Tax Increase on Lodging is About to Kick In; Revenues Will be Used for City Improvements

By Frank Sabatini Jr.

It seems like this occurred in the distant past amid these rapidly changing times, but in 2020 San Diego voters approved a tax increase on hotel rooms and short-term rental properties through a ballot initiative listed as Measure C. Known otherwise as the Transient Occupancy Tax (TOT), more than 65 percent of voters favored it. But it has taken a while to implement because of various legal challenges against the measure that ended up in local and state courts.

It now appears cleared for takeoff, which means it’s time to inform your out-of-town guests who pass up your spare room (or couch) that starting May 1 they will pay a bit more for commercial lodging here.

The additional amount of tax visitors pay will depend on which of the three tax zones they stay. The current tax across the board is 10.5 percent.

Properties closest to the San Diego Convention Center (Zone 3) will be taxed the highest on the new scale, at 13.75 percent. Those further away will pay less—12.75 percent in Zone 2; and 11.75 percent in Zone 1.

The City of San Diego estimates that $1.04 billion in additional revenue will be generated in the first 10 years of implementation. In the first five years, 59 percent of those revenues are earmarked for Convention Center improvements and operations; and 41 percent will go toward shelters, programs, and permanent housing solutions for the homeless.

Over the next five-year period, the allocations will be similar, but with 10 percent of the revenues carved out for street repairs and street-infrastructure improvements.

The City Treasurer has already begun notifying lodging operators, property management companies, and online hosting platforms of the tax increase.