A listing recently posted online advertises a 200-square-foot studio for $1,050 a month. The unit is located in what appears to be a backyard shed behind a home in the city's North Park neighborhood.
"I was amazed it was going for that much money," neighborhood resident Joe Moreno told KGTV. "Does it have plumbing? I mean, does it have facilities?"
The area is considered one of San Diego's most walkable neighborhoods. J.D. Management, which is renting the unit, told the news station the rent is $300 less than what the last tenant paid.
That renter paid $1,100 a month for two years.
The company said it doesn't expect to have trouble finding takers.
"Maybe it is high for what it is offered at, but the reality is that the square footage and the location is exactly what this market needs," Alan Nevin, director of research at the Xpera group, told the outlet.
The unit comes with plumbing, a kitchen with a small refrigerator and stove, laminate flooring and air-conditioning.
It doesn't include a parking space.
Applicants must earn 2.5 times the rent and have a credit score of at least 650.