The Hidden Cost of Vacation Rentals: Why San Diego County is Missing Out on $10 Million Annually
San Diego is a premier destination for tourists, drawing millions of visitors each year to our beautiful beaches, vibrant downtown, and world class attractions. With this influx of visitors comes a booming short term rental market. However, a recent report from the San Diego Union Tribune highlights a significant issue: hundreds of vacation rental owners are failing to pay their required taxes, costing San Diego County an estimated $10 million every year . This missing revenue represents the county's single largest source of uncollected tax funds, prompting a closer look at enforcement and compliance.
The tax in question is the Transient Occupancy Tax, commonly known as TOT. In San Diego County, the TOT rate is set at 8 percent of the rental amount, which must be collected by the property operator from the guest and remitted quarterly to the county . While many property owners operating within the City of San Diego are aware of the city's 10.5 percent TOT, those operating in unincorporated areas of the county, such as Fallbrook, Bonsall, and Rainbow, have sometimes claimed ignorance of the county level requirements . This lack of compliance has led the county to initiate a crackdown on unregistered short term rentals, utilizing data from platforms like Airbnb and VRBO to identify non compliant properties.
The implications of this $10 million shortfall are substantial, especially as local governments grapple with budget deficits. The City of San Diego, for instance, is currently facing a $120 million structural budget deficit . Uncollected taxes mean less funding for essential public services, including police, fire departments, libraries, and parks. In response to the broader housing and budget crises, voters will soon decide on Measure A, a vacant homes tax aimed at generating revenue and encouraging property owners to rent out empty homes . Meanwhile, the city has already implemented new regulations that are expected to reduce the volume of short term rentals by 30 percent .
For buyers and sellers in the San Diego real estate market, these developments signal a shifting landscape for investment properties. If you are considering purchasing a property for use as a short term rental, it is absolutely critical to factor in all local tax obligations, including both city and county TOT, into your financial projections. Failing to do so can result in hefty penalties and interest on back taxes. For current owners, ensuring full compliance is the best way to protect your investment and avoid the county's increasing enforcement efforts. As the regulatory environment tightens, working with a knowledgeable real estate professional can help you navigate the complexities of property ownership and maximize your returns legally and sustainably.
Based on the San Diego Union Tribune article, read the full story here: https://www.sandiegouniontribune.com/2026/05/31/hundreds-of-vacation-rental-owners-arent-paying-their-taxes-costing-san-diego-county-10m-every-year/
References
[1] San Diego Union Tribune: Hundreds of vacation rental owners aren't paying their taxes
[2] San Diego County Treasurer Tax Collector: Transient Occupancy Tax
[3] Village News: San Diego County cracks down on short term rentals
[4] Times of San Diego: San Diego budget deficit
[5] Yahoo News: Thousands of vacant homes could soon trigger a hefty new tax