San Diego's short-term rental landscape operates under the Short-Term Residential Occupancy (STRO) Ordinance, which took effect in May 2023. While no major regulatory overhaul has been announced for 2026 as of late 2025, the current framework continues to shape how property owners can operate vacation rentals in the city. If you're running a vacation rental in San Diego or considering entering the market, understanding these regulations isn't optional—it's essential to protecting your investment and avoiding costly violations that can shut down your operation.
Thinking about starting a vacation rental or want to ensure your current property stays compliant? Contact us for guidance on navigating San Diego's regulations or call 619-738-6199.
Understanding the Four-Tier License System
San Diego's STRO Ordinance created a four-tier licensing system that determines how you can operate your vacation rental. Each tier has different requirements, limitations, and availability. Choosing the right tier depends on how often you plan to rent your property, whether you'll be living there, and where it's located.
The tier system was designed to balance property owner rights with neighborhood preservation. The city wanted to allow homeowners to occasionally rent their properties while preventing entire neighborhoods from converting to tourist accommodations. Understanding which tier fits your situation is the first step toward legal operation.
Here's how the four tiers break down:
| Tier | Description | Key Requirements | Licenses Issued (Nov 2025) | Availability |
|---|---|---|---|---|
| Tier 1 (Part-Time) | Whole-home rentals ≤20 days/year | Two-night minimum stay; host need not live onsite | 142 | Unlimited |
| Tier 2 (Home Sharing) | Room rentals >20 days/year OR whole-home ≤90 days/year | Host must reside onsite ≥275 days/year; primary residence proof required | 2,386 | Unlimited |
| Tier 3 (Whole Home) | Whole-home rentals >20 days/year outside Mission Beach | Must rent ≥90 days/year; quarterly utilization reports; capped at 1% of city housing stock | 4,655 | 896 remaining |
| Tier 4 (Mission Beach) | Whole-home rentals >20 days/year in Mission Beach | Same as Tier 3 plus two-night minimum; capped at 30% of Mission Beach housing | 1,097 | 0 available (waitlist closed) |
What Each Tier Really Means for Investors
Tier 1 works for homeowners who want to occasionally rent their property when they're traveling or during peak seasons. With only 20 days allowed per year, this isn't a viable investment strategy for serious vacation rental income. However, it's useful for offsetting mortgage costs or testing the short-term rental market before committing to a full operation.
Tier 2 is the home-sharing option where you rent out a room while living in the property, or rent the whole place for up to 90 days per year while maintaining it as your primary residence. This tier requires you to live in the property at least 275 days annually. It's perfect for homeowners who want meaningful rental income without giving up their residence. The unlimited availability makes Tier 2 accessible, but the occupancy requirement means you can't use this for investment properties where you don't actually live.
Tier 3 is where serious vacation rental investors focus. This allows whole-home rentals for more than 20 days per year in areas outside Mission Beach. You don't need to live in the property, making it viable for pure investment purchases. The catch is the 1% cap on total city housing stock—once San Diego hits that limit, no new Tier 3 licenses are issued. As of November 2025, 896 Tier 3 licenses remain available out of the cap, so there's still opportunity, but it won't last forever.
Tier 4 applies only to Mission Beach and follows similar rules to Tier 3 but with stricter limitations. The waitlist closed with zero licenses currently available, effectively shutting down new whole-home vacation rental operations in Mission Beach. If you already own a licensed Mission Beach property, you're holding a valuable asset since no new competition can enter the market.
License Fees and Application Costs
San Diego increased license fees effective March 1, 2025. These costs are non-refundable, so you need to ensure your property qualifies before applying. The fee structure varies by tier:
| Tier | Application Fee | License Fee | Total Cost | License Duration |
|---|---|---|---|---|
| Tier 1 | $33 | $193 | $226 | 2 years |
| Tier 2 | $33 | $284 | $317 | 2 years |
| Tier 3 | $41 | $1,129 | $1,170 | 2 years |
| Tier 4 | $41 | $1,129 | $1,170 | 2 years |
These fees cover the two-year license period. You'll need to renew before expiration to continue operating legally. Missing your renewal deadline means losing your license, and if you're operating under Tier 3 or 4 where availability is limited, you might not be able to get a new license due to the caps.
