This article will give you an introduction to the short term rental regulations for Palm Springs, CA, based on my personal experience. If you’re interested in owning a vacation rental in Palm Springs, this article is a must read.
But first: By reading the information in this article, you absolve The Darwinian Doctor of any liability related to the use of this information. You understand that this introductory article is not a comprehensive text on Palm Springs Short Term Rental Regulation.
(I’m putting this here in bold because the consequences of missteps here can be very costly.)
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Introduction
Palm Springs, a California desert gem nestled in the heart of the Coachella Valley, has long been a sought-after destination for tourists. Its beautiful landscape, rich culture, and sunny climate make it an ideal location for short-term vacation rentals. The community rose to fame in the 1920s as the go-to weekend getaway for Hollywood movie stars. Many of the stars purchased homes in Palm Springs.
Over the years, the city has settled in as a beloved vacation spot for both Los Angelenos and others alike.
Yet, as the popularity of platforms like Airbnb has grown, so have the challenges faced by property owners seeking to navigate the city’s increasingly complex short-term rental regulations.
The Rise of Short-Term Rentals in Palm Springs
The proliferation of short-term rentals in Palm Springs is no accident. The city’s appeal to tourists, combined with the potential for rental income, has led many property owners to convert their residences and investment properties into short-term rentals. This trend has been particularly noticeable in residential neighborhoods, where rental homes and vacation homes have multiplied.
Initially, these rental properties provided a welcome boost to the local economy. Real estate agents reported a surge in demand for second homes, and the city itself benefited from the additional fees associated with rental permits and transient occupancy taxes.
However, as the number of short-term rental properties grew, so did the concerns of residents and city council members.
Residents complain about rowdy tourists disturbing the peace of their tranquil neighborhoods, as well as the double edged sword of property value inflation. As investors have sought to cash in on the high potential for income from the short term rental market in Palm Springs, competition over homes have spiked home values.
As you can see from this chart from Redfin, single family home values (inferred by sales prices) have spiked literally 100% over the last 3 years in Palm Springs.
While this is great for existing homeowners, it can make it nearly impossible for local Palm Springs residents to break into the property market, or resist selling their homes for a profit. With too much investment as opposed to primary homeownership, the local fabric of Palm Springs could unravel.
The Advent of Regulations
In response to these concerns, the Palm Springs City Council introduced in 2008 the Palm Springs Vacation Rental Ordinance. This new ordinance was specifically aimed at regulating the short-term rental market. This marked a significant turning point in the city’s approach to short-term rentals.
The ordinance created the The Department of Special Program Compliance. This department and the following core requirements of the short-term rental ordinance are widely considered to be some of the strictest regulations on short term rentals in existence. They set the stage for similar regulations in other cities not only in the greater Palm Springs area, but around the country.
Below, I’m going to list some of the regulations that are the most important to know.
Aside: When you read things on the web, often times you’ll just read the highlights and skim the rest of the article. If you’re seriously considering owning a short term rental in Palm Springs, you should study this next part very carefully and click on the official links to the city website. Regulations have recently gotten much more strict. The data below is current (to my knowledge) as of early 2023, but things can change. Read the official material on the Palm Springs Vacation Rental Website to have the most accurate information.
By reading the information in this article, you absolve The Darwinian Doctor of any liability related to the use of this information. I’m putting this here (again) because the consequences of missteps here can mean the difference between tens or hundred of thousands of dollars.
List of Some of the Most Important Regulations
Vacation Rental Certificate
To legally operate a short term rental in Palm Springs, you must have a valid vacation rental certificate. To do this, you must apply via the city website. The application process is both costly and time consuming. It involves paperwork that establishes proof of ownership and also a safety inspection. If your property has a pool, for example, there are additional requirements specific to pool safety and signage. The safety inspection is quite detailed and even defines the minimum square footage of bedrooms.
During the pandemic, turnaround time on short-term rental permits took about 3 months, though this is reportedly much faster now. The application is still paper based, but it should move to an online process later in 2023. The permit must be renewed annually.
