Introduction
San Diego has become an increasingly popular destination for travelers looking to stay in short-term rentals. The city's beaches, parks, attractions, and ideal climate draw over 35 million visitors per year. More and more of these visitors prefer to stay in short-term rentals like Airbnb instead of hotels nowadays.
In response to the growth of short-term rentals, the City of San Diego has regulations in place requiring property owners and managers to obtain a Short-Term Residential Occupancy (STRO) license in order to legally operate this type of business. Unlike some cities that ban short-term rentals altogether, San Diego takes a balanced approach that allows and regulates short-term rental activity.
This guide will provide an overview of the STRO license types, application process, and requirements for short-term rental hosts in San Diego.
Types of STRO Licenses
There are 3 tiers of Short-Term Residential Occupancy (STRO) licenses available in San Diego:
Tier 1: Non-Primary Residence, Rented Less Than 20 Days Per Year
A Tier 1 STRO license is meant for homeowners who want to do short-term rentals of a non-primary residence for less than 20 rental days per year. For example, this allows homeowners to rent out a secondary vacation property they own when they are not using it themselves.
The property cannot serve as your primary residence under this license. The annual permit fee is higher than Tier 2 but lower than Tier 3.
Tier 2: Primary Residence
A Tier 2 STRO license is for homeowners who want to rent out their primary residence on a short-term basis for less than 30 consecutive days per guest. This allows homeowners to rent out a room or their entire primary home while they are out of town.
To qualify for a Tier 2 license, the property must be your primary residence where you live for more than 6 months out of the year. This license has a low annual permit fee and simplified permit process compared to the other tiers.
Tier 3: Non-Primary Residence, Rented More Than 20 Days Per Year
A Tier 3 STRO license is for homeowners who want to rent out a non-primary residence on a short-term basis for more than 20 total days per year. This tier is popular for real estate investors who purchase properties specifically to operate as short-term rentals.
The property must be a non-primary residence, not where you live most of the time. The annual permit fee for Tier 3 is the highest since the property will be rented more frequently as a business. Additional regulations also apply around parking, noise, trash, etc.
We created a free visual step-by-step guide to help you acquire a Tier 3 license in the simplest way possible: Tier 3 STRO License Guide
Who Needs a STRO License
A STRO license is required for San Diego property owners who want to rent out their properties on a short-term basis. The type of license needed depends on whether the property is your primary residence or an investment property.
For your primary residence, you need a license if you plan to rent it out for more than 20 days per year while you are not present. This allows you, as the homeowner to occasionally rent out extra rooms or your entire home while you are on vacation or a work trip.
For investment properties, you need a license if you plan to rent it out at all, even for just one night. This applies to secondary residences, condos, apartments, or other properties that you own solely for rental income and not as your primary home. The city wants to regulate and track any rental activity for investment properties.
So in summary:
• If it is your primary home, you only need a license if you plan on renting for over 20 nights per year.
• For any other property, you need the license for any rental activity, even just a single night. The type of STRO license needed depends on the property type, location and rental plans.
Benefits of Getting a STRO License
Getting a STRO license provides several key benefits for short-term rental owners in San Diego:
Legal Compliance
Operating a short-term rental without the proper license is illegal in San Diego. Getting a STRO license ensures your rental complies with local regulations and avoids fines or other legal issues. The license legally allows you to rent out your property on a short-term basis.
Tax Benefits
With a STRO license, you can legally collect and remit Transient Occupancy Tax (TOT) charged to guests. TOT must be collected on short-term rentals under 30 days in San Diego. By having a license, you avoid tax issues and demonstrate to the city that you are collecting and paying TOT appropriately.
Increased Guest Trust
Displaying your STRO license number and other permit details on listings builds trust and credibility with potential guests. They can verify you have acquired the proper permissions to operate the rental legally. This provides guests peace of mind when booking.
Ability to Advertise
The STRO license allows you to legally advertise your short-term rental on platforms like Airbnb, VRBO, and more. Without the license, advertising short-term rentals in San Diego is prohibited.
Access to Insurance
Some insurance providers require a valid STRO license to provide coverage for short-term rental properties. The license can make it easier to get the proper insurance.
By obtaining the correct STRO license, short-term rental owners can operate their business legally, avoid tax issues, build trust with guests, advertise their listing, and access insurance coverage. The license brings about major benefits and is critical for successfully running short-term rentals in San Diego.
Transient Occupancy Tax
The Transient Occupancy Tax (TOT), also called the hotel tax, is charged to travelers staying in short-term rental accommodations in San Diego. The TOT rate for short-term rentals in San Diego is 10.5% of the rent charged by the operator.
The TOT must be collected from guests and paid to the City Treasurer's Office on a monthly basis. Payments are due on or before the last day of the month following the close of the reporting period. For example, TOT collected in January would be due by the last day of February.
TOT payments can be made online through the City Treasurer's TOT filing system. Owners and investors must set up an account to file and pay online. Checks can also be mailed or delivered in person to the Treasurer's Office. Receipts should be retained for at least 3 years as proof of payment.