The higher fees for Tier 3 and 4 reflect the greater impact these whole-home rentals have on housing availability and neighborhoods. The city uses these fees to fund enforcement and administration of the STRO program.
Required Documentation and Insurance
Getting your STRO license requires more than just paying fees. You need several documents and certifications before the city approves your application:
Transient Occupancy Tax (TOT) Certificate: Every short-term rental must have an active TOT certificate from the city's Treasurer-Tax Collector office. This separate registration allows you to collect the 10.5% TOT on all bookings. Most platforms like Airbnb and Vrbo now collect this automatically, but you're still responsible for ensuring it's paid correctly.
Rental Unit Business Tax: San Diego requires a business tax certificate for rental properties. This is separate from your STRO license and TOT certificate. The cost depends on your property's gross receipts, but it's typically a few hundred dollars annually.
Liability Insurance: Properties must carry adequate liability insurance. For larger properties or those with multiple units, the city requires proof of $1 million in liability coverage. Your standard homeowner's policy likely doesn't cover short-term rental activity, so you'll need to add a rider or purchase separate short-term rental insurance. Make sure the policy names the City of San Diego as an additional insured party.
Human Trafficking Training: All STRO license holders must complete human trafficking awareness training. This free online course takes about 30 minutes and aims to help hosts recognize and report signs of trafficking. You'll receive a certificate upon completion that you submit with your application.
Primary Residence Proof (Tier 2 only): If you're applying for Tier 2, you need documentation proving the property is your primary residence. This can include utility bills, voter registration, driver's license, or tax returns showing the address as your primary home.
Properties That Don't Qualify
Not every property can get an STRO license. The city specifically prohibits short-term rentals in certain situations:
Accessory Dwelling Units (ADUs): Any ADU built after 2017 cannot be used for short-term rentals. The city implemented this rule to preserve ADUs for long-term housing, as they're seen as part of San Diego's affordable housing solution. If you have a pre-2017 ADU, you may be eligible, but you'll need documentation proving its construction date.
Properties Without Proper Permits: If your property has unpermitted additions or doesn't meet building codes, you won't get an STRO license. The city can inspect properties during the application process or in response to complaints. Any code violations must be corrected before licensing.
HOA-Restricted Properties: Many HOAs prohibit or restrict short-term rentals. The city doesn't override HOA rules, so even if you qualify for an STRO license under city regulations, your HOA can prevent you from operating. Always verify HOA regulations before purchasing a property for vacation rental purposes.
Operational Requirements and Quarterly Reporting
Getting your license is just the beginning. Tier 3 and 4 operators face ongoing compliance requirements that must be taken seriously:
Minimum Utilization: Tier 3 and 4 properties must be rented for at least 90 days per year. This prevents people from getting licenses they don't actually use, which would waste limited license availability. If you don't meet the 90-day minimum, the city can revoke your license.
Quarterly Reports: Tier 3 and 4 hosts must submit quarterly utilization reports showing how many days the property was rented, guest information, and booking details. These reports verify you're meeting the minimum utilization requirement and help the city track STR activity. Missing report deadlines can result in fines or license suspension.
Two-Night Minimum Stay: Tier 1, 3, and 4 properties must enforce a two-night minimum stay. This rule aims to reduce party bookings and neighborhood disruption from constant guest turnover. One-night bookings are prohibited, even during high-demand events.
License Posting: You must display your STRO license number prominently at the property and include it in all online listings. The city monitors platforms to verify license numbers and can identify unlicensed properties.
Good Neighbor Policy: Every property needs a written good neighbor policy that addresses noise, parking, trash, and occupancy limits. Guests must receive this policy before check-in. Repeated neighbor complaints about policy violations can jeopardize your license.
Platform Requirements and Data Sharing
San Diego requires all short-term rental platforms operating in the city to verify STRO licenses before activating listings. Airbnb, Vrbo, and other platforms must check that your license number is valid and matches the property address. This verification process helps the city identify and shut down unlicensed operations.
