Vacant Units in San Diego – Estimated Using Vancouver as Example

I’ve been thinking about vacant housing units in San Diego for some time and recently was reading about the issue in Vancouver, Canada.  The data provided was much more thorough than anything I found locally so I wanted to use it to estimate what the numbers might be in San Diego.  Following is my take and links to the underlying information from Vancouver.  If you have information on this topic I’d love to connect or hear your input.


This article from the Vancouver Sun from February 2017 lays out some good information about vacant housing units in that city, which in recent years has been often in the news for quickly rising housing prices.  Included is the following:

  • The figures from “2016 show there were 25,502 unoccupied or empty housing units in the City of Vancouver” (below graph from article shows the growth in this number from 1986 to 2016, a period during which Vancouver real estate prices skyrocketed)
  • This figure is for the City of Vancouver, not the region, and represents 8.2 per cent of total housing units
  • Per City of Vancouver, there were 309,418 total dwelling units in the municipality as of 2016.  This total supports the above calculations (309,418 x 8.2% yields 25,372 or roughly the same amount as show in bullet one)

In response to the high housing prices in Vancouver, the city levied a 1% property tax surcharge on vacant units to push owners to add the units to the housing supply for renters or other owners.

I’ve been trying to find vacant number estimates or similar studies in San Diego and have asked various reporters, housing industry experts, random Twitter users, and other avenues to seek this information.  The answers I have received have been all anecdotal but mostly consistent – there are a lot of Downtown condos and probably a fair share of other units that are mostly vacant but it’s hard to ballpark the percentage.

Vancouver is a relatively similar city to San Diego, located on the west coast of North America and with high housing prices and demand.  Below are some basic demographic and economic factors – San Diego is larger but in the same ballpark, a large regional hub in a developed country.

  • Media income – Vancouver metro = $53,759 (2016 median family income converted to US dollars), San Diego metro (2015 median household income) = $64,309
  • Poplulation (metro) – Vancouver = 2.3M, San Diego = 3.3M
  • Poplation (city) – Vancouver = 647,520, San Diego = 1.4M
  • Housing units (city) – Vancouver = 309,418, San Diego = 526,663 (1/1/2015)

Since I can’t find a good local estimate for vacant units I thought Vancouver would be a reasonable estimate, or at least a starting point for conversation and hopefully the SD City Council, EDC, Chamber of Commerce, or other party could commission a study to quantify this aspect of housing stock in San Diego.  (I would guess the amount would be higher in San Diego than Vancouver given the long history as a vacation destination, the warmer weather, and the presence of large population centers nearby – Los Angeles, Phoenix, Las Vegas, etc.)

The above San Diego housing unit number from SANDAG estimates the number of vacant units in San Diego at 27,386 (based on provided vacancy rate of 5.2%)

The SANDAG numbers may best reflect the number of vacant units, but it’s worth looking at a portion of the above referenced Vancouver Sun article which notes that the private study produced a vacancy rate more than double existing city estimates.

“The census numbers of unoccupied units are more than double an estimate released by city hall last year because a completely different set of criteria and data were used.

Assessing the extent of empty or underused homes can differ depending on “your measurement tools,” said Yan.

While the census might count a greater number of folks who are, say, on extended vacation during the census period, the city’s estimate was criticized for likely missing the number of units used for only short, seasonal periods, perhaps one or two months in the summer, but then are left vacant for the rest of the year.”

So, based on SANDAG’s vacancy rate of 5.2% we would have 27,386 vacant units in San Diego.  Using the Vancouver vacancy rate of 8.2% would estimate 43,186 vacant units here.  And if we thought that the government estimates are off by half due to sampling methodology, as they were in Vancouver, we could use a rate of 10.4%, yielding 54,773 vacant units in San Diego.

Given the large impact that property tax rules in California can have on homes held for long periods (Prop 13 being most prominent) I would think the vacancy number in San Diego would be at the high end of the above numbers, probably 50,000 or higher, maybe much higher.  Prop 13, over time, can result in incredibly low property tax burdens for long-time owners.  Prop 13 allows properties like the amazing home below, currently for sale for $1.7M, to pay a total of $136.97 in total taxes a year – a rate of .008% rather than the approx 1.05%, $17,850 a year, if taxes were applied on market value at existing property tax rates.  When holding costs are essentially nothing, there’s greatly decreased incentive to sell and little cost to holding an empty property.  It’s probably a large part of the reason the house across the street from me in desirable North Park, which is worth around $750k, has sat completely empty for the 4 years I’ve been in the neighborhood.

amazing home, amazingly low taxes (shout out Prop 13 & Drake)

I’m not advocating for an empty house tax as Vancouver did, but seeking to get an estimate of vacant units in San Diego to consider a similar or other action.  Being involved in the short-term rental (aka Airbnb) debate here the impact of short-term rentals on housing availability and prices frequently comes up.  It’s undeniable that increased demand has an upward effect on housing prices.  However, short-term rentals produce economic activity for owners, businesses, and the city whereas empty units do none of those things.  Upper estimates of short-term rental units in San Diego are around 15,000 (I would guess it’s around half that number) – likely far dwarfed by empty units in our city.  We would be much better served putting vacant units on the market rather than reducing economic activity, entrepreneurial opportunity, and property rights by greatly restricting short-term rentals.

Airbnb Co-Hosting – Have You Heard About This Program?

New Airbnb Feature Likely To Be A Boon For The Platform
Airbnb has a feature currently only available in a number of cities around the world – Co-Hosting.  The current list, below, includes 25 cities although additional cities are being rolled out per my conversation with an Airbnb representative this week.