Tier 3 License Application Process
The Tier 3 license is the most common type for short-term rental investors and owners in San Diego. Here's what you need to know about applying for a Tier 3 license:
Eligibility Requirements
- Property must be located in a zone that allows short-term residential occupancy
- Applicant must have a legal right to operate the property as a short-term rental, such as being the owner or having owner's written consent
- Property must pass all inspections and comply with all regulations
Documents Needed
- Application form completed and signed
- Copy of current business tax certificate
- Copy of grant deed for property
- Floor plan showing location of bedrooms, windows, and smoke detectors
- Proof of liability insurance
- Owner's consent if an applicant is not the owner
Application Steps
- Complete the application form online or in person
- Pay the license application fee
- Schedule an inspection of the property
- Submit all required documents
- Obtain an Operator's Permit
- Request license issuance after passing inspection
Timeline
- Allow 2-4 weeks to gather documents
- Inspections are scheduled 1-2 weeks out
- License approval can take 4-6 weeks after submitting an application
Following the eligibility requirements, submitting proper documents, and allowing adequate processing time will help streamline obtaining a Tier 3 short-term rental license.
Maintaining the License
Once you have your short-term rental license, there are a few key things to keep in mind:
Reporting Requirements
- License holders must file monthly Transient Occupancy Tax (TOT) reports. This reports your gross receipts from short-term rental income and calculates the taxes owed. Reports are due on the 15th of each month for the previous month's activity.
- In addition to monthly reports, an annual report reconciling the full year is required by February 1st.
- Keep detailed records of all bookings, income, and expenses to streamline reporting. Some property management software can help automate this process.
Renewal Process
- Licenses must be renewed annually before the expiration date. Renewal applications are available 60 days prior to expiration.
- Submit the renewal form with any required documents and pay the renewal fee to avoid a lapse in your active license.
Updates for Changes
- Notify the Treasurer's office within 15 days if any details about your licensed property change, such as:some text
- Ownership or title transfer
- Managing agent or contact info
- Number of units or bedrooms
- Floor plan
- Any other relevant details
- Failure to report changes can result in penalties, so staying on top of notifications is crucial.
Properly maintaining your short-term rental license involves diligent recordkeeping, tax reporting, renewals, and keeping the City updated on any changes. This helps avoid fines and keep your permit active. Consider working with a professional property manager like Parkside Asset Management to handle compliance.
Working with a Property Manager
Short-term rental investing takes a significant amount of time and effort to maintain. Working with a professional property management company can help take the workload off your shoulders so you can focus on other areas of your business or personal life. Here are some of the key benefits of partnering with a property manager for your short-term rental:
Listing and Marketing
A property manager will handle all aspects of listing your property on rental sites like Airbnb, VRBO, and Booking.com. They will create compelling listings with professional photos to attract guests. The manager will also promote your listing through social media and other marketing channels.
Guest Communication
Property managers act as a point of contact for all guest inquiries and bookings. They'll communicate details about checking in/out, provide recommendations, and address any issues that come up during a stay. This saves you time from fielding numerous messages.
Cleaning and Maintenance
Keeping a short-term rental clean and maintained between guests can be exhausting. A property manager coordinates cleaning, does laundry, and handles any repairs needed. They'll stock supplies and ensure the unit is guest-ready.
Revenue Management
Managers optimize pricing and availability across platforms to maximize your rental revenue. Their expertise helps ensure your unit is priced right for the season and local market.
Regulatory Compliance
Navigating local regulations like registering for a short-term rental license and paying transient occupancy taxes can be complex. Property managers handle compliance so owners avoid penalties.
Partnering with a property management company like Parkside Asset Management provides owners peace of mind. Our full-service management takes the hassle out of short-term rental investing.
Work with Parkside Asset Management
Parkside Asset Management has extensive experience managing short-term rental properties in San Diego. Our dedicated team handles all aspects of running a successful rental, from marketing and guest communications to cleaning and maintenance.
We offer the following services for short-term rental owners:
- Listing optimization and management across platforms like Airbnb, VRBO, and more
- Responding to all guest inquiries and booking requests
- Creating pricing strategies based on proprietary data and market trends
- Professional cleaning before and after each stay
- Regular property visits and maintenance coordination
- Assistance with license applications and tax compliance
With over 30 years of combined experience in San Diego’s real estate scene, our team understands the local rental market inside and out. Our hands-on approach ensures your property delivers maximum returns while minimizing compliance risk.
Whether you're an individual property owner or a seasoned investor with multiple units, we make short-term rental management easy. Learn more about our services and pricing or schedule a call to discuss your investment goals. Our team is ready to help you succeed as a short-term rental owner in San Diego.
Conclusion
Getting a short-term rental license in San Diego can seem daunting, but breaking it down into steps makes the process more manageable. Here are the key things to keep in mind:
- Decide which type of STRO license you need based on your rental property and plans. The main options are home-share, non-hosted, and whole-home rental licenses.
- Calculate the Transient Occupancy Tax you'll need to collect from guests and remit to the city. The tax rate is currently 10.5% of the rental rate.
- For a Tier 3 non-hosted license, the most popular for investors, submit your application with required documents like floor plans, photos, contact info, and more.
- Once approved, follow all requirements to maintain the license, like collecting and reporting TOT taxes, posting your STRO number in listings, and adhering to noise and nuisance regulations.
- Consider hiring a property management company like Parkside Asset Management to handle licensing, reporting, guest communications, cleaning, and other rental services for you.
Getting an STRO gives you the green light to rent your property on a short-term basis and tap into the lucrative San Diego vacation rental market. With the proper preparation and process, you can get approved and start earning rental income in no time.
