San Diego Vacant Home Tax Rejected: $8,000 Annual Tax Voted Down

What Happened: The Rules Committee Vote

On Wednesday, January 28, 2026, after nearly 200 people spoke during public comment, the San Diego City Council's Rules Committee voted 3-2 to reject Councilmember Sean Elo-Rivera's vacant home tax ballot measure. Council President Joe LaCava joined Elo-Rivera in supporting the measure, while Councilmembers Kent Lee, Raul Campillo, and Vivian Moreno voted against it.

According to KPBS reporting, the committee's rejection came despite a last-minute amendment attempting to save the proposal. The lengthy public comment period reflected the deep divisions over the measure, with supporters arguing it would generate revenue and address housing shortages, while opponents warned it would damage San Diego's tourism economy and hurt middle-class small business owners.

Councilmember Raul Campillo, who voted against the measure, stated clearly: "I'm here to advocate for the middle class San Diegans who run small businesses, who know this tax will undermine their life's work." His position reflected broader concerns from the business community about targeting the tourism sector, which has long been a cornerstone of San Diego's economy.

The vote effectively killed the proposal for the 2026 election cycle, though supporters could potentially revive it in future years if political dynamics shift.

The Proposal Details: $8,000 Annual Tax Explained

The "Vacation Home Operation Tax to Preserve Housing" would have imposed an $8,000 annual tax on properties that fell into two categories: empty second homes and short-term vacation rentals. The flat tax structure represented a significant departure from traditional property tax models, which are typically based on assessed value.

The proposal specifically targeted approximately 10,600 properties across San Diego—representing about 2% of all homes in the city. This included roughly 5,600 short-term vacation rentals on platforms like Airbnb and VRBO, plus approximately 5,000 vacant second homes. Primary residences and long-term rental properties would have been exempt from the tax.

City officials projected the tax could generate between $100 million to $135 million annually in new revenue. These funds were designated for affordable housing initiatives and programs to address San Diego's ongoing housing crisis. Proponents argued this dual approach would both generate funding and incentivize property owners to either sell their vacant homes or convert short-term rentals back to long-term housing.

If approved by voters in June 2026, the tax would have taken effect in early 2027, giving property owners several months to decide whether to sell, convert to long-term rentals, or pay the annual fee. For neighborhoods like Pacific Beach, Mission Beach, and La Jolla—where vacation rentals are particularly concentrated—the impact would have been substantial.

Who Would Have Been Affected

The vacant home tax would have directly impacted three distinct groups of property owners across San Diego's most desirable neighborhoods:

Short-Term Rental Operators: Approximately 5,600 property owners currently operating vacation rentals through Airbnb, VRBO, and similar platforms would have faced the $8,000 annual tax. Many of these properties are concentrated in coastal communities like Pacific Beach, Mission Beach, Ocean Beach, and La Jolla, where tourism demand drives high short-term rental income. According to Steadily's analysis, more than 81 percent of Airbnb hosts in San Diego are local residents, and more than half say the income earned through hosting has helped them stay in their homes.

Second Home Owners: Around 5,000 owners of vacant second homes would have been subject to the tax. These properties typically include beach houses used occasionally by out-of-town owners, investment properties held for appreciation, and homes inherited by families who haven't decided whether to sell or occupy them. Many of these properties are located in premium areas like La Jolla, Point Loma, and Coronado.

Tourism-Related Businesses: While not directly taxed, property management companies, cleaning services, maintenance providers, and other businesses serving the short-term rental market would have experienced significant economic impacts if owners converted properties or sold them to avoid the tax.

Notably, the tax would not have affected primary residences, long-term rental properties (leases of 30 days or more), or properties temporarily vacant due to renovations, estate settlements, or active marketing for sale or rent.

Arguments For and Against

The vacant home tax proposal sparked passionate debate from both supporters and opponents, reflecting fundamental disagreements about housing policy and economic priorities.

Arguments in Favor

Proponents, led by Councilmember Sean Elo-Rivera, argued the tax would address San Diego's severe housing shortage by incentivizing property owners to convert vacant homes and short-term rentals into long-term housing. With San Diego continuing to fall behind on housing production, supporters saw the tax as a creative tool to increase available housing without requiring new construction.

Housing advocates pointed to revenue projections of $100-135 million annually that could fund affordable housing development, helping address the crisis directly. They also cited successful examples from other cities: Vancouver's Empty Homes Tax, implemented in 2017, resulted in a 54% decrease in vacant properties and collected over $202 million Canadian dollars since 2018.

Supporters argued that keeping homes vacant during a housing crisis represented a misallocation of scarce housing resources, and that a modest tax could realign private incentives with public needs.

Arguments Against

Opponents raised concerns about economic impacts on San Diego's crucial tourism industry. Chris Cate, CEO of the San Diego Regional Chamber of Commerce, stated the business community was "tired of the targeted attacks on industries, particularly tourism," noting that short-term vacation rentals have always been a part of San Diego's tourism ecosystem, according to Voice of San Diego reporting.

Critics argued the $8,000 flat tax was arbitrary and could unfairly burden middle-class property owners who depend on rental income to afford their homes. Airbnb's public policy team called it "not the right approach" and indicated plans to "significantly back candidates who champion home sharing and tourism" in San Diego's 2026 elections.

Business owners worried about job losses in property management, cleaning services, and tourism support sectors. Some opponents also questioned whether the tax would actually convert homes to long-term rentals or simply push investment capital out of San Diego entirely.

