State of California Short-Term Rental Regulations

Are you looking to rent out your property in California on a short-term basis? With its year-round sunny weather and abundance of popular tourist destinations, the Golden State attracts visitors from around the world. Renting out your home, condo, or apartment to vacationers can be lucrative. But before listing your property, it's important to understand the patchwork of rules and requirements for short-term rentals across cities and counties in California.

Defining Short-term Rentals in California

This section will cover key factors that distinguish short-term rentals from other types of rentals in California.

What is Considered a Short-term Rental

In California, a short-term rental generally refers to a residential property that is rented out for less than 30 consecutive days. This includes vacation rentals booked through platforms like Airbnb, VRBO, and HomeAway. The transient nature of these short stays differentiates them from long-term rentals with leases of a year or more.

Short-term rentals are also distinct from home shares, which involve the primary resident remaining on-site with guests. While home shares may fall under short-term rental regulations in some areas, exceptions are often made to accommodate this type of arrangement.

Geographically, short-term rental rules can vary across different jurisdictions. Some regulations only apply within certain neighborhoods or zoning districts. Make sure to check the local laws for the specific city, county, and neighborhood where your rental property is located.

Rental Period Length

To qualify as a short-term rental in California, the maximum length of stay is typically 30 consecutive days or less. However, some cities and counties have exceptions for longer reservations up to 90 days, provided there are no back-to-back bookings.

For example, Los Angeles limits short-term rentals to 120 days per year, but guests can book stays up to 90 days if another reservation is not booked immediately before or after. Different rules apply in San Francisco, where the rental period cannot exceed 30 nights.

Be sure to check the exact rental period limits in the jurisdiction where your property is located. Exceeding these thresholds could result in steep fines and penalties in some areas.

Types of Rentals

Short-term rental regulations apply to a range of property types when rented for temporary stays. This includes:

• Apartments
• Condos
• Single-family homes
• Bed and breakfasts
• Cottages
• Cabins

In some areas, rules may differ for hosted home shares versus entire unit rentals when nobody from the household is present. Regulations also vary for primary residences compared to vacation properties that do not serve as the owner's full-time abode.

Geographic Oversight

Short-term rental oversight happens at multiple levels in California:

• Statewide laws - The Department of Business Oversight oversees registration of booking platforms.
• Counties - Some rural counties have vacation rental ordinances.
• Cities - Many urban cities enact their own short-term rental policies.
• HOAs - Some homeowners and condo associations prohibit short-term rentals.

Be aware of regulations at each geographic level that could apply to your rental property. In some cases, local rules may be stricter than state laws.

Starting a Short-term Rental Business in California

This section covers key steps for hosts getting started with short-term rentals in California.

Registration

Several popular tourist destinations in California require short-term rental hosts to register with the city annually. This includes San Diego, Los Angeles, Palm Springs, San Jose, and Anaheim. Registration procedures help local governments track short-term rentals for zoning and occupancy tax purposes.

The registration process usually involves submitting an application with details on the rental property, local contact information, and a registration fee. Approved registrations are valid for 1-2 years before requiring renewal.

Licensing

Some areas of California require short-term rental operators to obtain a license or permit. For example, the city of Oceanside issues annual short-term lodging licenses. In Palm Springs, short-term rental permits must be renewed every 5 years.

Licenses are tied to the host and property location. Operating without a valid permit can lead to citations and fines from code enforcement. Be sure to check licensing requirements in your jurisdiction before listing your property.

Application Process

The registration or licensing application for short-term rentals typically requires:

• Property address
• Type of rental (apartment, condo, house, etc.)
• Number of bedrooms
• Maximum occupancy
• Proof of property ownership or permission from landlord
• Onsite emergency contact information
• Planned rental periods and booking platform(s)
• Payment of application fee

Having all required documentation ready will help streamline the approval process. Most applications are submitted online for convenience.

Getting Started Tips

Here are a few tips for an easy launch as a short-term rental host:

• Read up on your area's local rules and limitations.
• Consult neighbors beforehand to avoid nuisance complaints. 
• Collect transient occupancy taxes to remit to the city.
• Display your registration or permit number in all listings.
• Purchase proper home-sharing insurance coverage.

