California Short Term Rental Laws: Airbnb and Vacation Rental Regulations
California short term rental laws make starting an Airbnb business difficult and expensive. Learn more about the state and city regulations for vacation rentals and how to get the appropriate licenses and more.
California emerged as one of the best places to invest in Airbnbs because it’s the most visited state in the US. The unique national parks, the beautiful nature, the warm climate, the swimming and skiing opportunities, Disneyland, and Universal Studios Hollywood are just some of the tourist attractions that bring in visitors year-round.
Before you buy a vacation rental property in The Golden State, you need to familiarize yourself with the California short term rental laws. California is infamous for having some of the strictest and most prohibitive vacation rental regulations across the US.
Similar to Texas short term rental laws and North Carolina short term rental laws there are few state-level regulations in California. Instead, the state leaves it up to local authorities to restrict and regulate short term rentals in line with the local situation and the best interest of the community.
Each city in the California real estate market has imposed its own Airbnb laws, and we will take a detailed look at those after we discuss the general state definitions and requirements.
* If after reading this article you still need some help in starting your California short term rental business, keep in mind that Awning offers full-service property management including navigating the legal requirements and paperwork for an industry-low fee of 15% of revenue.
California’s Definition of a Short Term Rental
The State of California defines a short term rental as a residential dwelling or a portion of a residential dwelling that is rented out for 30 consecutive days. A residential dwelling, in turn, refers to a private structure that has been designed and is available for use and occupancy as a residence by one or more individuals. This definition excludes commercially operated hotels, motels, bed and breakfast inns, and timeshare properties.
This blanket definition of short term rentals is widely applied by the majority of California cities. Moreover, it’s comparable to the definitions adopted by other top Airbnb rental markets, including the Florida short term rental laws and the Tennessee short term rental laws.
Starting a Short Term Rental Business in California
Starting any business, including a vacation rental, in California is handled by the Office of the California Secretary of State (SOS). According to their website, you need to go through a few steps in order to form a business.
The 5 steps to start a short-term rental business in California are:
1. Develop a Business Plan
The SOS website recommends building a business plan as a first step in the process of starting a California business. As an aspiring California Airbnb host, you should think about the location, structure, marketing, advertising, and promotion of your short term rental before buying a property.
2. Choose a Location for Your Business
As a second step, it’s important to select the best location for your business. This is especially true for an Airbnb property as investing in different California markets comes with varying property prices, daily rates, occupancy rates, Airbnb income, and return on investment as well as various laws and regulations.
*You can research various locations and estimate the potential earnings of properties using the free Awning Airbnb Estimator.
3. Select a Business Structure
As a California short term rental business owner, you can choose from a few different legal structures: corporation, limited liability company (LLC), limited partnership, general partnership, limited liability partnership, and sole proprietorship. Each of these provides its own pros and cons, so you need to study them carefully and decide on the best business structure for your specific situation.
4, File Tax and Employer Identification Documents
California Airbnb hosts are expected to pay taxes, which requires the filing of tax and employer identification. You need to apply for an employer ID number (EIN) through the IRS website, as a federal requirement. You will also need to pay transient occupancy tax to the California Department of Tax and Fee Administration. In many California counties and cities Airbnb and other short term rental listing platforms collect and remit this tax on behalf of hosts.
5. Obtain Licenses and Permits
The final step is applying for relevant licenses and permits. While there are no such requirements for short term rentals at the state level, in most California cities starting an Airbnb business requires a license or a permit. Keep reading to find out the city-level regulations in this regard.
California Short Term Rental Taxes
Owners of California short term rental properties are expected to pay transient occupancy tax (TOT). There is no universal TOT rate as it varies between counties and cities. In most cases the transient occupancy tax rate ranges from 6% to 14%. This tax is levied on the listing price including cleaning fees and any other relevant fees.
Federal Tax Deductions
If you rent out your California vacation rental for a minimum of 14 calendar days a year and you use the property for personal reasons for a maximum of 14 calendar days a year, you qualify for federal tax benefits pertinent to short term rental businesses. As a savvy investor, you need to know and take advantage of all tax deductions as this helps you maximize your cash flow and Airbnb profit margin.
Here are the expenses you can write off when filing taxes:
- Mortgage interest
- Mortgage insurance premiums
- Property tax and other taxes
- Maintenance work
- Cleaning services
- Accounting services
- Home office expenses
Statewide Short Term Rental Rules in California
The statewide California short term rental laws are not very detailed. Instead, they allow local authorities to impose regulations in the areas under their jurisdiction in order to address the needs and interests of the local communities in the most appropriate manner.
