San Diego, known for its beautiful beaches, vibrant culture, and year-round pleasant weather, is a top tourist destination. Short-term rentals have become a popular choice for visitors seeking a personalized and comfortable stay compared to traditional hotels. For property owners, short-term rentals offer a lucrative opportunity to maximize investment returns while contributing to the local economy. However, operating a short-term rental in San Diego comes with specific regulations and considerations that must be carefully navigated.
This article explores the benefits of short-term rentals in San Diego’s tourism market, including financial advantages, regulatory requirements, economic impact, and their broader implications for the housing market. Whether you’re a property owner considering short-term rentals or interested in their role in San Diego’s economy, this guide provides valuable insights.
Short-term rentals (STRs) offer significant financial advantages for property owners in San Diego. Compared to long-term rentals, STRs can generate 2-3 times higher returns on investment (ROI) due to dynamic pricing strategies. This is especially true in tourist hotspots like San Diego, where demand for accommodations spikes during peak seasons, allowing owners to charge premium rates.
The vacation rental market is also on a growth trajectory. Industry forecasts predict a 2.9% annual growth rate until 2030, with total revenue expected to reach $21.11 billion by that year (Grand View Research). This growth reflects a shift in consumer preferences toward unique, home-like accommodations over traditional hotels.
Additionally, STRs provide property owners with greater flexibility. Owners can choose when to rent out their properties, allowing them to use the space for personal vacations or family visits when desired. This flexibility is particularly appealing for second-home owners or those who travel frequently.
Another benefit is the preservation of property value. Regular cleaning and maintenance, essential for attracting repeat guests and maintaining high ratings, keep properties in excellent condition. Well-maintained properties not only command higher rental rates but also appreciate more over time, especially in desirable tourist areas like San Diego.
Operating a short-term rental in San Diego requires strict adherence to local regulations. As of 2025, the City of San Diego has implemented a licensing system for short-term rentals, categorizing them into four tiers based on rental type and host residency:
Each tier has specific application and license fees, updated as of March 1, 2025:
Tier | Application Fee | License Fee | Renewal Application Fee | Renewal License Fee
Tier 1 | $33 | $193 | $33 | $193
Tier 2 | $33 | $284 | $33 | $284
Tier 3 | $41 | $1,129 | $41 | $1,129
Tier 4 | $41 | $1,129 | $41 | $1,129
There are caps on the number of licenses available for Tier 3 (400 remaining as of April 25, 2025) and Tier 4 (no remaining licenses). As of April 25, 2025, the city has issued 9,348 licenses across all tiers:
Tier | Licenses Issued | Remaining Licenses
Tier 1 | 221 | Unlimited
Tier 2 | 2,881 | Unlimited
Tier 3 | 5,151 | 400
Tier 4 | 1,095 | 0
All STR operators must obtain a Transient Occupancy Tax (TOT) Certificate and collect TOT on rental income. Properties rented for more than 6 days per year are also subject to the Rental Unit Business Tax. Prohibitions include renting Accessory Dwelling Units (ADUs) built after September 2017 or using vehicles (e.g., RVs) as STRs.
For licensing questions, contact the STRO Administration at 619-615-6120 or stro@sandiego.gov. Report violations via Get It Done.
Short-term rentals play a vital role in San Diego’s thriving tourism economy. Visitors staying in STRs contribute significantly to local businesses, spending on dining, attractions, and other services. According to a study, visitors in STRs spent $86.4 million on such activities, with a total economic impact of $285 million (Granicus).
Moreover, the STR sector supports job creation. It’s estimated that STRs in San Diego support 1,842 jobs, primarily in areas like cleaning, maintenance, and guest services. By providing additional accommodation options, STRs help meet the high demand for lodging, especially during peak tourist seasons when hotel availability may be limited.
beach, visiting the San Diego Zoo, or exploring the Gaslamp Quarter. The image should convey a sense of fun, relaxation, and exploration."
While STRs offer clear benefits, their impact on the housing market is a point of contention. The conversion of residential properties into STRs can reduce the number of units available for long-term renters, potentially driving up rental prices and exacerbating housing affordability issues.
In San Diego, regulations aim to balance the benefits of STRs with the need to preserve housing stock. However, loopholes—such as allowing multiple licenses under different hosts—have raised concerns about their effectiveness. For example, one owner secured 110 licenses, and a limited partnership owns an eight-unit complex with eight licenses (San Diego Union-Tribune). As of 2025, there are over 1,300 licenses available for whole-home rentals under the mandated cap, but in areas like Mission Beach, the cap is nearly met, limiting options for long-term residents.
City officials are exploring solutions, including increasing taxes on STRs or incentivizing owners to convert back to long-term rentals. A study is underway to examine the link between visitor spending from STRs and housing needs, with recommendations for potential nightly fees to support affordable housing initiatives (inewsource).
For those interested in starting an STR in San Diego, here are the key steps:
Short-term rentals offer substantial benefits for property owners in San Diego, including higher financial returns, flexibility, and contributions to the local tourism economy. However, they also come with regulatory challenges and potential impacts on the housing market. By understanding the regulatory landscape and staying informed about market trends, property owners can successfully navigate this lucrative sector.
As San Diego’s tourism market continues to grow, STRs will remain a key part of the accommodation landscape. With careful planning and compliance, they can be a rewarding investment for years to come.
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