Cities currently offering Co-Hosting on Airbnb – San Diego’s on the list!

So what is the Co-Host program about?  Basically, it’s a way for a property owner (a “Host” in Airbnb parlance) to add another Host (the “Co-Host”) to a listing.  You can tap a friend, relative, neighbor, or experienced Airbnb huser to manage your property for you.  This is a huge growth opportunity for the platform and one I’m surprised is not getting more publicity.  I’d guess this is because they’re currently in test mode and working out any bugs in the program.  In addition to assigning management rights to an Airbnb listing, the Co-Host option allows users to set fees (management fees as a percentage of gross earnings or fixed fee, cleaning fees, etc.) and the platform will automatically split earnings and distribute to both the Host and Co-Host per the Co-Host settings.

There are a number of reasons why someone might want a co-host for their property.  The hassle of managing a property isn’t for everyone and to be able to hand off some or all of that responsibility will be attractive to some.  For others, travel schedules or work demands might necessitate a co-host for short periods of time or seasonally.  I can see myself wanting to add one of my children as a co-host to our listings in the future and giving them limited management rights to gradually give them control and responsibility for their own business.

In addition to existing Airbnb Hosts it’s easy to see how the Co-Hosting option could enable landlords to allow long-term tenants to utilize Airbnb in a monitored and responsible way.  Between landlords, existing hosts, and the growth in the number of hosts in general I see a lot of growth potential for co-hosting.  It should also allow Airbnb to retain hosts as there’s an option to avoid the hassles of managing a listing but still have the earnings, flexibility of schedule, and other benefits the platform provides.  Airbnb has built a huge user base complete with reviews and other data and strengthening that base and building on it will be a competitive edge for the platform against the many competitors in the field.

I recently became a Co-Host here in San Diego and am excited for the opportunity.  As one of the most experienced SuperHosts in the area I’m comfortable with taking on another listing to manage and hopefully the Host will see a benefit from the reduced workload for the property.  If you are considering a Co-Host in San Diego you can find my profile at the below link.  I’d be happy to talk with you about co-hosting and my experience and expertise.

https://www.airbnb.com/co-hosting/profile/869862

Have a great day!

The current co-host options that are on offer, as of 4-28-2017.

Wondering if Airbnb offers Co-Hosting in Your Area? You can find out by logging in, and checking at the bottom of the menu bar.  If Co-Hosting is an option for you, there will be a section labeled “Management” with a sub-section “Co-hosts” on your menu bar.  You can directly invite someone you already know as a Co-Host or use the “Find a co-host” option to search by location for experienced hosts.

The Airbnb Battle Continues in San Diego

Below is a Facebook post I shared in August but am updating and adding some links and additional text.  Next Tuesday the San Diego City Council will have a special meeting to consider changes to the Municipal Code which would eliminate nearly all short-term rentals in the city.  The changes will address whole unit rentals of less than 30 days, as home-sharing (a room in a home rather than a whole unit) is essentially already banned. For more in-depth detail and the legal mumbo jumbo I’d recommend reading this great post by Omar Passons from earlier this week.

The following are my thoughts on Airbnb / short-term rentals, why I support short-term rentals in our city, and where I see the industry going in the future.

I am an Airbnb host and have been for a few years. When our family travels it’s basically exclusively what we use. We’ve had a great experience on both sides of the equation and I’ve never tried to hide that. I’m a supporter, user, money maker, etc.  Next month we’ll be taking our family to Mexico City for a week and look forward to staying in an Airbnb property there.  Here’s a photo of the property we’ll be staying at.

polanco-airbnb

Locally and globally Airbnb has experienced massive growth since being launched in August 2008, this wouldn’t be possible unless it was affording an opportunity for the millions of hosts on the platform. (Potentially this could be due to hotel rooms being artificially capped by zoning / permits / etc but I think it’s mostly because these platforms are accessing non-standard rooms and properties in authentic neighborhoods that provide superior value.) Pair the desire for non-standard rooms / neighborhoods and value with the growth in travel globally and you have a massive opportunity.

However, the growth to date is likely to be dwarfed by the growth to come.  PriceWaterhouseCoopers (PWC) issued a report in 2015 on the “sharing economy” including a variety of sites across industries including Uber, onefinestay, Airbnb, Feastly, and many more. As of the report date, only 7% of the U.S. population had participated in the sharing economy as a provider.  PWC predicted that five major sharing economy sectors – travel, car sharing, finance, staffing, and music / video streaming – would grow from $15 billion in 2015 to $335 billion in 2025, a growth rate of approx. 36.4% annually.

income-levels-and-provider-ages

What does the current opportunity and projected growth mean for hosts? Money. I know of few people that open their homes to strangers for free – even CouchSurfing is predicated on the give & get premise so there’s a benefit or exchange of value derived. There’s an economic opportunity for people to utilize and they are taking it – great. They’re doing so on a widespread, individual basis and connecting one-to-one with guests – even better.

I think a lot of the blowback is about “punk” millenials like me that are just saying “screw the rules” and “i do what i want, the system is the one with a problem”. Based on my interactions with other hosts I think this far from the truth. It’s widely covered that millenials don’t have much money, have major debts, live with their parents at historically unprecedented levels, and mostly don’t own property.

Who does own property? Boomers. And older members of Gen X and the Greatest Generation. (And Millenials that inherited from those groups or have had above average successes.)  Additionally, for many years the average house size has been growing while the average household size has been shrinking. Per the American Enterprise Institute, from 1973 to 2014 the average number of persons per home declined from 3.01 persons to an all time low of 2.54 persons.  Over the same period the median home size increased from 1,525 square feet to a record high of 2,506 square feet.