Short Term Rental Rules By California City
While the vacation rental industry has spread across the entire US in the past decade, its growth in California has been explosive. After all, this is the birthplace of Airbnb which largely drove the industry-wide expansion. Consequently, each California county and city has enacted its own vacation rental regulations in an effort to protect the safety, quality of life, and housing options of local residents.
Here are the Airbnb laws in 11 top California cities:
San Diego Short Term Rental Laws
In San Diego, short term rentals are defined as dwelling units if they are rented out for less than one month at a time and are located within the City of San Diego. According to the San Diego Short-Term Residential Occupancy (STRO) Ordinance, this requires a license, and a host can hold only one license at a time. Moreover, licenses are not transferable between owners, locations, and units.
San Diego short term rental properties are divided into four license types with different requirements and regulations:
- Tier 1 - Part-Time: In case a dwelling unit is rented out for an aggregate of no more than 20 days per year, the owner or permanent resident does not need to be on site during the stay.
- Tier 2 - Home Sharing: This refers to the renting of a room or rooms for more than 20 days a year, provided that the owner or permanent resident resides on site. They can be absent during the STRO for a maximum of 90 days per calendar year. Home sharing can include duplexes and eligible accessory dwelling units if the host resides on site.
- Tier 3 - Whole Home Excluding Mission Beach: When a property is rented out for more than 20 calendar days a year and the owner or permanent resident does not reside on site, the total number of licenses will not exceed 1% of San Diego’s total housing units outside the Mission Beach Community Planning Area. Guests are required to stay for a minimum of two nights per stay.
- Tier 4 - Mission Beach Whole Home: For properties rented out for 20 days or more in a year where the owner or permanent resident does not reside on site, the total number of licenses will not exceed 30% of the Mission Beach Community Planning Area. The minimum stay per guest is two nights.
San Diego non-owner occupied short term rentals are limited, so investors need to check out whether they can qualify before buying an Airbnb property in the city.
Since the current San Diego short term rental laws are new, the license application period will open on October 3rd, 2022 and close on November 30th, 2022 for Tier 3 and Tier 4 applications. Tier 3 and Tier 4 licenses will be given through a lottery process, established by the Office of the City Treasurer, in case the number of applications exceeds the number of available licenses as per the regulations above. Priority will be given to good actors defined as hosts who have paid taxes, have recent booking activity, and have less than three verifiable complaints. The lottery results will be announced on December 16th, 2022.
Submitting a STRO application in San Diego requires the following information:
- Property information including full address, number of bedrooms, maximum number of guests, property parcel number, and proof of right to occupy and allow STRO if not the owner.
- Host information including name, phone number, and email address.
- Local contact information including name, phone number, and email address.
- Tax account information including TOT certificate number and rental unit business tax (RUBT) account number.
- STRO operations information including estimated number of short term rental days per year as well as proof of booking activity and proof of TOT payments for Tier 3 and Tier 4 applications.
- Host advertisement information including hosting platform or property management company, link to advertisement, and host/account ID number.
- Payment information.
- Non-refundable application fee: $25 for Tier 1 and Tier 2 and $70 for Tier 3 and Tier 4.
Short term rental licenses are valid for two years in San Diego, after which they need to be renewed. The license fees are $100 for Tier 1, $225 for Tier 2, and $1,000 for Tier 3 and Tier 4.
In terms of taxes, San Diego Airbnb hosts are responsible for paying:
- Transient occupancy tax (TOT) at a rate of 10.50%;
- Rental unit business tax (RBUT) at a rate of $34 for a business with no more than 12 employees and a rate of $125 plus $5 per employee for a business with more than 12 employees.
Big Bear Vacation Rental Laws
Unlike most California locations, the City of Big Bear Lake refers to Airbnb-style properties as vacation rentals. The City regulates vacation rentals within the zip code 92315, while properties outside this zip code should contact San Bernardino County.
Big Bear Lake short term rental owners need to apply for a vacation rental registration.
Submitting a Vacation Rental Program Registration Application requires:
- Property owner information including name, phone number, mailing address, and email address.
- Rental property information including address and assessor’s parcel number.
- Management company information if not owner managed including name, mailing address, phone number, and email address.
- In-person check-in agent information including name and phone number. They must reside within 15 miles of the rental unit.
