San Diego

How Future of Vacation Rentals Could Affect Housing Prices

In July, the City Council voted to limit rentals to primary residences for six months a year

It's up in the air right now whether restrictions on short-term vacation rentals passed by the San Diego City Council will be permanent.

Regardless of if they go through or not, what does it mean for the local real estate market? 

In July, the City Council voted to limit rentals to primary residences for six months a year. That means the elimination of out-of-town owners and multiple property investors. The change was set to go into effect in July. 

Councilmember Lori Zapf said the new restrictions would protect "Property owners from the hell of seeing their neighborhoods being taken over by mini-hotels." 

But opponents gathered 62,000 signatures to put a referendum on the ballot. 

Now, one of two things could happen: the council will either have to rescind the new restrictions or send them to voters to decide. 

Nancy Kramer said she has 62 rental units and has never had a complaint in 17 years.

 “We need to keep vacation rentals in San Diego," she said. "It’s a lot of income. It’s the tourists. We’re a tourist town.”

One real estate analyst told NBC 7 Thursday that there will be very different outcomes on the housing and rental market depending on if the ordinance is permanent. 

“We have an incentive for people who are paying a lot to buy a home or to sublease,” said Dana Kuhn of Johns Burns Real Estate Consulting. Kuhn has 40 years of experience in the business and teaches real estate development at San Diego State University. "Anything possible to offset that expense." 

Kuhn said the market is now experiencing a net-negative domestic migration, meaning more people are leaving San Diego than coming in. A factor that could stabilize rent rates and prices. 

"If the ordinance goes through in July, there would be a temptation for people who own those units to put them on the market for sale," said Kuhn. "You'll see rents stabilize and more homes up for sale." 

Which means housing costs for buyers would decrease, according to Kuhn. 

But if the referendum is successful, we'll continue to reach a peak in the housing market, according to Kuhn. It could be possible that rent rates stay the same while housing costs for buyers increase. 

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