So today home sizes in the US have never been higher and family size has never been lower. Meaning? There are tons and tons of empty rooms – completely unused, spider web covered. I live across from an entirely empty house (next to a surface level parking lot in a residential neighborhood) in the heart of San Diego’s hippest neighborhood of North Park. Empty rooms are the real opportunity of the short-term rental industry – for both host and community.

Many articles focus on flip young people (me and my brethren punk millenials) boasting about having 10 units and how the money is so easy putting properties on VRBO, Flipkey, or Airbnb. It’s probably true, to some extent. This is a new opportunity with a ton of excess demand not currently being met. This excess demand will be met due to the incentives created – there is real money on the table.

The idea and model of web-based room renting is fairly new – even a few years ago it was unknown or fringe. (Though boarding houses and room letting has existed for centuries.) Today people from all age groups use it widely, though as the PWC report points out there is much room to grow. Think of the evolution of users of Facebook – young first adopters, then a broader segment of the populace, and today with a huge amount of older frequent users. That’s where this model is going – both on the user and host sides. The same with uptake of private room vs. whole home. When I started hosting our guests were 70-80% foreign, today that’s about 15%. The idea of staying in someone’s home was odd to Americans but more familiar to foreigners. This trend will continue and even now I hear a lot of commentary about preference for private room vs. whole home. The personal connection is much greater – part of the “live like a local” push that is the current Airbnb media slogan.

As all of these trends come together the biggest opportunity – empty rooms – will take over. This will be driven by the biggest owners of property in the US, Boomers. Those multiple property “owners” (quotes because the multiple property hosts are often lessors that use Airbnb as a sublet opportunity) will be crushed by home-owning Boomers. Especially in California the advantage is huge – no mortgage, property taxes fixed at a very low level thanks to Proposition 13, and more empty rooms than a younger family with kids at home. Someone paying $700K for a 2 bedroom today can not possibly compete with someone offering a room in the same 2 bedroom bought for $70K in 1975.  In a similar vein will be people with changing situations and spare rooms – couples about to have their first child and build a family, older couples that recently sent their children to college, etc.

What else is the economic opportunity doing? It’s spurring people to add units – increasing supply of total housing. That’s a good thing. Attic and garage conversions, adding separate entrances to bedrooms, building grandma flats, even building new units with purpose built areas for use as short-term rentals – when there is opportunity people respond. It’s the same reason you see cranes everywhere  in San Diego today and none in 2010 – if there’s no opportunity no one is going to commit capital and take risk. Today many (maybe most?) of these sorts of new units may be going to short-term rentals. That won’t always hold true and when total supply goes up there is more flexibility in the market and potentially a decrease in average cost. (Potentially because demand also fluctuates.)

airbnb-uber-projection-to-2025

This post doesn’t even touch on non-economic factors – the personal connection is enormous and underplayed. Many of our guests are moving to SD, want to move here, are interviewing for jobs or academic opportunities – they instantly have a local perspective on the region, a connection for the future, and a guide. This is a huge deal. San Diego is the best place to live in America and I love sharing why with others. I know many other San Diegans feel the same. Our residents can connect and relate to guests from around the globe 100x better through short-term rentals than the biggest ad campaign, Comic-Con, or other paid marketing can accomplish.  Opponents of STRs use the term “Short Term Vacation Rentals”, I prefer short-term rentals as many guests are not here to party and play at the beach, there are a host of reasons people visit San Diego and top of my priority list is attracting talent to our city.

I have a feeling that short-term rentals are likely to be banned soon in San Diego. Many other California cities have taken this path and it’s hard to blame them. We’re looking at all-time highs for rents, property prices, etc. Our population continues to boom. The economy grows, but mostly at the top. It is not a pretty picture for those looking to buy or rent and short-term rentals are undoubtedly a part of that growth in prices (although based on number of units I would say a very small part). But giving people an economic opportunity is a good thing and taking it away by dictat is a bad one.

I’m proud of the hosts / property owners I’ve met. We are committed to addressing real issues. We have proposed a number of specific, meaningful regulations to avoid negative impacts for San Diegans – an increasing fine scale including prohibition of use, dedication of TOT funds from short-term rentals for enforcement, an annual registration fee with funds for enforcement, posting of contact information and a required response time (or additional fine). These are meaningful suggestions and address complaints from opponents. We are happy to come to the table and discuss other aspects of the debate.

I didn’t come from money, we didn’t inherit our house. The opportunity from short term rentals enabled us to purchase our home in North Park as well as have a parent at home during the early years for our children. That was huge, huge, huge for us. If others don’t want to have a stranger in their home or yard – that’s absolutely their choice. But to take away that opportunity from future home buyers and others we should not do. Good times come and go – not long ago many in SD were underwater on their homes. More opportunity and more flexibility is great and should be embraced.  I hope that short-term rentals will continue to provide an opportunity for San Diegans of all backgrounds, means and neighborhoods.

I hope you agree and will let your City Council Member know.

The Short-Term Rental Debate Returns in San Diego

The debate over short-term rentals in San Diego had been quiet for a number of months but a recent series of op-eds at Voice of San Diego seems to signal the return of the debate to the public stage.  The op-eds have been both against short-term rentals, for short-term rentals, and some general articles about the number of short-term rentals.

What this debate is about is what rules should apply to the rental of a portion of a property or a whole property for a period of less than 30 days.  Changes to the hotel taxes on short-term rentals are not being debated.  Monthly rentals are not being debated either.

