with a policy approach that has shown mixed results elsewhere, potentially sacrificing some tourism industry vitality in exchange for new revenue and the hope of encouraging more housing availability.

The debate reflects a broader tension facing popular destination cities: how to balance the economic benefits of tourism with the housing needs of local residents in markets where the two increasingly compete for the same scarce resource. For San Diego, the question is whether a vacant home tax represents a meaningful solution or an expensive distraction from the fundamental challenge of building more housing.

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Sources

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