Overview: Are Short-Term Rentals Allowed in Arroyo Grande?

EXPLICIT ANSWER: YES, short-term rentals are allowed in Arroyo Grande, CA, but with significant restrictions and a current cap on the number of permitted rentals.

The City of Arroyo Grande permits short-term rentals through a comprehensive regulatory framework. However, the city has reached its cap of 90 total vacation rentals and will not be granting any additional approvals at this time. New applications are being added to a waiting list and will be processed on a first-come-first-served basis if new approvals become available.

Arroyo Grande distinguishes between two types of short-term rentals:

• Vacation Rentals: Structures rented for less than 30 days without concurrent owner/operator occupancy
• Homestays: Owner-occupied dwellings where a maximum of two short-term lodging rooms are provided for compensation

How to Start a Short-Term Rental Business in Arroyo Grande

Step 1: Determine Eligibility

Given the current cap on vacation rentals, first verify whether any permits are available by contacting the Community Development Department.

Step 2: Understand the Two-Step Process

Operating a short-term rental in Arroyo Grande requires both:

1. Minor Use Permit – Plot Plan Review (Planning approval)
2. Business License (Municipal licensing)

Step 3: Application Process

Submit applications through the City's Permit Portal:

• Select "Apply for a Permit" under "Planning Permits"
• Choose "Plot Plan Review" from available permit types
• Complete business license application through City Hall

Step 4: Prepare for Application Review

The Community Development Director authorizes approval of Minor Use Permits for both vacation rentals and homestays upon demonstration of compliance with performance standards and special conditions.

Required Documents, Permits, Licenses, and Guidelines

For Vacation Rentals

Required Submittal Items (for complete application):

1. Payment of required application fee
2. Site plan of the property
3. Floor plan of the structure(s)
4. Emergency contact person residing within 15-minute drive of rental property
5. Mailing labels with property owner mailing addresses for all properties within 300-foot radius

Required Permits and Licenses:

• Minor Use Permit – Plot Plan Review (Section 16.16.080)
• Business License
• Compliance with all Building Code and Fire Code requirements
• Compliance with Environmental Health regulations

For Homestays

Required Submittal Items (for complete application):

1. Payment of required application fee
2. Site plan of the property
3. Floor plan of the structure(s)

Required Permits and Licenses:

• Minor Use Permit – Plot Plan Review (Section 16.16.080)
• Business License
• Compliance with all Building Code and Fire Code requirements
• Compliance with Environmental Health regulations

Financial Requirements

• Transient Occupancy Tax (TOT): Required under Arroyo Grande Municipal Code Section 3.24.030
• Minimum TOT Remittance: Must remit minimum amount at least every six months (amount established by City Council resolution)
• Application Fees: Listed in the City's Master Fee Schedule

Specific Regulations for Short-Term Rentals

Performance Standards for Vacation Rentals

Neighborhood Compatibility:

• Must be compatible with neighborhood in terms of landscaping, scale, and architectural character
• Use must be harmonious and compatible with existing neighborhood uses

24/7 Emergency Contact Requirements:

• Maintain contact person/entity within 15-minute drive of property
• Available via telephone 24 hours/day, 7 days/week
• Response time requirements: 3 hours (7 a.m. to 9 p.m.), 30 minutes (9 p.m. to 7 a.m.)
• Three instances of unresponsiveness within 12 months = grounds for revocation

Occupancy and Parking:

• Overnight occupants limited to 2 persons per bedroom plus 2 additional persons
• Bedrooms must meet minimum Building Code size requirements
• Two off-street parking spaces required for rental guests, kept free and clear

Operational Restrictions:

• On-site advertising prohibited
• Establishments within 500 feet of existing STR or school are not permitted
• No vacation rentals permitted within Planned Unit Developments (PUDs)
• All refuse must be stored in appropriate containers and placed curbside weekly
• Written notice must be posted inside unit with required information (contact person, address, maximum occupancy, parking info, garbage collection days, Police Department non-emergency number)

Compliance and Enforcement:

• Must remit TOT as required
• Must maintain minimum TOT remittance levels
• Violation consequences include permit revocation
• Revocation proceedings initiated for: 3 unresponsive contacts in 12 months, 2 citations, or 2 arrests within 12 months

Performance Standards for Homestays

Owner Occupancy Requirements:

• Operator must reside on premises during entire rental stay

Stay Limitations:

• Individual guest stays limited to 14 days
• Seven-day period required between stays

Operational Restrictions:

• On-site advertising prohibited
• Bedrooms must meet minimum Building Code size requirements
• Establishment within 500 feet of existing STR or school not permitted
• Must comply with all Building Code, Fire Code, and Environmental Health requirements

Compliance Requirements:

• Must pay TOT as required
• Must maintain minimum TOT remittance levels
• Violations constitute grounds for permit revocation
• Revocation proceedings for 2 citations or 2 arrests within 12 months

Application and Approval Process

Neighborhood Notification:

• Upon vacation rental permit approval, city mails postcards to property owners within 300 feet
• Postcards include project information and emergency contact details
• Appeal process information included

Appeal Process:

• Appeal period based on permit approval date
• 10 calendar days from approval date or by 5:00 p.m. day following Planning Commission meeting (whichever is longer)
• Appeal form available with applicable fees and mailing label requirements

Contact Information for Local Authority

Primary Contact - Community Development Department

• Phone: (805) 473-5420
• Address: 300 E Branch Street, Arroyo Grande, CA 93420
• General Phone: (805) 473-5400
• Fax: (805) 473-0386
• Website: www.arroyogrande.org

Police Department (for disturbances/complaints)

• Phone: (805) 473-5100

Emergency Contact Lists:

• Vacation Rental Emergency Contacts
• Approved Homestays List

Important Considerations for Investors

Current Market Status

• CAP REACHED: The city has exceeded its 90-vacation rental cap
• Waiting List: Complete applications added to first-come-first-served waiting list
• Limited Availability: New approvals only possible when existing permits are revoked or surrendered

Investment Risks

• Permit Revocation Risk: Multiple grounds for permit revocation including unresponsiveness, citations, or arrests
• Regulatory Changes: City Council can modify regulations (most recent major change October 11, 2022)
• Limited Expansion: No new vacation rental permits available until cap changes

Compliance Monitoring

The city has contracted with third-party compliance services to monitor short-term rental websites and ensure hosts comply with conditions of approval and TOT remittance requirements.

Source Links:

• Short Term Rental Regulations - Arroyo Grande Official Site
• Arroyo Grande Code of Ordinances
• Permit Portal
• Citywide Master Fee Schedule
• Ordinance No. 718