Much of the debate on short-term rentals has come to be synonymous with the largest platform for short-term rentals today – San Francisco tech wundercompany Airbnb.  The debate is more about the proper place for Airbnb and less about the wide variety of short-term rentals that exist outside of this relatively young company (founded in 2008).

Some examples of short-term rentals that may not be directly discussed or considered as part of the short-term rental debate but will likely be impacted by any rules, fees, or regulations include the following (and many more):

  • Foreign exchange students – Hosting a student for less than 30 days is common and a great cultural experience for many. This type of use has a long history in San Diego.
  • Evergreen Club – A website ($75 annual membership fee) for those 50 and older to stay with other members for $20 per night.
  • HomeExchange – A site connecting people from all over the world that would like to “swap” houses for a period of time.  Per website, HomeExchange currently has more than 65,000 listings in 150 countries.  Many swaps do not include exchange of money.
  • Couchsurfing – A site to connect with others and share space in your home.  Website states 400,000 hosts per year and 4 million users.  Website name comes from sharing a spare couch, but includes more than couches, Couchsurfing invites hosts to share a – “couch, spare room or air mattress available to travelers”.
A screenshot from Couchsurfing San Diego taken 6-4-2016 shows the number of hosts, guests, and properties.
A screenshot from Couchsurfing San Diego taken 6-4-2016 shows the number of hosts, guests (“surfers”), and local events.
  • VRBO – Vacation Rental by Owner – An early entrant into the online world of vacation rentals.  Founded in 1995 and sold to Homeaway in 2006 (which was subsequently purchased by Expedia in 2015).  This site continues to thrive in traditional vacation locations.
  • onefinestay – A short-term rental site focuses on luxury / upmarket offerings.
  • Warm Showers – “A free worldwide hospitality exchange for touring cyclists” – similar to couchsurfing but for travellers exploring by bicycle.
  • Informal – Whether by personal connections, Craigslist, or other means there are short-term stays arranged directly by property owners and visitors to provide lodging for visitors, friends of friends, or strangers.

There are many, many other sites and services that offer short-term rentals (and the above also offer non short-term rentals – stays longer than 30 days).  As the debate over short-term rentals continues it shouldn’t be lost that we aren’t talking about just one website or one multi-billion dollar company.  The rules we put in place will affect a wide variety of uses that San Diegans have for their property.

Also worth noting is that many of the above noted sites and platforms are relatively young and new offerings and ideas are being created as the market for short-term rentals changes and grows.  When I started traveling and hosting via Airbnb a few years ago my parents thought it was quite odd, likely unsafe, and a generally weird idea.  Today they have used the site a number of times and it has become a mainstream tool that people from all over the world use.  I expect this trend to continue and hope that San Diego will embrace new tools that benefit both local residents and visitors in ways financial, social, and cultural.  Increased flexibility and opportunity is a good thing.

Uptown Planners Election – Tonight, 3/1, 6 PM

If you live in, own a business in, or own property in Uptown you are eligible to vote tonight at 6 PM for the board of Uptown Planners. Show up at 3900 Vermont St., San Diego, CA 92103 to make your voice heard and have a say in the future of Uptown!  Please consider supporting the slate of candidates noted below.


 

Tonight, Tuesday March 1, the community planning group for the neighborhoods of Uptown, Uptown Planners, will hold a board election.  Groups like Uptown Planners, give input to the city about development, park space, and other important issues.  Per the city websiteCommunity planning groups (CPG) provide citizens with an opportunity for involvement in advising the City Council, the Planning Commission, and other decision-makers on development projects, general or community plan amendments, rezonings and public facilities. The recommendations of the planning groups are integral components of the planning process, and are highly regarded by the City Council and by staff.

For an idea of the topics that Uptown Planners you can view the agenda for the meeting tonight following the election.

Being a part of a planning group is a significant commitment of time and dedication to a community.  It is also a very important part of how things get built in San Diego.  This applies to buildings, sidewalks, bike lanes, housing, dog parks, and much more.

Please see the below graphic for a slate of candidates that has stepped up and organized to run for Uptown Planners. I support this group of candidates and hope you will too.  Paul Jamason at SD Urban has a thorough write up of the major issues at stake and why it is important to support these candidates.

“Let’s move beyond the priorities of traffic, parking and home value appreciation, to the more important challenges of climate change and housing affordability. We can do this by supporting Uptown Planners candidates who will work to implement San Diego’s Climate Action Plan and transit-oriented development in our neighborhoods.”

Uptown Planners election

Following is a message from Bike San Diego that has endorsed two of the above slate of candidates for this election.

Tomorrow is the Uptown Planners Board Election – Tuesday, March 1st, 20166:00-7:00 p.m.

BikeSD is pleased to announce our endorsements of Ms. Maya Rosas and Mr. Joshua Clark, for the Uptown Planners Board election this coming Tuesday, March 1st. It’s time to get out the vote!
Uptown Planners is a key community planning group in the City of San Diego’s urban core and includes the neighborhoods of Bankers Hill/Park West, Hillcrest, Mission Hills, University Heights, Five Points/Middletown, and the Medical Complex. As the official planning advisory board to the City, it’s key that forward-thinking members with an eye toward fostering smart urban growth focused on active transportation, be elected to the Board. Maya and Josh are running on a slate of candidates who fit the bill. BikeSD recommends that you arrive early enough on Tuesday, March 1st (tomorrow), to meet Maya and Josh, as well as hear their recommendations for the remaining slate of candidates. A voter may vote for up to seven candidates!