There are a lot of details involved, so please see the Palm Springs Vacation Rental Website for more detail.
Important: if you operate a short term rental without a valid short term rental certificate (and are discovered), you will be fined $5000 and barred from ever being granted a certificate in the future. That’s right, this will mean permanent ineligibility from ever joining the short term rental program.
The specific website to learn about the application process is here: Vacation Rental Certificate
Rental contracts required
This is one of the key regulations to know when setting up your short term rental in Palm Springs.
For all stays, guests must sign an official rental contract (aka rental agreement). The contract must include specific parameters and must be filed away in case the department requests them. A “contract summary” for every stay must be filed on the department website in advance of the guest stay.
I can’t emphasize this next point enough. In the most recent incarnation of the rules, if you do not submit the contract summary, you will immediately be fined $2500 and your permit will be suspended for 6 months. There will be no warnings.
Here is the link to the page to file your contract summaries: Submit your contract summaries
Limits on rental contracts
This is one of the key regulations to know when setting up your short term rental in Palm Springs.
There is a strict limit on the maximum number of times that you can rent out your short term rental every year. This number has shifted around over the years. In 2022, home share hosts were allowed 32 rental contracts a year, with an additional 4 contracts allowed during July-September, for a total of 36 contracts a year.
However, Ordinance 2075 passed in November of 2022 and reduced this contract limit to only 26 a calendar year. Existing permit holders are grandfathered in to the old limits until January 1, 2026. At this time, the allowed contracts for existing permit holders (prior to November 2022), will also fall to 26 a year.
To clarify, a “contract” covers a single guest stay and doesn’t specify the number of days in the stay. The guest stay can be a one night stay or a 28 night stay. Both would be considered one contract. (Twenty nine day stays are not considered short term and are not regulated via these rules.) This is an important point.
Read more about Ordinance 2075 here: Ordinance # 2075 Tool Kit and FAQs
Occupancy Limits
There are limits to the number of people that can stay in a short term rental. These limits are based on the number of bedrooms in your rental. Essentially, they allow up to two guests a room up to a maximum of 12 guests (plus two kids under the age of 12). Houses that are more than 4 bedrooms are considered “estate homes” and are subject to additional fees and regulations.
As you can see the number of guests allowed are different for daytime versus overnight guests. There are also limits of how many vehicles are allowed at the rental.
This is quite different from cabins in places like Broken Bow, OK or the Smoky Mountains, where bunk beds can easily push overnight occupancy to 16 people!
Transient Occupancy Tax
This is one of the key regulations to know when setting up your short term rental in Palm Springs.
The City of Palm Springs collects a “Transient Occupancy Tax” for all short term rental stays. This special tax must be manually submitted to the city every month, even when you don’t have any bookings. As of 2023, this tax was 11.5%.
There is a web page to submit the taxes that will help you calculate the tax based on your revenue. Unfortunately, this is a separate part of the city website from the page where you submit your contract summaries.
If you do not submit your TOT taxes in a timely manner, you’ll also get an administrative citation and be fined and suspended from the rental program.
Local Contact Person
Even if you are operating your short term rental from a distance, you need a designated responsible person who will be on file as your local representative. If there is a complaint such as a noise complaint for your rental, the local contact must be able to respond to the issue, no matter what time it occurs.
City ID number in all advertising
This is one of the key regulations to know when setting up your short term rental in Palm Springs.
To assist in identifying permitted versus unpermitted short term rentals, you must list your City ID number in all advertising. Failing to do this is another red flag and will lead to fines and suspension if discovered.
Note: this is a different number from your TOT tax ID.
For those of you who plan to use a management software, I recommend you triple check that your ID appears in the end use websites like Airbnb and VRBO. I use OwnerRez to manage my short term rentals, and OwnerRez allows you to enter more characters (2000) in its property description than will be ultimately displayed on Airbnb’s property description (500).