Platforms must also report data to the city monthly, including host information, booking details, and revenue data. This transparency allows the city to track STR activity, verify tax collection, and enforce regulations. The days of flying under the radar with an unlicensed property are essentially over.
If you're listed on multiple platforms, each one requires your STRO license number. Keeping your license information current across all platforms is important, especially when you renew your two-year license.
Enforcement and Violations
San Diego actively enforces STRO regulations through multiple channels. The Get It Done portal allows neighbors to report suspected violations, leading to city investigations. Common violations include:
- Operating without a valid STRO license
- Exceeding tier limitations (renting more than 20 days under Tier 1, for example)
- Failing to collect or remit TOT
- Not meeting minimum utilization requirements
- Violating the two-night minimum stay rule
- Creating neighborhood nuisances (noise, parking, trash)
- Failing to submit quarterly reports
Penalties vary by violation severity but can include:
- Warning letters for first-time minor violations
- Fines ranging from hundreds to thousands of dollars
- License suspension for repeated violations
- Permanent license revocation for serious or ongoing violations
- Legal action for egregious cases
The city has made it clear that enforcement is a priority. They're using technology to cross-reference platform listings with license databases and responding to neighbor complaints more aggressively than before the STRO ordinance.
What Property Owners Need to Know About Availability
The Tier 3 license cap creates urgency for investors. With only 896 licenses remaining out of the 1% housing stock cap as of November 2025, these will eventually run out. Once the cap is reached, the only way to get a Tier 3 license is to wait for someone to give up theirs or for the city to increase the cap—which seems unlikely given the political climate around housing.
This scarcity has implications for property values. A property with an existing Tier 3 license becomes more valuable than a comparable property without one, simply because new licenses may not be available. Some investors are specifically seeking properties with licenses already in place.
Mission Beach's Tier 4 waitlist closure shows what happens when caps are reached. Property owners with existing licenses are now operating in a limited-competition environment, which can support higher nightly rates and better occupancy.
Managing Compliance Professionally
Staying compliant with San Diego's STRO requirements while managing day-to-day rental operations is challenging for individual property owners. License renewals, quarterly reporting, TOT filing, insurance maintenance, and guest screening all require consistent attention.
At Stay Classy Homes, we handle all compliance aspects for property owners. We track license renewal dates, submit quarterly reports on time, ensure tax collection and filing happens correctly, maintain required insurance documentation, and respond to any city inquiries. This gives owners confidence that their properties remain in good standing while they enjoy the returns their investment generates.
Professional management also prevents violations before they happen. Our guest screening process filters out problematic bookings. Our 24/7 concierge service addresses noise or parking issues immediately. We maintain good neighbor relations and handle concerns proactively rather than waiting for city complaints that could jeopardize your license.
Looking Ahead to 2026 and Beyond
While no major regulatory changes have been announced for 2026, San Diego's STR landscape will continue evolving. The city monitors how the STRO ordinance affects housing availability and neighborhood character. If problems emerge or political pressure increases, additional restrictions could be implemented.
Potential future changes might include:
- Tightening the 1% cap or reducing available Tier 3 licenses
- Expanding Mission Beach-style restrictions to other neighborhoods
- Increasing fees or insurance requirements
- Adding owner-occupancy requirements to more tiers
- Stricter enforcement and higher penalties for violations
Staying informed about proposed changes helps you adapt your strategy. Working with a management company that specializes in San Diego vacation rentals means having a team that monitors regulatory developments and adjusts operations accordingly.
The vacation rental industry in San Diego isn't disappearing, but the regulatory environment rewards operators who take compliance seriously. Properties that maintain valid licenses, meet all requirements, keep neighbors happy, and follow every rule will continue thriving while non-compliant operators face increasing consequences.
If you're operating a San Diego vacation rental or planning to start one, understanding and following STRO regulations protects your investment and maximizes your earning potential. We help property owners handle the complexity of compliance while delivering the guest experiences that generate strong reviews, repeat bookings, and solid returns. Call us at 619-738-6199 to discuss how we can help you operate successfully within San Diego's regulatory framework.
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