Last year, our endorsement helped elect Michael Brennan and Kyle Heiskala to the Uptown Planners board, and their influence on the board cannot be understated. It was through Heiskala’s patience and willingness to educate his fellow board members that Uptown Planners voted to support protected bike lanes along all of University Avenue at their 2015 December meeting, something that could happen through city efforts regardless of SANDAG’s own project. This development was a huge departure from Uptown Planners of the past and it is only because of Heiskala and Brennan than this change was possible. So this being election year, don’t discount your voice. Opposition to safe streets and in favor of maintaining the status quo is still strong – so come out next Tuesday and VOTE!

Details of the election are below:

What: Uptown Planners Board Election
When: Tuesday, March 1st, 2016 – 6:00-7:00 p.m.
Where: Joyce Beers Center, 3900 Vermont St., San Diego, CA 92103 (between Aladdin Restaurant & Panera Bread)

**To vote, an individual must present identification proving either residency, property ownership, or business ownership in Uptown. (See map of Uptown boundaries here.) Identification may include a driver’s license, utility bill, tax bill, business license, or rent receipt – any document that has the voter’s name and street address. Photocopies of documents are acceptable.**

Don’t live or own property in Uptown? If you have friends or family who live there (Bankers Hill/Park West, Hillcrest, Mission Hills, University Heights, Five Points/Middletown, and the Medical Complex), give them a call and tell them to come out.

 

“Nuisance complaint” (Code 415N) police calls in San Diego

Awhile back I received a data set of all the Code 415N calls to San Diego Police Department for all properties in San Diego for a one-year period, 10/1/2014 – 9/30/2015.  I believe 415N is the police department code for Disturbing The Peace.  The data is for all property types, not only short-term rental properties.  During the short-term rental debates there has been quite a bit of discussion about the crime and safety impacts that short-term rentals have on communities so it would seem a decent place to look for elevated impacts in areas with more short-term rental units.

I took the information and did some high level analysis of the complaint calls – the data file is included here and the notes / calculations I added are  at the top right of attached file.

[Note: I didn’t have the TOT addresses to match to the 415N info (and the 415N info doesn’t have zip so I’m not sure how you match it unless they use the exact same address typing for both sets of data.  I didn’t take a stab at it since it’s above my skill level to break that down.  I’m also unsure of the completeness of TOT addresses since Airbnb now handles those remittances for hosts, so many are likely not registered with the City Treasurer.]

Some points I thought might be relevant to the ongoing discussion:

  • Total calls in past year = 13,869. With city population of 1.381 million that comes out to 1% of the population making 1 call per year.  I don’t know what a “good” nuisance reporting rate is, but if 1 of 100 people are calling once per year that seems pretty low.
  • Average calls per district – with 9 districts the total number of complaints comes out to 4.22 calls per day.  When thinking about enforcement needs, this seems a relevant point.  I would think 1 hire per district could handle 4.22 calls per day, maybe 10 or 20 (I don’t know).  At least a good point for talking about what resources are needed to handle complaint volume.
Police beat areas with most 415N calls
Police beat areas with most 415N calls
  • Complaints by neighborhood – the data doesn’t match to exact addresses, but is useful in seeing where complaints are from by beat area and how that matches to the neighborhoods cited as being short-term rental problem spots.  In the top 5 by % of complaints are: Pacific Beach (6.51%), North Park (5.78%), Ocean Beach (3.99%), East Village (3.14%), and Logan Heights (3.12%).  Pacific Beach & Ocean Beach have had a lot of anti short-term rental sentiment, but not the other 3, maybe North Park if you include Burlingame.  By address would be better to be more precise, but if you look at the Excel the neighborhoods that receive the most calls don’t correspond much to anti short-term rental sentiment, and I would guess correspond mostly to total population (which makes sense in general) than to perceived / actual short-term rental caused issues.

    Wanted to share this information in case of interest to others.  It seems a good touch point in the overall conversation so I thought worth posting.

Below is the Excel data set for download / use.

[embeddoc url=”http://www.johnpatrickanderson.com/wp-content/uploads/2016/02/415N-Calls.xlsx” download=”all” viewer=”microsoft”]

Some Market Thoughts on Short-Term Rentals in San Diego

The topic of short-term rentals in San Diego continues to be debated and potential rules / changes to rules will be a hot topic in 2016.  After ending 2015 with a well attended Planning Commission meeting in December it looks like the next official meeting / hearing will be in late February or March at the City Council.  It is sure to be a long hearing, with hundreds of San Diegans attending and providing commentary both for and against short-term accommodations in San Diego neighborhoods.

In the meantime, I wanted to jot down some thoughts about short-term rentals in San Diego from a market economy perspective, which follow.

Serving unmet demand – Short-term rentals in San Diego (and many places globally) have grown briskly in the past 5 years.  Airbnb was founded in August 2008 and is the largest short-term rental platform today although it was preceeded by Craigslist, Vacation Rental by Owner, and many other “more traditional” short-term rental uses like bed and breakfasts, room-letting, and others.  Today Airbnb has more than 2 million listings worldwide in more than 190 countries and 34,000 cities.  On New Year’s Eve 2015 the site was expected to host more than 1 million guests in a single night, up from 550,000 a year previous – nearly 100% growth in a year.

In San Diego the total number of short-term rental units in the city was estimated at 6,116 in a National University System Institute for Policy Research (NUSIPR) study released in October 2015.  This report was paid for by Airbnb and the San Diego Vacation Rental Managers Alliance which has lead some to believe it is biased. (The Union-Tribune article linked to states that the Short-Term Rental Alliance of San Diego (STRASD) paid for the study as well – I am part of STRASD and our organization paid for a not a cent of the study, just to clarify.)  With vested parties paying for the study this may be true although NUSIPR does studies on a number of topics in San Diego and is a credible research organiation.  Regardless of intent or paying party, this study remains the most comprehensive, and I believe only, one on the subject in San Diego.

