Overview: Are Short-Term Rentals Allowed in Morro Bay, CA?

YES — Short-term rentals are allowed in Morro Bay, California, but they are heavily regulated under the city's Short Term Rental Ordinance adopted in 2020. The city permits STRs in residential, mixed-use, and commercial zones, provided property owners comply with all permit requirements and operational standards. However, there are significant limitations: full-home rentals in residential zones are capped at 175 properties, and new applications are currently paused due to reaching the cap.

How to Start a Short-Term Rental Business in Morro Bay

Step 1: Initial Consultation

• Contact city staff before submitting any formal application
• Verify zoning compliance, parking requirements, maximum occupancy, insurance, and house rules
• Visit staff in-person at the City of Morro Bay Public Services Building or contact via provided channels

Step 2: Waitlist Registration

Due to the current cap on full-home residential STRs, interested investors must:

• Contact city staff to get on the waitlist if interested in a full-home rental in a residential zone
• Wait for city outreach with next steps
• Understand that only properties meeting the 175-foot buffer requirement will qualify

Step 3: Application Submission

• Submit completed STR application to str@morrobayca.gov
• Include all required documentation (see permits section below)
• Pay applicable fees (see cost section below)

Step 4: Review and Inspection Process

• Staff reviews application for completeness within 30 days
• If incomplete, additional information requested
• If found incomplete on second submission, application deemed abandoned
• Staff approves, conditionally approves, or denies within 45 days of complete application
• Inspection scheduled after initial review

Step 5: Compliance and Operations

• Maintain all required permits and licenses
• Display permit number in listings
• Comply with operational standards (noise, parking, signage)
• Renew permits annually
• Submit to re-inspection every 4 years

Required Documents, Permits, Licenses, and Guidelines

Required Permits and Licenses:

1. STR Permit (City-issued)

   • Initial application with inspection
   • Annual renewal required
   • Re-inspection every 4 years

2. Business License

   • Required before operating
   • Annual renewal
   • Must be current to remain operational

3. Transient Occupancy Tax (TOT) Account

   • Required for tax collection and remittance
   • Annual renewal
   • Separate from business license

Required Documentation:

• Completed STR Application Form
• STR Application Worksheet
• Proof of insurance
• Property ownership documentation
• Good Neighbor Brochure acknowledgment
• House rules documentation
• Local contact person information

Guidelines and Standards:

• Maximum occupancy limits (property-specific)
• Parking requirements (property-specific)
• Signage restrictions
• Noise and disturbance limitations
• Guest conduct requirements
• Neighborhood impact mitigation measures

Specific Regulations for Short-Term Rentals

City of Morro Bay Regulations:

Zoning Permitted:

• Residential zones (with restrictions)
• Mixed-use zones
• Commercial zones

Cap Limitations:

• Full-home rentals in residential zones: MAXIMUM 175
• Currently at capacity with 186 properties on waitlist
• Home-share rentals in residential zones: NO CAP
• Commercial zone STRs: NO CAP

Buffer Requirements:

• New STRs must be separated by at least 175 feet from existing STRs
• Measured from property lines
• Does not apply to home-share STRs in residential zones
• Does not apply to STRs in commercial/mixed-use zones

Operational Standards:

• Maximum occupancy limits per property
• Parking requirements per unit
• Signage restrictions
• Noise control measures
• Guest management requirements

Inspection Requirements:

• Initial inspection for new permits
• Re-inspection every 4 years
• Annual renewal verification

Enforcement Actions:

• Current Status: Active enforcement began November 2024
• Penalties: Up to $500 per day for non-compliance
• Back Taxes: Liable for last 3 years of unpaid TOT
• Cease Operations: Required for illegal operations

County and State Regulations:

San Luis Obispo County: Follows Morro Bay city regulations within city limits. No additional county-specific STR regulations identified in provided content.

State of California: Morro Bay regulations align with state law requirements. No specific additional state regulations beyond standard California business and tax requirements were identified.

Contact Information

City of Morro Bay STR Department:

• Email: str@morrobayca.gov
• Phone: 805-772-6264 (Angie Buoncristiano, Administrative Technician)
• Phone: 805-772-6211 (Erik Valentine, Assistant Planner)
• Phone: 805-772-6270 (Susana Toner, Assistant Planner)

City of Morro Bay Main Contact:

• Address: 595 Harbor Street, Morro Bay, CA 93442
• Phone: 805-772-6200
• Fax: 805-732-7329

HdL Licensing Company (Contracted):

• Email: Morrobay@hdlgov.com
• Phone: 805-339-2649
• Application Portal: morrobay.hdlgov.com/Home/Home/MorroBay.hdlgov.com

Community Development Director:

• Email: asingewald@morrobayca.gov

Office Hours:

• Location: 955 Shasta Ave
• Hours: Monday-Thursday, 8:00 AM through 5:00 PM

Costs and Fees

Application Costs:

• STR Application Fee: Starting at $600 (as per Airbnb reference)
• Business License Fees: Refer to Master Fee Schedule (FY2024-2025)
• Annual Renewal Fees: Applicable annually
• Inspection Fees: Included in application/re-inspection process

Important Timelines and Deadlines

Current Status (as of provided content):

• Permit Pause: No new full-home residential STR permits being issued until active permits drop below 175
• Waitlist: 186 properties currently waitlisted
• Enforcement: Active enforcement letters sent starting November 4, 2024
• Renewal Deadline: All existing permit holders must renew by January 1, 2025

Application Review Timeline:

• Completeness Review: Within 30 days of submission
• Final Decision: Within 45 days of complete application
• Annual Renewal: 60 days prior to expiration

Current STR Statistics (as of provided content):

• Total STRs: 193 total properties
• Full-Home Rentals: 173 in residential zones
• Commercial STRs: 9
• Home-Share STRs: 11
• TOT Revenue (2023-2024): $707,641 from STRs

Links to Source Pages

1. City of Morro Bay STR Information: www.morrobayca.gov/1085/Short-Term-Vacation-Rentals

2. Municipal Code - Short-Term Rental Ordinance: library.municode.com/ca/morro_bay/codes/code_of_ordinances?nodeId=TIT17ZO_DIVIIICIRE_CH17.30STSPUS_17.30.220SHRMVAREIP

3. Application Portal: morrobay.hdlgov.com/Home/Home/MorroBay.hdlgov.com

4. Master Fee Schedule: www.morrobayca.gov/259/Master-Fee-Schedule

5. Business Licenses/TOT Information: www.morrobayca.gov/82/Business-Licenses

6. Airbnb Help Article (Third-party reference): www.airbnb.com/help/article/3540

Investment Considerations and Risks

Current Market Conditions:

• High Demand: 186 properties on waitlist indicates strong investor interest
• Limited Supply: Hard cap reached for residential full-home rentals
• Active Enforcement: City actively monitoring and shutting down non-compliant operations
• Regulatory Risk: City Council considering stricter regulations in January 2025

Compliance Requirements:

• High Compliance Burden: Multiple permits, annual renewals, regular inspections
• Neighborhood Impact Standards: Strict requirements to minimize neighborhood disruption
• Financial Obligations: Significant upfront and ongoing fees plus TOT payments

Market Opportunities:

• Home-Share Option: No cap on home-share rentals in residential zones
• Commercial Properties: No cap on commercial zone STRs
• Existing Permits: May be opportunity to acquire existing permitted properties

This guide provides the essential information needed for STR investment decisions in Morro Bay, CA. Prospective investors should note the current permit pause and consider alternative strategies such as home-share arrangements or commercial zone properties while monitoring for potential regulatory changes in early 2025.