- Property information including living area in square feet and number of bedrooms.
- 24/7 compliant response agent information including name, phone number, and address. They must reside within 15 miles of the rental unit.
- Home Share License if the owner lives on site during all rentals.
- Payment of a non-refundable fee of $550 for a Vacation Rental Permit.
- Passing a home inspection. You need to submit a Rental Inspection Application, and the process takes 2-4 weeks.
- Owner and agent certification. Owners (except those who always hire full-service Airbnb property management companies) and agents need to pass an annual certification exam with a 100% score.
- Good Neighborhood Policy signed by all agents.
Big Bear vacation rental licenses are valid for one year, after which they need to be renewed. Permits are not transferable through ownership. Furthermore, you can hold a maximum of two vacation rental permits regardless of whether you own a property individually or in a trust or a corporation.
Big Bear Lake Airbnb hosts need to collect and remit TOT at a rate of 11% of gross receipts. This has to be done on a monthly basis.
Palm Springs Vacation Rental Laws
Palm Springs is one of the hottest Airbnb locations not only in California but nationwide. In the City of Palm Springs Airbnb properties are referred to as vacation rentals and are defined as stays of less than 28 days. To run a Palm Springs short term rental business, you need to obtain a Vacation Rental or Homeshare Registration Certificate.
Submitting a Vacation rental application to the City of Palm Springs requires:
- Owner operator application if the property is owner managed or agency operator application if the property is managed by a company.
- Copy of owner’s driver’s license.
- Ownership form.
- Signed electrician’s pool statement and invoice unless a pool is shared and maintained by an HOA.
- Safety inspection form.
- Proof of insurance with a minimum liability of $500k per occurrence.
- Annual registration certification fee of $1,009 for single family homes and condos and $252 for timeshares.
- TOT permit application if applying for the first time or in case of ownership or deed change.
- TOT permit one time fee of $25 if applying for the first time and unless an agency files on your behalf.
- Estate home addendum and land use permit (LUP) if the vacation rental has more than four bedrooms.
- Estate home one time LUP fee of $426 if applicable.
- Letter from the HOA and/or management company that you are not violating the HOA governing documents if your property is located within an HOA.
- Friends and family list for single family homes and condos if applicable.
Palm Springs vacation rental certificates need to be renewed for a fee of $1,009 for single family homes and condos and $252 for timeshares. This requires most of the documents listed above.
Before you invest in a California short term rental in Palm Springs, it’s important to note that you can have a maximum of 32 guest stays per calendar year in addition to four more guest stays in the months of July, August, and September, for a maximum of 36 guest stays. Moreover, the maximum occupancy is two adult overnight guests per bedroom and one vehicle per bedroom.
Moreover, the vacation rental owner or agent should sign a written contract with a responsible person of 25 years of age or older and file a summary of it with the Department of Special Program Compliance prior to each occupancy.
Palm Springs vacation rentals are subject to:
- Transient occupancy tax (TOT) at a rate of 11.5%, to be filed and paid monthly.
- Tourism business improvement district (TBID) at a rate of 1%, paid on a monthly basis.
Overall, while renting out on a short term basis is legal in Palm Springs, the regulations are rather strict, and investors need to be well aware of them before buying a vacation rental property in this market.
Los Angeles Short Term Rental Laws
As one of the most visited cities in California and one of the most demanded Airbnb locations in the US, Los Angeles has some of the most stringent short term rental regulations not only in The Golden State but also nationwide.
The Los Angeles Municipal Code defines a short term rental as a rental unit rented in whole or in part to a person or persons for transient use of no more than 30 consecutive days. This form of homesharing is limited to the host’s primary residence only. A primary residence is defined as the residence in which a host resides for more than six months per calendar year. This doesn’t necessarily need to be the property owner; it could also be a tenant.
Short term home sharing is limited to no more than 120 days per year unless the host has obtained an extended home sharing approval. Additionally, a host is limited to running a single short term rental only. Also Los Angeles has prohibited short term rentals in the City’s most restrictive residential zones.
A host must submit the following documents to register for home sharing in Los Angeles:
- Affidavit signed by the property owner/landlord and the host that the owner allows the home sharing in case the host is not the property owner.
- State-issued photo ID.
- Proof of primary residence.
- Local responsible contact person.
- List of hosting platforms to be used.
Regular short term home sharing registrations require a fee of $89 and need to be renewed annually.
