Santa Barbara adopts new short-term rental licensing and operating rules

Short-term rental (STR) operators in Santa Barbara, California, will be required to get STR-specific permits and follow other new operating rules, according to two new zoning amendments approved by the City Council. The new rules come after years of controversy in an attempt to balance concerns about housing affordability and neighborhood disruption with the economic benefits of STRs. Until now, the city has regulated STRs as hotels, without requiring STR-specific permits, which has made it difficult for the city to track them.

Key takeaways:

• Santa Barbara STR operators must obtain annual permits. The new regulations require city-issued licenses for STRs and homeshares and establish operating rules. Violations are subject to fines of up to $5,000 per day.

• New zoning rules limit where STRs can operate. Inland STRs will be allowed in certain commercial zones but banned in residential zones and high-fire areas, while the California Coastal Commission must approve coastal rules before they take effect.

• Operators are required to collect lodging tax from guests. Hosts must register for a city business tax certificate, collect transient occupancy tax (TOT), and file and pay the tax monthly.

The new rules define an STR as “the rental of a whole residential unit, or portion thereof, for a period of 30 consecutive days or less,” where the owner isn’t present during the stay. A homeshare is the rental of a portion of an STR that is the primary residence of the operator, who must be present during the stay.

Operators of both types of rentals are required to obtain a city-issued license annually, and the license number must be included on all advertisements or listings. Properties must undergo a city inspection before the operator can receive a license. Hosts have 180 days after the law goes into effect to get a permit. 

STR permits aren’t allowed to be issued to real estate trusts and corporate entities; for accessory dwelling units (ADUs), deed-restricted affordable or employee housing, live-work units, or manager/caretaker units; or for properties that have been rented to long-term tenants in the past two years (this applies to STRs only, not homeshares).

STRs must also be booked for a minimum of two nights, and only one STR may operate on lots with multiple units. This doesn’t apply to condominium units that are separately owned within a legally established condominium subdivision.

Operators also:

• Aren’t allowed to hold more than one STR permit.
• Must designate a manager who is always available by phone and can respond on-site within 30 minutes of a request from the city.
• Are required to enforce quiet hours from 10:00 p.m. to 7:00 a.m. 
• Must follow occupancy and parking limits.

• .Aren’t allowed to hold large events such as weddings without temporary or conditional permits.

  Operators who violate the rules can be fined up to $5,000, with each day of the violation considered a separate offense.

The new regulations also target STR marketplaces such as Airbnb and Vrbo. Marketplaces aren’t allowed to list or facilitate the booking of STRs or homeshares unless the property has a valid license. Marketplaces must also provide the city with monthly reports identifying all listings upon request. Violators can be fined up to $1,000 per illegal listing per day.

One of the new ordinances, which will go into effect in January 2027, applies to inland areas. The other ordinance covers coastal areas, which must be approved by the California Coastal Commission before it goes into effect. The commission has become more active in short-term rental debates in recent years, often coming down on the side of allowing STRs to preserve coastal access.

Currently, inland STRs are banned in residential areas of the city, so they’re illegal in most inland neighborhoods. STRs are allowed in coastal areas due to a 2021 California appeals court ruling that overturned a 2015 law prohibiting most STRs from coastal areas of the city. According to the ruling, the city is only allowed to enforce penalties for coastal STR violations when it receives a nuisance complaint about a property or if there is an ADU at the property.

Under the new rules, inland STRs are allowed in buildings in commercial zones that already permit housing. They’re prohibited in residential zones and high-fire areas. Coastal zone STRs will be prohibited in single-family and two-family residentia zones. The new regulations will also allow homeshares in residential and commercial zones in the coastal area where housing is already permitted.

Short-term rental operators are required to register with the city for business tax certificates, collect transient occupancy tax (TOT) from guests, and pay the tax to the city monthly. While Airbnb and Vrbo collect local lodging taxes on behalf of their hosts at the time of booking in some California cities, neither marketplace collects taxes for hosts in Santa Barbara, so hosts are solely responsible for TOT compliance.

The city created an STR enforcement program as a pilot for 2023, and it was extended in 2024. Department investigators gather evidence, communicate with operators, and visit properties to crack down on illegal rentals and enforce lodging tax compliance.

With the focus on enforcement, STRs have generated more than $1 million a year in tax revenues over the past two years. City finance staff estimate that the new regulations could lead the city to lose out on nearly $3 million in tax funds annually.

Avalara helps simplify tax and compliance for the hospitality industry through automation. With Avalara MyLodgeTax, STR owners and property managers can register with tax authorities, calculate lodging taxes, prepare and file returns, and remit payment. Avalara is trusted by 200,000+ direct and indirect customers in 75+ countries.

For more on lodging taxes in California, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.

FAQ

When do Santa Barbara’s new short-term rental regulations take effect?

The inland regulations are scheduled to take effect in January 2027, while the coastal regulations must first be approved by the California Coastal Commission. Operators have 180 days after the applicable law takes effect to obtain a permit.

Can Santa Barbara short-term rental operators use an LLC or trust to hold a permit?

No. The new rules prohibit real estate trusts and corporate entities from obtaining STR permits. Operators cannot hold more than one STR permit.

Who is responsible for collecting and remitting lodging taxes in Santa Barbara?

STR operators must collect city transient occupancy tax (TOT) from guests and file and pay the tax to the city monthly. Airbnb and Vrbo don’t collect Santa Barbara lodging taxes on behalf of hosts.