In the study a few figures stick out:

  • Hotels have increased their occupancy rate and nightly room rate consistently over the past 5 years despite the growth in short-term rentals.  Occupancy increased from 68.4% in 2010 to 76.7% in 2015. Over the same period revenue per available room, a figure that measures both occupancy rates and average room rates, increased from $84.72 in 2010 to $103.52 in 2014.  It would seem short-term rentals are not hurting hotel business and are a complementary offering, at least to date.

    airbnb - hotel rates in sd
    Image from NUSIPR study, click for link.
  • Total short-term rentals now comprise a maximum of approx. 1.1% of total housing stock in San Diego.  This is based on a total of 6,116 short-term rentals per the NUSIPR study and a total housing stock of 518,300 per the American Community Survey 5-year estimate (2010-2014) for housing information, Table DP04.  This estimate treats all short-term rentals as whole unit rentals although many are a room in a unit or the use of a primary home on a part-time basis.  I’ m using the total number to be conservative and over-estimate the total impact on housing stock.  6,000 units is not a small number, although it is much smaller than the number of vacant units in San Diego.  Per the same ACS study there are 39,221 vacant units in San Diego – approx. 1.6% of homeowner occupied units and 4.2% of rental units.  A similar question could be posed regarding vacation homes or second homes owned in San Diego, I do not know the figure for such property holdings here.
  • Short-term rentals are blunting the ability of hotels to increase room rates during high-demand special events.  The Economist recently wrote about the impact of increased short-term rental supply around large special events like the Olympics or the annual Berkshire Hathaway shareholder meeting.  Traditionally, hotels have been able to greatly increase rates during high-demand events but more recently the higher prices have incentivized property owners to add to the existing short-term rental stock.  In San Diego this can be seen in the increase of short-term rentals around Comic-Con.  Interestingly, as reported by Voice of San Diego, “It turns out getting Comic-Con to stay in town for 2017 and 2018 is more about discounted hotel rooms than the size of San Diego’s Convention Center.”  Spending millions of dollars to expand or renovate the Convention Center gets much press and attention when perhaps we could secure the future of Comic-Con by simply encouraging local homeowners to house attendees or take a full paid vacation to Hawaii for the weekend.
An Airbnb listing in Barrio Logan.
An Airbnb listing in Barrio Logan.
  • Short-term rentals keep more money in local pockets. Per the same Economist article, “more room rentals should also mean that more money flows directly to residents every time small cities stage a tourist-magnet event. (Airbnb passes on around 85% of guests’ total payments to hosts, whereas hotels spend just 30-35% on labour.)”  The NUSIPR study put the total rental revenue to property owners at $110M and the total economic impact, including government tax receipts, restaurant spending, etc. at $285M.  If spread evenly across the total number of short-term rentals that means an economic impact of $46,599 per short-term rental property in San Diego, with $17,985 going to the property owner in direct rental payments.
  • San Diego is an expensive place to live. This is due to many factors and not a new phenomenon.  For example, in the Morena Boulevard area a recent plan to add units (read: increase population density in a manner consistent with housing patterns in an urban portion of a major city rather than suburban land use) would have added 4,800 units to a blighted area near I-5.  It was widely panned by local residents and scrapped.  San Diego does not have to build more housing at all, but if we do not it is not logical or reasonable to think that housing prices will not increase.  San Diego is a very desirable place to live and priced at a discount to other California hubs like San Francisco.  Static housing stock and increased demand and/or population will yield increasing housing prices and rent costs.  Short-term rentals with a total of 6,116 units in the city pale in comparison to the anti-build / anti-growth / anti-height / anti-density sentiment common in many areas of the city.
  • Relative to income levels, the costs of rent in San Diego have fluctuated both up and down in recent years.  Per an October 2015 article in the Union-Tribune 55% of San Diego renters are “cost-burdened”, spending a third or more of income on rent.  As shown in the image below, this ratio is about the same as in 2007 – before Airbnb existed and prior to the rapid growth in the number of short-term rentals. The ratio has been both higher and lower than the 2015 figure in recent years.  Interesting sidenote from the article: “In Miami, 66 percent of residents are paying a third or more on rent. In Detroit, because of low incomes, more than 65 percent of renters are cost-burdened”.  Both low income levels and high housing prices can result in a high percentage of income going to rent.
    Data and image from Union-Tribune (click for full article)
    Data and image from Union-Tribune (click for full article)

    There is a finite demand for short-term rentals.  Although short-term rentals are not new in San Diego and have existed for many decades in some areas of the city – particularly beach areas like Mission Beach – the recent growth has been fueled by new techonology and trends.  Ubiquitous smart phones, social media and the internet connecting the world market, and increasing global travel are all major causes.  At the onset of a new trend growth can be explosive but will decline over time.  At some point the supply will meet, or exceed, demand.  It is hard to predict what the total demand for short-term rentals is.  Per the NUSIPR study, short-term rental room nights totaled 456,000 in 2014-15 compared to 11,300,000 total room nights for hotels and motels.  Short-term rentals were an estimated 4% of the hotel total night stays.  Perhaps this ratio could reach 10%, maybe even 25% – it’s hard to predict but seems unlikely that short-term rentals would entirely replace hotels, or even rise to an equivalent level.  My best estimate is we are relatively close to meeting demand – 5% or perhaps 10% of total hotel nights would be my estimate.  This is based on discussions with other short-term rental owners / hosts and I have not found a study or formal estimate of this.  Especially over the past few months I’ve spoken to many hosts / owners that have seen a large drop in occupancy and/or reduced nightly rates.  This is partly due to the slower winter season but likely also due to increased competition as the number of short-term rental units have increased.  Given the low vacancy rate and rising rent levels for rental units in San Diego and the reduced labor hours, taxes, and hassle to operate a long-term rental vs. a short-term rental I would not be surprised to see some short-term rentals being converted to long-term rentals.  It may not be a trend today, but whenever the demand is met (or approached) each unit entering the short-term rental pool will reduce the revenue per unit for the short-term rental market.