This led to a problem where my property’s city ID was cut off in the Airbnb listing, since I put it into the end of the property description in OwnerRez. This ultimately led to a citation and 6 month permit suspension! More on this below.
OwnerRez – vacation rental software!20% Neighborhood Saturation Limits
A new aspect of the regulations since November of 2022 has now capped the total number of vacation rental permits per neighborhood to 20% of all homes. This means that if a particular neighborhood has more than 20% of the homes operating as short term rentals, no new certificates will be issued for that neighborhood. Interested owners can put their names on a waiting list, but they will not have a permit granted unless there is natural attrition from current permit holders.
So if you are thinking about purchasing a home and using it as an investment via short term rental, make sure you check the city vacation rental density map.
Various
Other notable requirements include providing guests with a good neighbor brochure. This defines rules specific to short term rentals, like quiet time hours overnight and the restriction on amplified noise (like music) outside of the house. Even music inside the house cannot be audible at the property line, lest you risk a citation.
There are more regulations for short term rental in Palm Springs. Many more.
Here’s a reminder to spend a few hours reading through all the information available on the short term rental city website if you are seriously considering becoming a STR host in Palm Springs: Palm Springs Vacation Rental Website
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Ordinance Enforcement
The same ordinances that established the vacation rental regulations also funded an enforcement arm of the Office of Special Program Compliance. These officers will respond to nuisance calls and investigate short term rentals to ensure compliance with all regulations.
Part of the reason why Palm Springs is considered such a strict short term rental market is that the enforcement of some regulations has a “no warning” policy.
In fact, on their website, it specifically states: “pre-citation or courtesy notices are not given (see Admin Reg 08/2014)”.
As I mentioned above, I learned this the hard way when I was issued citations for a couple of issues that led to an automatic STR permit suspension in early 2022. More on this below.
As you can see below, the compliance department enforces the regulations with vigor.
The Impact on the Palm Springs Short-Term Rental Market
The impact of these new restrictions on the short-term rental market has been significant. While the regulations have undoubtedly added an extra layer of complexity for property owners, they have also led to a more structured and controlled rental market. This allows for a more predictable impact on the community and local homeowners.
The recent tightening of restrictions in late 2022 will undoubtedly have the effect of chilling the short term rental market. This is true both for primary homeowners and or investors considering purchasing a second home that can also serve as a short term investment property.
In my opinion, this is likely by design. The new regulations will decrease what some see as the detrimental impact of short term rentals on the City of Palm Springs. This negative impact can be anything from tourists disturbing the peace of neighborhoods to investors driving up property values. While increased property values can be great for existing homeowners, this can also make it less affordable for local renters to eventually purchase a new home.
In city studies, the regulations have led to a decrease in the number of nuisance complaints associated with short-term rentals. Moreover, the new restrictions will help to ensure a more equitable distribution of rental properties throughout the city, preventing the concentration of rentals in specific neighborhoods.
The Effect on the STR Curious Homeowner
Investors and property owners need to consider a range of factors before listing their properties for short-term rental. These include the potential rental income, the cost of permit fees, and the responsibility of collecting and remitting transient occupancy taxes and contract summaries. As evidenced by the dozens of citations issued in recent months, the department of Special Program Compliance is dedicated to both issuing and enforcing regulations.
The new limit on rental contracts in particular may give homeowners pause when they consider joining the short term rental market with their home. The new rules from 2022 limit contracts to 26 a year.
By limiting the total number of annual contracts, this preferentially increases the minimum nights of your average stays within the Palm Springs area. Instead of using up a contract on a two night stay, for example, a host will likely choose to have a longer minimum stay requirement.
My Palm Springs short term rental generally has a minimum stay requirement of 5 days, for example. It’s currently operating as a month-to-month rental, but it’ll be back in operation as a short term rental in late August 2023.)
The Future of Short-Term Rentals in Palm Springs
Despite the challenges, the short-term rental market in Palm Springs remains robust. The city continues to be a popular tourist destination, and the long term demand for vacation rentals shows no sign of waning.
