San Luis Obispo County Report on Short-Term Vacation Rentals

Read more on San Luis Obispo County’s Report on Short-Term Vacation Rentals

On average, around two million tourists visit the San Luis Obispo County each quarter, generating an annual economic impact of $2.15 billion. The county’s Leisure and Hospitality industry 3 directly employs around one in six workers (17%), which is around 50% higher than the statewide figure. Short-term rentals are an increasingly popular choice of accommodation for travelers throughout the United States. With the growth of online platforms such as Airbnb and Vrbo, visitors have an enormous range of accommodations to choose from. However, communities are grappling with the growth of these platforms and are increasingly focused on how best to appropriately incorporate STR properties into their existing regulatory and fiscal framework, and to better understand the role they play in local economies and housing markets.

• Like much of California, SLO CAL has seen limited growth in its housing stock over the last decade, adding just 7,796 units from 2013 to 2023, a 6.6% increase, slightly below the state average.

• Most housing units in San Luis Obispo County are single-family, with a higher share of single-family housing compared to other parts of California.

• In a community where the median single-family home costs more than $800,000, the relative lack of multi-family housing limits the ability of lowincome workers to live in the community.

• Like many parts of California, SLO CAL is in the midst of a housing accessibility and affordability crisis.

• In the first quarter of 2023, just 12% of households could afford a singlefamily home in SLO CAL, at current market prices.

• High housing costs mean that lower-income households have to devote a significant portion of their incomes to housing, move further away from job centers, or move to lower-cost areas of the state or country.

• In San Luis Obispo County, 92% of households earning less than $20,000 are rent burdened, meaning they spend over 30% of their household income on housing.

• It is widely agreed that limited housing supply in the face of strong demand is the primary driver of high housing costs, and that to solve the housing affordability crisis, more housing is required

• For STRs to affect housing affordability in a community, two things should hold true. First, STR activity should reduce the supply of housing in a community. And second, STR activity should specifically remove lowerincome housing from the market.

• Across the county, around 2.7% of the housing stock is devoted to STR activity. Active listings account for around 2% of the total housing stock in SLO CAL.

• Across Grover Beach, Paso Robles, the City of San Luis Obispo, and the unincorporated areas of the county2 , more than one in five listings (22.3%) are non-compliant.

• It is unlikely that all housing currently devoted to STR activity would be converted to long-term rentals, and therefore increase local housing supply, in the absence of STR activity.

• Many STR properties in SLO CAL are second homes. Removing all STR activity, therefore, would not necessarily lead to a 2-3% increase in housing supply since it is likely that many of these units would remain vacation homes for property owners.

• Based on the best available research, converting all short-term rental properties in the community to long-term rentals would effectively reduce rents by less than 1%. This changes very little if non-compliant properties are included.

• STR properties across SLO CAL are typically larger than those in which lowerincome households reside. On average, STR properties have 3.4 bedrooms, while lower-income households typically live in much smaller properties.

• STR properties in SLO CAL have an average value of more than $1.2 million, far beyond the reach of lower-income households.

• Overall, STR activity is occurring in the wealthiest, least affordable parts of the community, home to few low-income households.

• If STR properties were converted to long-term rentals, based on prevailing market prices, households earning $100,000 would only be able to afford 5% of the properties listed as STRs.

• If local leaders are seeking to increase housing supply in their communities, there are more direct ways to achieve this by zoning for more housing.

Tourism is an important industry to SLO CAL’s economy. This is borne out by a number of different metrics. The county’s Leisure and Hospitality industry5 directly employs around one in six workers (17%). In the State of California, the industry employs around 11% of the total workforce. With respect to real GDP, the industry is similarly around 50% more important to the county’s economic output than it is to the state’s economy. When the impact of leisure and hospitality is extended to include tourism’s total impact, tourism accounts for nearly 10% of countywide GDP. The following analysis reveals the health of the tourism industry in SLO CAL.

In 2023, 12.9% of homes were vacant in San Luis Obispo County, significantly higher than the 6.6% vacancy rate in California. However, most vacant properties in the county are second homes. In 2021, second homes accounted for 65.7% of vacant units in San Luis Obispo County, as compared to just 32.1% in California. Removing second homes from the vacancy rate tally brings San Luis Obispo County in line with California. Second homes account for 9.0% of SLO CAL’s total housing stock, compared to just 2.4% in California. San Luis Obispo County also has a larger share of housing stock devoted to second homes than its Central Coast neighbors: Monterey (4.2%), Santa Cruz (3.3%), Ventura (1.9%) and Santa Barbara (1.9%). While the pandemic increased demand for second homes in 2021, the high proportion of second homes in San Luis Obispo County is not a recent development.