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Krystle Moore
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STRO License - tier 3 applications

Krystle Moore
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  • San Diego, USA
Posted Jan 3 2023, 11:27

Has anyone not applied for their Tier 3 license? Just before the holidays, there were still over 2,000 licenses available. I am shocked - based on the number of TOT certificates, I thought for sure that there would be a lottery though not enough people applied and we got all 4 of our licenses. There are still licenses if you are interested - I would hurry before they're gone!

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Melissa Bovee
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Melissa Bovee
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Replied Jan 3 2023, 11:55

I was also surprised that everyone who applied got one! I wonder if some people don't think they will be able to enforce the ordinance or somehow missed the requirement? What are your thoughts on the requirement that only one licesne is issued for each natural person?  My family has been operating real estate in San Diego as a primary income business for 3 generations and it seems odd that a real estate business would have to only operate as many STRs as they have employees who could apply for the license. I'm in Pacific Beach where tourism is huge. 

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John Underwood
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John Underwood
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Replied Jan 3 2023, 14:19

This for San Diego?

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Bruce Woodruff
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Bruce Woodruff
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Replied Jan 3 2023, 15:39

What is a Tier 3 license?

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Melissa Bovee
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Melissa Bovee
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Replied Jan 3 2023, 15:49

This is San Diego specific.  There is a new short term rental ordinance that requires a license to operate.  There is a cap on licenses.  Everyone thought that applications for a license would exceed the cap and the licenses would be give via lottery.  Surprisingly, that is not the case. 

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Bruce Woodruff
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Replied Jan 3 2023, 15:51

Throughout all of San Diego?

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Dan Heuschele
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Dan Heuschele
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Replied Jan 3 2023, 16:04
Quote from @Bruce Woodruff:

What is a Tier 3 license?

Tier 3 is San Diego, but excludes Mission Beach, and is non-owner occupied STR permit. Basically tier 3 and tier 4 on non-owner occupied high occupancy strs (not restricted in number of days to be rented in a year). Tier 3 had a 1% quota.

Note Tier 4 (Mission Beach) hit its limit. Tier 4 had a 30% quota. We have a Mission Beach STR that has operated 23 years that did not get a permit. It had maximum lottery entries (Max entries was for all STRs that were over 5 years in operation and paid the occupancy taxes (and could provide proof to the city) with no significant complaints).

Also the city left it to the individual to show that they had tenants and paid the required tax.  You would think the city would know this.  I recently switched PMs but was able to obtain records going back 7 years (only 5 was needed).  What if I had switched PMs a year ago (or PM folded, etc.) and I could not obtain tenant records for the 5 years in spite of having paid the taxes.  The city should have had this responsibility.

Prior to not getting one of our units selected in the STR lottery, I had contributed to a legal fund to challenge the quota. It seems very arbitrary that a STR that has operated every year since 1999 and owned by same family and paid all its occupancy taxes could be shut down due to getting unlucky in a lottery. I will be looking at options. I fear Mission Beach may not be the best Mid-term rental market (a lot of people go there for short vacations, bridal and bachelor parties, etc). Not many people want to live in such a small unit at that rent point for long (prior to changing PMs the units averaged nearly $7.5K/month rent each for little 2 BR units (maybe 600')). Can you imagine someone staying 30+ days wanting to rent 600' at anywhere near $7.5K/month? I cannot. I suspect my rent point will likely decline by at least $2K/month as a MTR. We will see how this plays out, but I am not real optimistic.

Lesson, STRs can be regulated away. This includes STRs that have existed 23 years and owned by one family for those 23 years and have paid the occupancy taxes (and provided proof to the city for the STR lottery of paying the last 5 years).

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Dan Heuschele
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Dan Heuschele
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Replied Jan 3 2023, 16:07
Quote from @Bruce Woodruff:

Throughout all of San Diego?


 City of San Diego only.  Not county wide.  City goes further than most may recognize.  For example, Rancho Bernardo is city of San Diego even though it is inland North County.

Mission Beach had higher quota, but hit its quota.  One of our two Mission Beach units that have been STRs since 1999 did not get selected in the lottery.

Still evaluating options.  Goes into effect in May.

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Bruce Woodruff
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Bruce Woodruff
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Replied Jan 3 2023, 17:22

@Dan Heuschele Has the City Council gone completely to the left? When I left they were still 50/50 IIRC.....

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Dan Heuschele
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Dan Heuschele
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Replied Jan 3 2023, 18:04
Quote from @Bruce Woodruff:

@Dan Heuschele Has the City Council gone completely to the left? When I left they were still 50/50 IIRC.....

 City council is left.  County board of supervisors is 3-2 democrat, but the republicans are moderates and the democrats are left.  One of the 2 republicans is from my district.  In addition, the 3 left board members can carry the vote.  

The county Covid eviction moratorium was the most extreme in the country.  It was so extreme that multiple cities in the county came out against it (including my city). I believe vote was 3-1 (cannot remember why total was not 5 but the extra vote could not have changed the outcome).  Did you ever hear how extreme?  Evictions were only allowed for safety items.  No rent payments, cannot evict.  Bring in 20 of their friends to live there, could not evict.  Damage the unit, could not evict.  Bring a zoo into non-pet unit, cannot evict.  Smoke in non-smoking unit, could not evict.