The future for short-term rentals in San Diego is cloudy and could go any number of ways – we’ll have to wait and see.  To date, short-term rentals have provided a meaningful economic opportunity for many property owners in San Diego.  For the reasons above and many others, I hope to see this opportunity continued.

At the same time, non-economic factors remain important and seem the cause of the bulk of the disagreements between those supporting and opposing short-term rentals.  The OB Rag has written most about this topic and I think best presents the major issue dividing people – that of community character.  Community character is hard to define and it is difficult to measure social impacts or make comparative examples.  That doesn’t make it unimportant – the “feel”, personality, or culture of a place is often the most enduring and compelling attribute it can possess.  I’m sure that qualitative factors will continue to play an important role and I hope the prominent one.  Economically and quantitively I see short-term rentals as very much to the good of individuals (hosts and guests / owners and customers) and the region at large.  The impact of short-term rentals on our communities is less clear and should be well considered.

Temescal Creek – 374 Acres Of Beautiful San Diego Back Country

I was very happy to be included in an invitation to view and explore a new acquisition by the San Diego River Park Foundation just outside of Julian, California on Saturday, December 5.  Below are a number of photos of the 374 acres that the Foundation is in the process of buying from the current owners.  This acreage surrounds Temescal Creek, a coldwater creek that is part of the San Diego River watershed.  This acquisition will ensure the land is preserved for future generations and remains a wildlife corridor preserve for mountain lions, deer, turkey, hawks, and many other animals.  Executive Director Rob Hutsel noted that the vision is for this space to be open to the public and to host youth for overnight trips to explore and participate in science-focused lessons in nature.

Each September I organize a weekend bicycle ride, Ride For The River Park, from Ocean Beach to Julian and back to promote and support the idea of a continuous path for the entirety of the San Diego River.  2016 will be the 5th year for the event and if you’d like to join we’d love to have you.  My goal is to see this path be a reality by the 10th year of the event – by September of 2021.  The idea and the work is not mine, it is that of the River Park Foundation, I simply want to support and spur on the work they are doing.  At the event on Saturday, a mile marker post was debuted showing the start / end of the San Diego River Trail.  What a beautiful sight to see.

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Much work to be done, but a goal to strive towards.

In the same vein of supporting the vision of a full River Trail, 2015 is the first year for which I am donating 1% of my Airbnb income to charitable causes.  For this year that money is going to the San Diego River Park Foundation.  I got the idea from the 1% For the Planet movement, in which “Members donate at least 1% of sales to nonprofit partners we’ve vetted for participation in the 1% for the Planet network.”  I’m just a single person so after further research it doesn’t seem the 1% For the Planet program is a good fit for my giving.

Instead, I’m working with Airbnb for a roll-out to San Diego of their Charity Donation Tool which currently allows hosts in Portland to opt-in to donate a portion of their revenue to a local charity.  I’m hopeful that this will soon be an option for hosts in San Diego to automatically and regularly support great local charities like the River Park Foundation.  If you’re a host in San Diego and would like to help make this a reality please contact me.  In the meantime, I hope you’ll consider a voluntarily donation to the charity of your choice from your Airbnb (or VRBO or other platform) earnings.

The acreage surrounding Temescal Creek features many mature oaks, ravines, and all sorts of native plants thriving.  A beautiful, peaceful place to enjoy and savor the natural splendor of San Diego and a reminder that without support it will not endure.  It takes the efforts of many to protect and preserve our natural bounty.

[The Temescal Creek property is located at 5030 Eagle Peak Road, Julian, CA 92036 but is not currently open to the public.]

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San Diego County Spends $36M To Give Employees Free Parking

The San Diego County Board of Supervisors recently cut the ribbon to officially open a new $36,000,000 parking garage at Cedar and Kettner in Little Italy.  The garage has 640 spaces, built at a cost of $56,250 per space.  The garage will primarily be used for free parking for county employees and will also be available for paid public parking use on nights and weekends.

Here’s a laudatory video from the ribbon-cutting:

Supervisor Diane Jacobs noted “this truly is the best looking parking garage in the entire region and the most needed parking garage”.  The “stalls are a little wider than you’ll find in most commercial parking structures”.

The Little Italy neighborhood is home to many of San Diego’s most highly regarded restaurants including Bracero, Buon Appetito, Monello, Ironside, Davanti Enoteca, Juniper and Ivy, and many others.  Most of the restaurants have little, or zero, private parking provided.  The area has also seen tremendous growth in the number of residential units in recent years.  The result has been a thriving neighborhood that is among the most vibrant places in the entire county.  A large part of the enjoyment of Little Italy stems from the many people and attractive buildings present – I doubt India Street would be improved by the addition of a massive parking garage.  In recent years the need for parking of unused vehicles has been further reduced due to the explosive growth of taxi-hailing apps like Lyft and Uber.

