What is new with short-term rentals in Palm Springs, California?
The City of Palm Springs, California, has recently implemented new short-term rentals (STRs) guidelines. One of the most significant changes is the introduction of a neighborhood percentage cap. This cap limits the number of STRs that can be located in a given neighborhood to 20%.
The purpose of the neighborhood percentage cap is to protect the character of residential neighborhoods and to prevent STRs from becoming too prevalent. The city council believes that the cap will help to ensure that STRs are compatible with the surrounding homes and businesses.
The neighborhood percentage cap applies to all STRs, including entire homes and individual rooms. It also applies to both new and existing STRs. However, there are a few exceptions to the cap. For example, it does not apply to hotels, rehabilitation homes, or convalescent homes.
The City of Palm Springs Department of Special Program Compliance enforces the neighborhood percentage cap. If an STR owner violates the cap, they may be fined or penalized.
How the New Neighborhood Percentage Cap Works
The neighborhood percentage cap is calculated based on the number of residential units in a given neighborhood. The city council has divided the city into neighborhoods, and each neighborhood has a different number of residential units.
To determine the number of STRs allowed in a given neighborhood, the city council multiplies the number of residential units in the neighborhood by 0.20. This number represents the maximum number of STRs that can be located in the neighborhood.
For example, suppose a neighborhood has 100 residential units. In that case, the maximum number of STRs that can be located in the neighborhood is 20. If there are already 20 STRs located in the neighborhood, no new STRs will be allowed because it will be over the 20% rental cap.
If you are interested in applying for a Vacation Rental Registration Certificate and the property is located in a Neighborhood with a 20% or higher Vacation Rental to residential household percentage, your application will be returned. You may request to be placed on a waitlist for the respective neighborhood by completing the Vacation Rental Waiting List Application.
In addition to the neighborhood percentage cap
- The City of Palm Springs has also implemented other new STR regulations, such as a limit of 26 rental contracts per year for all new STRs. See below for information on existing STR owners.
- A new “Junior Permit” is available. The Junior Permit lets homeowners rent their home as a short-term rental six times per year. This is not regulated by the 20% neighborhood cap. For more information, please review the link at the bottom of the page.
Changes for Existing Short-Term Rental Owners
The neighborhood percentage cap applies to both new and existing STRs. However, existing STR owners will need to make a few changes to comply with the new guidelines.
- First, existing STR owners must pay a new annual registration fee. The fee is $1,072 for an entire home STR and $642 for a junior STR.
- “For Existing Permittees, no more than thirty-two (32) Contracts for Vacation Rental use of a property shall be allowed or provided in any calendar year; however, up to four (4) additional Contracts shall be allowed or provided for the Third Quarter of a calendar year so long as the entire term of each such Contract occurs during such Third Quarter, subject to reduction in such numbers on and after January 1, 2026” – Ordinance 2075. After January 1, 2026, all STRs will be limited to the new 26-annual contract limit
Conclusion
The City of Palm Springs’ new short-term rental guidelines are designed to protect the character of residential neighborhoods and to prevent STRs from becoming too prevalent. The neighborhood percentage cap is a key component of these guidelines and will likely impact the STR market in Palm Springs significantly.
Homeowners should pay attention to the rental percentage in their neighborhoods because they do affect a home’s perceived value. Homes in areas below the rental cap could have a higher home value for the time being, and it might be the right time to sell.
Existing STR owners must make some changes to comply with the new guidelines. However, the city has provided a grace period for existing owners to comply. This grace period will expire on January 1, 2026.
It is important to note that the City of Palm Springs is constantly reviewing its STR regulations. It is possible that the neighborhood percentage cap or other aspects of the regulations could be changed in the future by City Council resolution. Existing STR owners should stay up-to-date on the latest regulations to avoid penalties.
If you are interested in buying a property as a short-term rental, please read the entire ordinance to understand the laws, rules, and regulations. Click here for the Complete City Council Issued Short Term Rental Ordinance No. 2075