Taking these preparatory steps will help set up your rental business for success from the start.

Housing Rules and Requirements

This section outlines key regulations and responsibilities pertaining to safety, occupancy, and insurance for short-term rental properties in California.

Occupancy Limits

Local short-term rental ordinances usually specify maximum occupancy limits based on factors like:

• Number of bedrooms
• Number of beds
• Size of the rental unit in square feet

For example, Palm Springs restricts occupancy to 2 people per bedroom, with a maximum of 6 people. The city of Oceanside similarly caps occupancy at 2 per bedroom plus 2 additional overnight guests. Exceeding these limits could result in citations and suspension of rental permits.

Fire Safety

Short-term rental properties must comply with state and local fire codes. This includes having:

• Working smoke detectors in all bedrooms
• Working carbon monoxide detectors
• Operational fire extinguisher(s)
• Proper address markings visible from the street

Some areas may require interconnected smoke alarms, upper-level escape ladders, and fire sprinkler systems. Schedule regular fire safety inspections to identify and address any issues.

Inspections

Many California cities require an inspection of the rental property before approving a short-term rental registration. Standard items checked during an inspection include:

• Functioning utilities and appliances
• Adequate egress and entries
• Smoke detectors
• Carbon monoxide detectors
• Plumbing and electrical systems
• Absence of hazardous materials

Scheduling the inspection appointment as early as possible allows time to address any failed items needing correction before hosting guests.

Insurance

Standard homeowners insurance usually does not cover short-term rentals. California law requires hosts to maintain adequate liability coverage for vacation rentals. Options include:

• Home sharing insurance endorsement
• Commercial or landlord policy
• Umbrella liability policy
• Third-party insurance through rental platforms

Review policies carefully to ensure proper coverage for short-term rental activities, property damage, and injuries to guests.

Short-term Rental Taxes in California

This section examines key taxes that apply to short-term rental properties and hosts in California.

State Taxes

At the state level, short-term rental hosts must collect and remit California Hotel Occupancy Taxes (also known as transient occupancy taxes or TOT). This applies to rentals of 30 days or less and equals 12% of the rental rate.

Local Taxes

In addition to the 12% state tax, cities and counties in California charge their own occupancy tax rates on short-term rental transactions. For example:

• Los Angeles charges a 14%Transient Occupancy Tax (TOT) for a total tax rate of 26%, combining state and local.
• San Francisco has a 14% TOT, resulting in a 26% total tax rate.
• Palm Springs imposes an 11.5% TOT, bringing the total to 23.5%.
• San Diego's TOT is 10.5%, making the combined rate 22.5%.

Popular tourist areas have also enacted local Tourism Business Improvement District (TBID) taxes that tack on an additional per-night fee. In San Diego, the TBID assessment is 1.5% of the room rate. Palm Springs charges a flat $0.95 per night TBID fee.

Reporting and Remittance

Hosts must regularly collect occupancy tax info and remit payments to the California Department of Tax and Fee Administration (CDTFA). Tax reporting and payment frequency depends on revenue:

•  Under $20,000/quarter - File return annually
•  $20,000-$100,000/quarter - File return quarterly
•  Over $100,000/quarter - File return monthly  

The CDTFA provides tax return forms and instructions for reporting periods. Rental platforms like Airbnb often handle collection and remittance on the host's behalf through voluntary collection agreements. However, independent hosts are fully responsible for accurately tracking, reporting, and paying all occupancy taxes owed.

Penalties

California imposes strict penalties for short-term rental hosts who fail to properly collect, report, or submit occupancy taxes:

• Unreported taxes are subject to assessments equal to the amount owed plus interest.
• Delinquent returns receive a 10% late filing penalty on top of unpaid taxes.
• Misreported tax amounts incur a 20% accuracy penalty.
• Failure to collect taxes can result in fines starting at $500.
• Criminal tax evasion charges are possible for flagrant violations.

Proactively following all tax requirements can help hosts avoid significant fines, interest, assessments, and even rental permit suspension or revocation.

Our Thoughts

While popular, short-term rentals remain a legal gray area in many California locales. Make sure to fully research the specific rules in your community before listing your property. With proper preparation, hosts can navigate the patchwork of regulations to successfully operate a short-term rental business in this sought-after market.