To apply for an extended homesharing registration, you must have maintained a regular valid homesharing registration for a minimum of six months or to have hosted for a minimum of 60 days; to have no more than one citation within the previous three years; and to have no suspensions or revocations of your registration within the previous two years. The annual registration fee is $890.
Los Angeles vacation rental owners need to pay a TOT of 14% of the listing price including cleaning fees. If you rent out your property on Airbnb, the listing platform collects and remits this tax on your behalf.
Because of the restrictions listed above, Los Angeles is not an ideal market for California Airbnb hosts who’d like to invest in non-owner occupied short term rentals.
San Jose Short Term Rental Laws
San Jose has some of the most conducive California short term rental laws by city. The San Jose Municipal Code defines incidental transient occupancy as the right of use of any room or rooms or portions of them for dwelling, sleeping, or lodging purposes in any one-family dwelling, two-family dwelling, multiple-family dwelling, mobile home, live/work unit, or accessory dwelling unit by a transient user.
Both owner-occupied and non-owner occupied short term rentals are allowed in the San Jose market though they face different regulations. In specific, in case the host is not present, there is an annual limit of 180 calendar days on incidental transient occupancy. In case the host is present, the property can be rented out on a short term basis throughout the year.
When the host is present on site, the number of guests is restricted to three guests in a one-family dwelling or a mobile home and to two guests per dwelling unit in a two-family or multiple-family dwelling. Without the host on site, the maximum occupancy is limited to two persons in a studio unit, three persons in a one-bedroom unit, and two persons for each additional bedroom, with the total number not exceeding ten persons.
Unlike most other California cities, San Jose does not require Airbnb hosts to obtain a short term rental license or permit. Nevertheless, they need to get a general business license.
To register for a business tax certificate in San Jose, you need to submit:
- Start date of business
- Tax identification number
- Driver’s license number
- Phone number
- Owner’s name and address
- Email address
- State seller’s permit number.
- County health permit number.
San Jose Airbnb hosts need to pay business tax in addition to a TOT of 10%.
Oakland Short Term Rental Laws
The City of Oakland has adverse vacation rental regulations. Short term rentals are not defined as a category in the local legislation, so Airbnb-style properties fall under Bed and Breakfast Residential Activities or Transient Habitation Commercial Activities.
Bed and Breakfast Residential Activities are defined as the provision of lodging services to transient guests for less than 30 days. This activity should happen in a one-family residential dwelling facility, a one-family dwelling residential facility with a secondary unit, or a two-family dwelling residential facility. Such a facility should have no more than six guest units and host no more than twelve adult paying guests. Moreover, the facility needs to be owner-occupied. Importantly, Bed and Breakfast Residential Activities are entirely prohibited in many zoning districts. There are further restrictions regulating the status of facilities and the preparation of foods and drinks.
Meanwhile, the City of Oakland defines Transient Habitation Commercial Activities as the provision of lodging services to transient guests for no more than 30 consecutive nights. This essentially includes all short term rentals which do not get approved as Bed and Breakfasts. Most residential and commercial zones prohibit Transient Habitation, except for designated zones in downtown, along the waterfront, near the airport, along the I-880 freeway, and in the Specific Plan area.
To start an Oakland Airbnb business, hosts need to obtain a business tax certificate and in some cases a business permit. Furthermore, all rental properties need to be registered with the City.
In addition to paying business tax, owners of short term rental properties also need to pay TOT at a rate of 14% of the total rent charged.
Overall, the Oakland short term rental laws do not allow non-owner occupied vacation rentals, which makes the City suboptimal for investors.
Santa Ana Short Term Rental Laws
The City of Santa Ana does not have municipal codes regulating the vacation rental industry. The establishment of new Santa Ana short term rental properties was temporarily banned a few years ago, but the ban was lifted in October 2015.
In general, Airbnb properties count as rental properties and hosts need to have a business license for each individual property. Moreover, Santa Ana Airbnb hosts need to pay business tax and TOT equivalent to 11% of rent.
This lack of short term rental regulations makes Santa Ana one of the most favorable California markets for this strategy.
Lake Tahoe Short Term Rental Laws
The City of South Lake Tahoe emerged as a top Airbnb location around Lake Tahoe. The local legislation defines a vacation home rental as renting out an entire property for less than 30 consecutive days. Such rentals need to be licensed, but new licenses will no longer be issued for vacation home rentals in residential areas.
In order to renew a permit in a residential area or apply for a new permit in a non-residential area, you need to submit a vacation home rental application with the following information:
- Property owner information including name, phone number, vacation home rental address, mailing address, and email address.
