Palm Springs, our luxurious desert vacation destination in Southern California’s Coachella Valley, has become a case study illustrating the consequences of a community crackdown on short-term rentals, such as those listed on platforms like Airbnb, VRBO, and Vacasa.
In December 2022, the Palm Springs City Council enacted a new law imposing a 20% cap on the number of homes that can be used as short-term rental (STR) properties in a neighborhood. Additionally, it restricts how many times a homeowner can rent out a property in this manner each year.
A short-term vacation rental is traditionally defined as a single-family dwelling, or any portion thereof, utilized for occupancy for dwelling, lodging, or sleeping purposes without the owner being present for a period of 28 consecutive days or less. Stays 29 days or more are considered long-term and are not regulated by the Vacation Rental Ordinance.
Most of Palm Springs neighborhoods with a few exceptions, are regulated by the vacation rental ordinance, which establishes a 20% limit per neighborhood. According to the City of Palm Springs, “If the property being applied for a Vacation Rental Registration Certificate is in a Neighborhood that is at a 20% or higher Vacation Rental to residential household percentage, the application will not be accepted.”
The artificial inflation of property values due to pandemic panic buyers, who threw unheard-of sums of money at properties, has ceased. Consequently, some, but not all, Palm Springs neighborhoods, especially those on the North end, are experiencing a rapid increase in inventory, thus bringing sky-high property prices back down to earth. Another key factor is the dramatic downturn in the STR business. In Palm Springs, a cap on short-term rentals in specific high-demand neighborhoods has essentially frozen the market in those communities. In these neighborhoods, sales have decreased, homes remain on the market for months, and investors who bought Palm Springs properties during the COVID-19 pandemic are facing significant losses amounting to hundreds of thousands of dollars.
The tighter regulations were designed to help alleviate years of public turmoil over the city’s ballooning short-term rental market and its byproducts—namely, concerns about late-night parties and inconsiderate vacationers disrupting the peace in residential neighborhoods.
A Case Study: Desert Park Estates Neighborhood in Palm Springs North
Currently, there are 46 active listings in Desert Park Estates neighborhood of Palm Springs. According to the most recently updated Vacation Rental percentage table on the City of Palm Springs website, Desert Park Estates is at 24.09% of the neighborhood cap. Here is an overview of two active listings and two that recently sold.
Active Listings:
- 2222 W Acacia Rd, Palm Springs Days on Market: 402 Originally Listed at: $1,179,000 Currently Listed at: $879,000 (↓$300,000)
- 2405 E Bellamy Rd, Palm Springs Days on Market: 198 Originally Listed at: $1,229,000 Currently Listed at: $998,500 (↓$230,500)
Recently Sold Listings:
- 3023 N Bahada Rd, Palm Springs Days on Market: 153 Originally Listed at: $1,250,000 Sold at: $880,000 (↓$370,000)
- 2370 E Finley Rd, Palm Springs Days on Market: 61 Originally Listed at: $927,000 Sold at: $777,000
Will prices go back up anytime soon? Well, no one has a crystal ball, but the Urgency Buyers, desperate for a slice of Paradise as the world was shutting down, are now a thing of the past and housing prices appear to be decreasing steadily to a more sustainable level.
While the crackdown on short-term rentals might deter hordes of rowdy vacationers from gathering en masse in the desert, it could also have an upside. If the market is no longer as in demand and expensive as it once was, homebuyers might find it a bit more affordable.
For more information on the Palm Springs Rental Ordinance and neighborhood cap, visit: https://www.palmspringsca.gov/government/departments/special-program-compliance/vacation-rentals/vacation-rental-density
Marco Colantonio is consistently ranked as one the Top Producing Agents at Coldwell Banker Palm Springs. He is a neighborhood specialist with Global Marketing Outreach. [email protected] / (760) 537-8420