The new county parking garage is the second portion of the “Waterfront Park project” that created a 12-acre park across Harbor Drive from San Diego Bay, replacing 8 acres of surface level parking lots adjacent the County Administration Building.  That project cost $49.4 million dollars after an initial project cost estimate of $44.2M with $19.7M for building the park, $18.5M for building underground parking, and $6M for design and administration costs.

In total, between the two projects $54.5M was spent on moving parking spaces and $18.5M was spent on the actual park that people enjoy.  This is excluding the $5.2M of difference from the original estimate to the actual construction costs and the $6M of design and administration costs.  Those cost breakdowns yield a result of 75% of funds used to move spots for empty cars and 25% of funds used to build a park.  For purposes of this article let’s assume the admin and cost over-run figures split on the same lines.  The vast majority of the funds used for these joint projects was for moving parking spaces, not for building a park.

locations
This is how far the parking spots moved, for more than $50 million.
before pic
Here is the before photo – this is how San Diego uses prime bayfront real estate. Shake your head.

This project was sold as a project to build a great park – it would seem fitting if most of the funds were actually used to build a great park.  Instead we spent 75% of the funds to relocate parking spaces, not creating new spaces but moving existing parking spaces.  251 spaces moved approximately 15 feet, they were undergrounded in the same location as the previous surface level lots.

To boot, the county demolished an historic building in Little Italy to make room for the large new parking garage.  The Star Builders Supply Company building was built in 1911 and added to the county list of historic buildings in 1991.  County supervisors unanimously voted to demolish the building.  It’s now gone but you can enjoy the below video of the beautiful piece of San Diego history that has now been erased like so many others.

From the total 891 parking spots that were moved, 71.8% were moved about 1-2 blocks east from their previous location.  28.2% were moved about 15 feet underground.  To accomplish this feat, county taxpayers spent $54.5 million dollars.  As enjoyable as the the new park is and a huge improvement to the ugly surface parking lots perhaps it would have been better to save that money or spend it on a better use.  To move so many parked cars such a small distance seems a pyrrhic victory.  A small consolation might be that the total number of parking spots went from 1,200 in the surface lots to 891 in the new underground and multi-level parking garages, a net reduction of 25.75%.  We could have spent even more money if we moved all of them!  A legitimate question would be if the previous 1,200 spots or the new 891 spots are actually needed or not. But as so often happens when it comes to accommodating automobiles, too much is never enough and no cost is too high.  More lanes on I-5 for $6 billion? Of course!  More parking lots in Balboa Park? Of course!  Analysis of the actual demand and cost comes far behind the populist appeal of free goodies for motor vehicles.  The environmental impacts of our car culture is even further down the priority list than our dollars.

Enjoy the Waterfront Park (aka Parking Lot Relocation Park); it’s a great place.  Building beautiful things is something a great city does.  I’m proud that San Diego built it.  In total, though, this project was a massive use of taxpayer dollars to move parking spots a small distance – not to build a great public park.  They are distinct items and taxpayers did not need to spend tens of millions to provide a tax-free employment perk that most employees, government-employed or not, do not enjoy.  We also did not need to use prime real estate to do so.  Taxpayers must demand better stewardship of public funds and assets.

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Many thanks to Streetsblog, San Diego Free Press, Bike San Diego, and Voice of San Diego Morning Report for sharing this article!

Good Reading – The New Rules of Real Estate

I recently read Zillow Talk: The New Rules of Real Estate by Spencer Rascoff and Stan Humphries.  It’s a book in the “Zillow Talk” series and the authors are the CEO and Chief Economist, respectively, at Zillow, an online platform for housing data.  Zillow and Redfin are the biggest players in the space for MLS listings accessible to the public.

Austin is a really cool town and they have houses there! [Zillow screenshot]
Austin is a really cool town and they have houses there! [Zillow screenshot]
The book is a quick read – 258 pages – but is entertaining and has some interesting anecdotes and insights.  If you’re interested in real estate or work in the industry I’d definitely recommend checking it out.  Some of the items I most enjoyed learning about were:

  • Breakeven Horizon – A tool that Zillow has put together to estimate the number of years it would take for renting a residence vs. buying to even out when considering tax benefits, expected appreciation of real estate, etc.  In San Diego County the breakeven is 3.8 years so if you expected to live here for 5 years it would probably make more sense to buy rather than rent.  At the end of 2014 that national breakeven horizon was 1.9 years, there’s a lot of variation among markets.  Interesting tool to check out if you’re considering whether to buy or rent.
  • Words Matter – The book takes a look at how words affect home values in a variety of ways.  Which street suffixes are most valuable? Way, Place, and Court.  Which are least valuable? Street, Road, and Avenue.  The less valuable suffixes are the more common ones.  The book also looks at named streets vs. numbered streets (named streets are much more valuable – 33.5% more valuable in Dallas!).  Which words to use in a listing  to maximize price is also discussed – granite and stainless are great to use but cosmetic and TLC should be avoided.  More words in a listing also help quite a bit.
  • Timing (and Pricing) Matters Too – When is the best or worst time to sell or buy a home? It varies during the year, and in different ways in different markets.  December is a great time to buy generally and March/April is a great time to sell.  Having your listing price end in a 9 is a great idea but ending in a 4 is a bad one.  8 is also a great ending digit if you’re in an area with lots of Chinese residents.

Fun read and lots of interesting trivia and tidbits to absorb.  Well worth a couple of hours if you’re buying, selling, or potentially doing either in the future.  Enjoy!

The book is better than my photo skills. :)
The book is better than my photo skills. 🙂