For a long time San Diego was the most moderate of the CA big cities.  It may still be the case (only because the other CA big cities are even further left), but San Diego is quite liberal.

I am a registered democrat.  Socially liberal, financially conservative and believe in free market, Moderate on guns (I grew up with guns in glove box, hanging over the chair, and with Dad and step-mom both having conceal carry rights and always armed but I advocate for background checks to be able to own guns).  At the national level I vote democrat. At the local level (state, county, city), my voting is more mixed.  It is because I believe locally we are further left than I desire especially when it comes to interfering with the free market.

I do not want to provide everyone who wants to live their own place to live.  Not everyone can afford to live here and those at the lower wage scale need to make sacrifices to live in such a great place.  I like the option of low density places to live (my lot is over 1 acre, my Dad's lot is over 8 acres) and high density places to live (my Mom is from Berlin).  I think the dencity decision is best made at the lowest local level.

The state is very pro adding housing. They have eliminated single family zoning state wide. The San Diego city has done worse. There are various programs for placing incredible number of units on what previously was a SFR lot. You can end up living next to 6 units crammed into a small lot that was originally zoned for a SFH.

The voters of San Diego city (county and other cities did not get to vote, so I did not get to vote) voted for Midway district rezoning (very close vote).  It was the way to pay for a new Sports Arena.  The zoning raises the height limit from 30' to 100' (as well as other zoning changes).  4 of my units are not far outside the Midway district (they are in Pt Loma (Pt Loma Heights), but barely).  My Pt Loma units currently have a great view (Sea World, Mission Valley, etc).  I question for how long as a 100' structure placed in the wrong area could destroy the view.

I have often thought as a property owner in the city that I should get a say, but not if you do not live there (I have 7 units in the city of San Diego, but do not get to vote on city items).

Short answer is the city is consistently going further left and is a lot more left than even 4 or 5 years ago.

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Bruce Woodruff
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Replied Jan 3 2023, 18:21

@Dan Heuschele Damn, so sad. I lived there for 40 years and SD was a place of sanity regardless of where the L-R line settled. Too bad. Hope you continue to do well with your investments, my friend....

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Dan Heuschele
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Dan Heuschele
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Replied Jan 3 2023, 18:51
Quote from @Bruce Woodruff:

@Dan Heuschele Damn, so sad. I lived there for 40 years and SD was a place of sanity regardless of where the L-R line settled. Too bad. Hope you continue to do well with your investments, my friend....


 Maybe I am just getting old.  

There is an antiwork Reddit group.  They compared LL to sex workers with the LL being thought of as the worse of the two (at least the sex workers work for the money).  I cannot understand their mindset.  They seem to expect free housing.  They do not have any clue as to how expensive it is to build housing and that if it were not for LL there would be no way for them to have housing.  They do not understand that most RE purchases in many/most markets start with negative cash flow.  They do not understand how much effort goes into being a LL.  Basically, they come across as uneducated, entitled, and lazy (which I guess is why they are in a group called antiwork).

The world consistently seems to move left.  Socially and environmentally I consider this a positive. Intrusion into free market is scarry.  Financially, what is going to happen when a large percentage of the population does not desire to work hard?   Can the upper 0.5% cover for everyone?  Maybe top 1%?  Maybe top 2%?  if enough people are underworking, it will take a lot more than the top 2% to allow the non-productive/under productive to live a great life.

Maybe technology can save things, but in the absence of technology, I fear the US falling from highest GDP over the next generation.  I would love tech to allow workers to reduce hours, but the antiwork group does not desire to work at all. Hopefully this group is a small percentage of the population.

I worked tech for years and hope it can overcome the lack of work ethic that seems to be increasing as well as the environmental issues.

We are possibly getting too political for RE forum.

Have a happy new year.

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Kenny Simpson
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Kenny Simpson
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Replied Jan 4 2023, 08:37

lucky we got all of ours, very shocked by the outcome and will be interesting to see how this affects pricing and availability once this take place. No one never really knew the real # of STR, 12k, 16k were thrown around but clearly those must of been way off. 35 Million people visit SD a year, that number will only grow since we leave in such an amazing place :)

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Twana Rasoul
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Twana Rasoul
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Replied Jan 5 2023, 12:21

@Krystle Moore I applied for a license thinking I wouldn't get it here in San Diego (as we all know now, everyone who applied got them). I planned going from a medium term unit to short term and the license fee is $1,000 (due by Jan 6) and I likely won't be paying it and going that route as I personally won't make much more on the STR over current MTR rents to make it worthwhile for me.

However, this all didn't pan out the way the city thought and they  going to have roughly $2M less in revenue now  so it will be interesting to see how they operate moving forward with that much less revenue.  

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Nicholas Coulter
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Nicholas Coulter
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Replied Jan 5 2023, 19:30

@Krystle Moore just did and got it!