- Representative or agent information including name, phone number, mailing address, email address, and agent permit number if applicable.
- Vacation rental home information including living area, occupancy, number of bedrooms, number of paved parking spaces, trash pick-up days, presence of outdoor hot tub, presence of outside bear box, and property management type.
- Local contact information including name, 24/7 phone number, rental management agency name if applicable, and agent permit number if applicable.
Vacation rental home permits need to be renewed annually, and there is an annual permit fee ranging from $200 for properties with maximum occupancy of 1-4 persons to $1,335 for properties with maximum occupancy of over 12 persons.
Airbnb hosts in South Lake Tahoe need to pay a 10% transient occupancy tax.
North Lake Tahoe, within Placer County, is another popular area for vacation rental activities around Lake Tahoe. Recently Placer County adopted a new short term rental ordinance to protect the local community.
According to the new ordinance, a short term rental unit is defined as any unit or portion of a unit permitted for residential use and rented for occupancy, dwelling, lodging, or sleeping purposes for a period of no more than 30 days. This definition excludes commercial lodging-use properties such as hotels, motels, condo-hotels, and timeshares.
Placer County imposed an overall inventory cap of 3,900, which means that the total number of residential short term rental unit permits should not exceed 3,900. However, owner-occupied properties with a short term rental unit permit in good standing and a TOT certificate are exempt from this cap.
Permits need to be renewed on a regular basis. Renewals submitted within the deadline and in good standing will be approved. New permits, meanwhile, will be processed on a first-come, first-served basis until the cap is reached. A wait list will be maintained for new permits to be issued when permits are not renewed or revoked.
Submitting a short term rental unit permit application requires:
- Property owner or agent information
- Local contact person information
- Property address and assessor’s parcel number
- Rental unit type
- Number of bedrooms
- Number of on-site parking spaces
- Number and type of trash receptacles
- Application for TOT certificate
- Number and location of fire extinguishers and smoke and carbon monoxide alarms
- Passing fire-life safety inspection
- Passing defensible space inspection
- Photo proof of interior posting of Good Neighbor Flyer in the unit
- Non-refundable short term rental permit application fee
North Lake Tahoe short term rental permits are non-transferable in case of change of ownership.
The TOT rate to be paid by vacation rental property owners is equivalent to 10% of rent.
Temecula Short Term Rental Laws
The City of Temecula prohibits short term rentals within the city altogether. A short term rental is defined as a dwelling unit shared in whole or in part for temporary occupancy for less than 30 consecutive days. This applies to both whole homes and rooms listed on platforms like Airbnb and Vrbo.
Violators who try to operate a Temecula short term rental business illegally face a fine of $1,000 per day.
Irvine Short Term Rental Laws
Similar to Temecula, the City of Irvine prohibits short term rentals within all residential zones as well as within all other zoning districts in which residential uses are permitted or conditionally permitted. A short term rental, meanwhile, is defined as renting out a dwelling unit for a period of less than 31 consecutive days.
Violations may be issued administrative fees of $1,000 per day.
Long Beach Short Term Rental Laws
Similar to the rest of California short term rental laws, the City of Long Beach defines a short term rental as a residential dwelling unit or portion of it offered to a paying guest by a short term rental operator for 30 or less consecutive days. This excludes hotels, motels, inns, and bed and breakfast inns.
In Long Beach a person cannot operate more than one primary residence short term rental and more than one non-primary residence short term rental. Moreover, in a multi-family property the number of short term rentals should not exceed the number of dwelling units. Un-hosted stays in primary residences are limited to a total of 90 days per year.
To operate a legal Long Beach Airbnb business, you need to apply for a short term rental registration to be issued by the City. There is a non-refundable application fee of $250. Registrations are valid for one year, after which they need to be renewed. Registrations are non-transferable.
Importantly, the total number of non-primary residence short term rental registrations is capped at 800. In the coastal zone, this number is limited to 350.
Long Beach Airbnb hosts need to pay a TOT of 13% on a monthly basis.
While the California short term rental laws do not impose much regulation on the state level, some California cities have the most restrictive and prohibitive Airbnb laws across the nation. Nevertheless, vacation rental homes are legal and relatively unrestricted in many other California markets. So, if you’re looking to start a profitable short term rental business, you definitely need to consider the Golden State. Just make sure to choose a market where you can operate a non-owner occupied vacation rental in a legal manner.