San Diego Council member Sean Elo-Rivera has introduced a new proposal to combat the housing shortage in San Diego: a Vacation Home Operation Tax targeting full-time short-term rentals and second homes, excluding primary residences and long-term rentals. If approved, he claims this measure could generate $100–$135 million annually to support city services like public safety and homelessness prevention. 

Why It’s Getting Attention

Elo-Rivera frames the tax as a fairness measure: “It ensures those who own a vacation home or STVR pay their fair share for taking limited housing stock off the rental or for-sale market.” 

He estimates that roughly 11,000 homes in San Diego are sitting idle or operating as vacation homes, not serving residents, and the tax seeks to recapture value from those properties. Supporters, including former Council member Barbara Bry, argue the tax could help return units back into the long-term market. Opponents, especially small hosts and industry voices, warn about unintended fallout: reduced inventory of short-term units, downward pressure on profitability, and possible loss in Transient Occupancy Tax (TOT) revenue (which was just recently increased by the City of San Diego). The San Diego Chamber of Commerce cautions that at $5,000 per bedroom annually, which is what the proposal amounts to, would be a “punitive layer of costs” that doesn’t actually create housing.

What It Means for Investors

• Profitability Compression: Properties relying on vacation rental income may need higher rents or tighter budgets to absorb this tax. This is why we, and lenders, never use STR income for property valuations; It is too volatile and cannot be depended on.  

• Shift to Long-Term Rentals: Some hosts may choose to exit the short-term market entirely, which could tighten supply and increase competition for long-term units. We also may see STR’s come to market for sale as some investors and agents guide their clients on short term income instead of basing it realistic long term rents.

Implementation Risks & Legal Considerations

One key detail: Elo-Rivera’s team intends to classify the tax as a general tax, not earmarked to a specific purpose, to avoid needing a two-thirds voter approval. If it were considered a “special tax,” it would face stricter legal thresholds.

Final Thoughts

From an investor’s perspective, this proposal demands careful modeling. The motive is clear for the city, new revenue and a possible reallocation of housing stock. But the downside risks of reduced yield, policy uncertainty, and market disruption have to be considered.

If your portfolio includes short-term rentals or vacation homes in San Diego, now’s the time to stress test, update your rental surveys, and consider how your properties might fare under this new tax landscape. ACI Apartments offers free rent surveys and valuations —feel free to reach out if you’d like to see how your short term rental property will fare as a long term rental.