Impact on San Diego Real Estate Market

The rejection of the vacant home tax has immediate and long-term implications for San Diego's real estate market dynamics across all neighborhoods from Downtown to coastal communities.

Market Stability Preserved

Property owners who might have panic-sold to avoid the impending tax can now hold their investments. This eliminates a potential flood of distressed inventory that could have temporarily depressed prices in vacation rental-heavy areas like Mission Beach and Pacific Beach. Market stability benefits both sellers who can wait for optimal timing and buyers who won't face artificially inflated competition from tax-motivated sellers.

Short-Term Rental Market Continues

The 5,600 existing short-term rental operators can continue their business models without the additional $8,000 annual burden. This maintains the current regulatory environment established by San Diego's 2022 Short-term Residential Occupancy Ordinance (STROO), which already limits short-term rentals to 1% of the city's housing stock or about 5,400 licensed properties.

Investment Property Appeal

San Diego remains attractive for real estate investors without the added risk of a vacancy tax. With rental vacancy rates at 5.7%—the highest since 2009—according to recent market data, investors have breathing room to hold properties during market adjustments without penalty.

Long-Term Housing Shortage Persists

The tax rejection means San Diego won't gain the estimated additional long-term housing units that might have resulted from conversions. The city continues to face a chronic undersupply, having permitted barely two-thirds of the homes it should have by now based on long-term targets. This ongoing shortage will continue to pressure prices upward over time.

Regional Competitive Position

Unlike San Francisco, which passed an Empty Homes Tax in 2022 (though later blocked by courts), San Diego maintains a more property-owner-friendly regulatory environment. This could attract investors concerned about regulatory risk in other California cities.

What This Means for Cash Buyers

For cash buyers and real estate investors operating in San Diego's market, the vacant home tax rejection creates several strategic opportunities and removes significant uncertainty.

No Tax-Motivated Distressed Sales

Cash buyers won't see a wave of properties from owners desperate to sell before a tax takes effect. This means fewer motivated sellers in the short term, but also more rational pricing. Buyers can focus on genuinely distressed properties—inherited homes, financial hardships, or owners who need quick liquidity—rather than competing with other buyers chasing tax-motivated inventory.

Investment Property Strategy Unchanged

Investors can purchase properties in high-tourism areas like Pacific Beach, Mission Beach, La Jolla, and Ocean Beach without factoring an $8,000 annual tax into their return calculations. For buyers considering vacation rental properties, the business model remains viable under current STROO regulations without additional tax burdens.

Second Home Buyers Have Clarity

Buyers interested in second homes or occasional-use properties in San Diego's coastal communities now have regulatory certainty. The risk of a surprise vacancy tax has been eliminated for the near term, making long-term financial planning more predictable.

Market Timing Considerations

With the tax threat removed, some property owners who were considering selling may now hold their properties. This could slightly reduce inventory in neighborhoods where vacation rentals and second homes are concentrated. Cash buyers should expect steady but not elevated inventory levels in these areas.

Opportunity in Adjacent Markets

The regulatory divergence between San Diego and cities like San Francisco (which attempted vacancy taxes) may drive some investors to prefer San Diego's more stable regulatory environment. Cash buyers positioned to act quickly on properties in premium neighborhoods could benefit from this regional capital reallocation.

Focus on Fundamentals

Without the vacancy tax distraction, buyers and sellers can focus on core market fundamentals: San Diego's projected 3-5% appreciation, rental market dynamics, and neighborhood-specific supply and demand rather than reactive tax-avoidance strategies.

What Happens Next

The Rules Committee's rejection effectively ends the vacant home tax proposal for the 2026 election cycle, but the underlying housing policy debates are far from over.

No Ballot Measure in June 2026

With the committee vote killing the proposal, San Diego voters will not see the vacant home tax question on the June 2026 ballot. The measure needed committee approval to advance to the full City Council, and that pathway is now closed for this election cycle.

Potential Future Revival

Housing advocates and supporters like Councilmember Sean Elo-Rivera could attempt to revive a similar measure in future years, particularly if housing affordability worsens or if political composition of the City Council changes. The 2026 San Diego City Council elections could shift the balance of support for housing-related tax measures.

Alternative Housing Policies

The City Council may explore other approaches to address the housing shortage, including zoning reforms, streamlined permitting for affordable housing, or incentive programs for converting short-term rentals to long-term housing without punitive taxes.

Tourism Industry Vigilance

The business community and organizations like the San Diego Regional Chamber of Commerce will remain watchful for future attempts to tax vacation rentals or impose new regulations on the tourism sector. As Airbnb indicated, the industry plans to "significantly back candidates who champion home sharing and tourism" in upcoming elections.

Market Continues Under Current Rules

San Diego's short-term rental market will continue operating under the existing STROO framework, which already limits the number of licenses and restricts where vacation rentals can operate. The 2022 regulations remain the governing framework without additional taxation.

Ongoing Housing Production Challenges

San Diego must still address its chronic housing shortage through other means. The city continues to fall short of production goals, and the rejected tax measure was just one proposed tool among many needed to close the housing gap.

For property owners, investors, and cash buyers, the immediate takeaway is regulatory stability. The vacant home tax threat has been eliminated, allowing market participants to make decisions based on economic fundamentals rather than tax avoidance strategies.

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