State of New Jersey Short-Term Rental Regulations

With world-class beaches, historic Victorian mansions, buzzing Atlantic City casinos, quaint shore towns, and proximity to major cities, New Jersey draws over 100 million visitors annually. Many choose short-term rentals over hotels when vacationing in popular destinations like Cape May, Princeton, Asbury Park, and the Jersey Shore. For property owners, listing spare rooms or beach houses on sites like Airbnb, Vrbo, and Vacasa allows them to profit amid massive tourism demand. However, hosts must navigate New Jersey's strict regulatory approach governing short-term rentals. This guide provides a comprehensive overview of permitting, taxes, safety rules, inspection requirements, insurance mandates, and other regulations across the state to help owners achieve compliance.

Defining Short-term Rentals in New Jersey

While some localized variations exist, New Jersey takes a consistent statewide approach to defining and regulating short-term vacation rentals.

State Definition of a Short-term Rental

New Jersey defines short-term rentals as rooms, homes, or other lodging spaces rented out for less than 90 consecutive days. This covers typical vacation rentals.

Short-term vs. Long Term Stays

Stays exceeding 90 days typically constitute long-term residential tenancies with different regulations, while under 90 days is considered short-term lodging across New Jersey.

Types of Rentals Included

The definition covers entire homes, apartments, condos, spare rooms, carriage houses, or shared spaces listed on sites like Airbnb, Vrbo, etc.

Starting a Short-term Rental in New Jersey

Launching a compliant short-term rental business in New Jersey involves research, planning, permitting, and strict adherence to regulations.

Checking Local Zoning and Codes

Ensure short-term rentals are permitted under zoning codes for your property's neighborhood. Additionally, review condo or HOA rules regarding STRs.

Applying for Required State Permits

New Jersey requires all hosts to obtain a Hotel and Multiple Dwelling Inspector (HMI) License from the Department of Community Affairs before listing a short-term rental.

Registering with Tax Authorities

You must collect and remit all applicable state occupancy taxes and local taxes. Registration ensures tax compliance.

Researching Local Requirements

Some Jersey Shore communities impose additional local restrictions, caps on permits issued, special events prohibitions, and inspection requirements beyond the state licensing.

Building Projected Budgets and ROI

Carefully research and factor in all costs like licensing, taxes, utilities, furnishings, cleaning, and insurance to gauge your potential short-term rental return on investment.

State-Level Regulations for New Jersey STRs

In addition to taxes, New Jersey imposes strict statewide laws regulating the safety, permitting, and operations of short-term rentals.

State Licensing and Inspections

The required state HMI license involves a comprehensive inspection of safety systems, structures, electrical, plumbing, and more before a short-term rental can operate. Renewals are required.

Transient Accommodations Tax Collection

A statewide 5.625% transient accommodations tax applies to all hotel and short-term lodging rentals. Hosts must collect and remit this tax.

Operational Standards and Monitoring

The state oversees fire safety, cleanliness, parking, noise, disorderly conduct, and other operational aspects of licensed short-term rentals. Fines and revocation can result from violations.

Restricting Shared Spaces and Events

New Jersey prohibits renting out shared living spaces and holding events like weddings or large gatherings at short-term rental properties.

Local Regulations on New Jersey Short-term Rentals

In addition to extensive state oversight, municipalities in New Jersey impose their own restrictions and requirements on short-term rentals.

Local Permitting and Licensing

Many popular tourist towns require hosts to obtain local short-term rental permits in addition to state licensing. Local permits often cap the total rentals allowed.

Occupancy and Guest Limits

Some Jersey Shore communities impose maximum occupancy limits more stringent than those in state regulations, like 1 person per 200 square feet or 2 people per bedroom.

Noise, Parking and Nuisance Ordinances

Jersey Shore towns prohibit loud parties, overcrowding, excessive vehicles, disorderly conduct, outdoor noise past 10 p.m., and other issues through local ordinances.

Increased Inspection Authority

Local jurisdictions retain the authority to inspect short-term rentals beyond state requirements related to factors like noise, trash, parking, and occupancy.

Safety and Legal Standards for New Jersey STRs

Short-term rentals across New Jersey must comply with extensive regulations imposed by both state and local authorities.

State Health and Safety Code Compliance

The required state HMI inspection ensures compliance with all relevant building construction, fire, electrical, health, and safety codes.

Local Property Maintenance Standards

In tourist areas, short-term rentals must meet heightened property maintenance standards regarding litter, noise, appearance, vehicles, etc., set through local ordinances.

Swimming Pool, Hot Tub, and Outside Area Rules

Short-term rentals with pools, hot tubs, decks, balconies, and other outside amenities face stringent state and local safety rules.

Minimum Liability Insurance Requirements

New Jersey requires hosts to carry a minimum of $500,000 in liability insurance coverage on short-term rentals before issuing required licenses.

Taxes on Short-term Rentals in New Jersey

New Jersey levies extensive taxes on short-term rental transactions that hosts must factor into their pricing and budgets.

State Sales and Occupancy Taxes

New Jersey charges a 6.625% statewide tax on all hotel rooms and short-term rentals. This includes a 5.625% occupancy fee plus the standard 6.625% sales tax.

Local Accommodations Taxes

In addition to the 5.625% statewide occupancy tax, cities and towns across New Jersey impose their own local taxes on short-term rentals, creating a complex patchwork for hosts to navigate. These local room taxes range from 1-11% on top of state taxes. For example:

• Jersey City charges an 11% local tax on all hotel rooms and short-term rentals, including a 6% city tax and a 5% tourism district assessment.
• Hoboken levies a local tax of 5.825% on STRs. This includes a 1.785% municipal tax along with the standard 4.04% local tax.
• Atlantic City tops the state at a whopping 19.55% total tax on accommodations. This includes a 9% Atlantic City luxury tax plus a $1 per room night tourism fee.
• Cape May has a 3.15% county tourism tax on all short-term lodging in addition to state taxes.
• Princeton imposes a 9% local tax on top of the statewide tax for a 15.625% total lodging tax rate.

So, hosts must carefully research the patchwork of taxes across different municipalities when budgeting and setting rental rates. Some Jersey Shore destinations lead to a total tax burden nearing 20% when state, local, and occupancy taxes stack up.

Reporting Requirements and Deadlines

Detailed monthly reporting of occupancy rates, taxes collected, and taxes owed is mandated. Records must be kept for a minimum of 4 years.

Rental Revenue Subject to Income Tax

All net rental income is subject to federal income tax and New Jersey state income tax. Remember to accurately report profits.

New Jersey's extensive statewide oversight, paired with local regulations in tourism hotspots, creates a complex compliance challenge for hosts. However, following the requirements outlined in this guide allows your New Jersey short-term rental business to thrive. Use this as your regulatory roadmap to success in the Garden State.