Many people tout the financial benefits of home-sharing platforms like AirBnB and VRBO. But can renting out your home or a room in your home as a short-term rental in San Diego really pay off?

Short-term rentals have become a huge industry in San Diego, but they’ve also caused a lot of controversy. Many neighborhood groups object to short-term rentals in residential neighborhoods, and there remain a lot of legal and tax-related questions about short-term rentals.

Debate continues to rage among lawmakers, neighborhood groups, and the short-term rental industry over where, and whether, short-term rentals should be allowed in San Diego. Recently, San Diego City Attorney Mara Elliott released a memo stating that because short-term rentals are specifically defined or listed in the city code, they are not in fact allowed. However, the mayor’s office has released a statement saying that they will be waiting for the City Council to approve new regulations for whole-home and home-sharing rental options; these regulations and enforcement proposals are expected to be submitted to the City Council by early Fall 2017.

Taxes are another factor to consider. Earnings from AirBnB, VRBO, and other home-sharing platforms are taxable as income, so if you rent out your home or part of your home, you’ll need to pay business taxes, as well as San Diego’s Transient tax (which charges a tax charged for anyone who rents a home or portion of a home for less than one month). While AirBnB began collecting lodging taxes on behalf of its hosts in California in 2015, many homeowners who listed their homes on home-sharing platforms prior to that year have found themselves owing back taxes to the City of San Diego, to the tune of thousands of dollars. The City is continuing to audit short-term rental landlords and send out notices of delinquent tax payments; sometimes these landlords are located through complaints filed by their neighbors and sometimes the City uses short-term rental websites themselves to track down landlords who may not have filed.

In short – it’s complicated. San Diego is a prime vacation destination, so it is ripe for homeowners looking to make a little extra cash from tourists. But potential AirBnB and VRBO landlords need to be careful. If you’re thinking about entering the short-term rental market, it’s better to err on the side of caution. I recommend that you contact the Office of the City Treasurer or the Development Services Department to discuss zoning in your neighborhood, and if allowed, purchase a lodging permit. And condo owners should check to see if their HOA allows short term rentals (many do not).