The future of short-term rentals in Palm Springs will likely involve a continued balance between the interests of property owners, residents, and tourists.
A Delicate Balance
As a consequence of my deep dive into the regulations for this article, I have a greater appreciation for the tough balance that the city council is trying to strike.
One one hand, short term rentals bring in a lot of money to the city. In a 2018 impact study, short term rental associated taxes alone brought in about $13 million in revenue. Short term rentals were calculated to add about $36 million to the city economy. The same impact study estimated that the loss of the short term rental industry would in total strip $199 million annually from the local economy via direct and indirect losses.
On the other hand, it’s just not tenable for property values to double in 3 years. This can swiftly destroy the ability of true locals to live in their own city as homeowners. It’s not reasonable to sacrifice the well-being of the local population on the altar of profit from tourism.
The guest experience
Anything that allows tourists and guests to experience the calm splendour of Palm Springs is a win in my book. If that means that requires the strictest short term regulations in the country, I suppose that’s a price we all have to accept.
Whether you’re a homesharer in the Movie Colony or a guest looking for a vacation home with a private pool, understanding these regulations will help ensure a positive experience. The city of Palm Springs, its residents, and its council members are committed to maintaining the peace and charm of this desert oasis, while also adapting to the changing realities of the short-term rental market.
My Experience
I want to spend a few minutes reviewing my experience navigating the regulations as a short term rental owner in Palm Springs, CA. I love the city. From the dry, warm winters to the dramatic San Jacinto mountains, I always feel relaxed and happy when I visit my vacation home there.
But my experience operating as a vacation rental owner in Palm Springs has been rocky. Just a few months into operating our short-term rental property full time, a noise complaint around the holidays started a chain of events that led to the automatic 6 month suspension of our permit. We only realized belatedly that our settings in the OwnerRez platform, for example, had truncated our city ID number from our Airbnb listing.
Also, I mistakenly thought that sending in monthly transient occupancy taxes fulfilled the Palm Springs document requirement. I didn’t realize, or had forgotten, to send in the report about each and every rental contract. By the time I did realize my error, it was too late.
I Get It.
I understand that these rules are in place to prevent illegal short term rentals that do not adhere to the quality of vacation rental that the city requires. They also exist to ensure that the city of Palm Springs receives the appropriate transient occupancy taxes it is due. Finally, the rental rules also protect the local population from a variety of ills such as over-gentrification and rowdy guests.
I do wish that there had been even one warning or attempt to help me become compliant before being slapped with an automatic suspension. In an ideal world, laws use “intent” to differentiate between penalties. A good example is the difference between manslaughter and murder. It bothers me that Palm Springs code violation enforcement doesn’t differentiate between true bad actors and simple mistakes from lack of understanding.
Conclusion
Owning a vacation home in Palm Springs is a great blessing. It’s a truly special city and will always be a sought after destination. It can also be a blessing to share your home with tourists via short term rental. But the regulations of the short term rental industry in Palm Springs is incredibly strict.
I hope you have a good basic understanding of the regulations now.
Due to the recent changes to the short term rental regulations and my experience, I can’t recommend that investors purchase a property in Palm Springs with the the main intention of using it as a short term rental. There is too much risk involved.
If you do decide to give it a try, good luck! Buckle up for a challenging (but potentially rewarding) process.
— The Darwinian Doctor
Additional Reading:
- Medium: The Basics of Vacation Rental Regulations in Palm Springs
- VisitPalmSprings.com: Hollywood’s Playground
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2 comments
Great summary of the regs and ordinances, Dan. I may have missed your mention of it above, so I apologize for redundancy when I also add that owners are limited to one STR in the city of PS (makes it difficult to scale operations).
Also the potential approval of SB 584 for all of California STR owners is quite concerning as a significant addition to the cons column for PS STR investing.
Great comment Billy, thank you! This new bill would be a disaster for short term rental owners in California. Perhaps that’s by design.