Carmel By The Sea, California Short Term Rental Regulations Guide for Airbnb hosts

Overview: Are Short-Term Rentals Allowed?

Short-term rentals are largely prohibited in Carmel-by-the-Sea proper. The city maintains one of the most restrictive short-term rental policies on the California coast. Specifically, no home or subordinate unit may be rented for less than 30 consecutive days in the residential district. This 30-day minimum applies to all residential areas within city limits.

However, there are limited exceptions in commercial districts (CC, SC, RC) and R-4 zoning through two permit types: Legal Non-conforming permits (grandfathered properties) and Housing Incentive permits (requiring creation of affordable housing units). Additionally, properties located outside Carmel-by-the-Sea city limits but within Monterey County may offer more flexible rental opportunities, subject to county regulations.

What do Airbnb hosts actually earn in Carmel By The Sea?

Carmel By The Sea hosts earn a median $96,989/year with $641 ADR and 71% occupancy.

Top performers pull in $179,450+ per year.

See the full Carmel By The Sea market breakdown

How to Start a Short-Term Rental Business in This Market

Step 1: Property Location Assessment

Inside Carmel-by-the-Sea city limits: STRs are prohibited in R-1 residential zoning. Only commercial districts offer limited pathways.
Outside city limits: Properties in Carmel Valley, River Beach, Carmel Point, and unincorporated Monterey County may offer weekly or shorter rental opportunities, subject to county regulations.

Step 2: Zoning and Permit Verification

Legal Non-conforming Properties: If your property had a valid STR permit prior to Ordinance 2019-03, you may qualify for continued operation under the legal nonconforming use provisions.
Housing Incentive Permits: New permits in commercial districts require creating three new rental units—one low-income, one moderate-income, and one market-rate unit—to obtain permission for one STR unit.

Step 3: Permit Application Process

Contact the Planning and Building Department to discuss your specific property situation and eligibility.
For new permits, prepare documentation for conditional use permit applications in commercial districts.
Ensure compliance with parking requirements (one off-street space per STR unit).

Step 4: Business License and Tax Registration

Obtain appropriate business licenses through the City of Carmel-by-the-Sea.
Register for Transient Occupancy Tax (TOT) collection and remittance if operating a legal STR.

Required Documents, Permits, Licenses, and Guidelines

City of Carmel-by-the-Sea Requirements

Permits:

Legal Non-conforming STR Permit (for properties with valid pre-2019 permits)
Housing Incentive Permit (requiring creation of three new rental units)
Conditional Use Permit (required for new STR operations)

Licenses:

Business License from City of Carmel-by-the-Sea
TOT registration and compliance

Documentation:

Property deed or lease documentation
Proof of insurance
Site plans showing parking compliance
Income verification for affordable housing components (for Housing Incentive permits)

Key Guidelines

Minimum Stay: 30 days minimum in city residential districts
Parking: One off-street space required per STR unit
Zoning Compliance: Must be in CC, SC, RC, or R-4 districts for new permits
Advertising: No advertising of unpermitted STRs (CMC 17.28.040)

Specific Regulations

City of Carmel-by-the-Sea (Municipal Code)

Prohibited Uses (CMC 17.08.060):

STRs prohibited in single-family R-1 residential districts
STRs prohibited in residential districts without permits

Transient Rental Regulations (CMC 17.14.040.W):

Legal Non-conforming permits: Issued before Ordinance 2019-03, run with the land, do not expire
Housing Incentive Permits: Require creating three rental units (1 low-income, 1 moderate-income, 1 market-rate)
Minimum unit sizes: Two of the three rental units must be minimum 650 square feet
Location flexibility: Transient rentals may be on same site as new units or elsewhere in commercial districts
Parking requirement: One off-street space per unit in all districts

Monterey County (Unincorporated Areas)

2025 County Ordinances:

Cap Limit: STRs limited to 4% of single-family homes in unincorporated coastal zones
Hosted Stay Exception: Rentals allowed when owner resides on property
Limited Use Exception: Rentals permitted ≤3 times per year regardless of owner presence
Ban Areas: Commercial STRs prohibited in Big Sur and Carmel Highlands
Current Status: Approximately 400 vacation rentals exist; new cap would limit to 334 commercial units

Coastal Zone Regulations (California Coastal Commission approved):

Commercial STRs banned entirely in Big Sur and Carmel Highlands
4% cap on STR concentration in other coastal areas
Focus on preserving neighborhood character and housing availability

State of California

Subject to all California laws regarding STR operations
TOT collection and remittance requirements
Consumer protection and safety regulations
ADA compliance where applicable

Contact Information

City of Carmel-by-the-Sea

Planning and Building Department

Phone: (831) 620-2010
Website: ci.carmel.ca.us/
Address: Monte Verde Street between Ocean and Seventh Avenues, Carmel-by-the-Sea, CA 93921
Mailing: P.O. Box CC, Carmel-by-the-Sea, CA 93921
Fax: (831) 620-2004

General City Contact:

Phone: (831) 620-2000
Website: ci.carmel.ca.us/

Monterey County

Housing and Community Development

Website: www.countyofmonterey.gov/
Permit Center: www.countyofmonterey.gov/government/departments-a-h/housing-community-development/permit-center/short-term-rentals

California Coastal Commission

Website: www.coastal.ca.gov/
Contact through Monterey County offices for local inquiries

Links to Source Pages

Investment Recommendation: Given the highly restrictive nature of Carmel-by-the-Sea's STR regulations, investors should carefully evaluate whether the limited permit pathways justify the investment. The requirement to create three rental units (including affordable housing) to obtain one STR permit creates substantial barriers to entry. Properties outside city limits in unincorporated Monterey County offer more opportunities, though new county regulations will significantly limit future growth. Existing legal non-conforming properties may represent the most viable investment opportunities in this market.

Next step

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Ask the AI Advisor about Carmel By The Sea

Carmel-by-the-Sea, more commonly called Carmel, is a small and famously picturesque village in Monterey County on California's central coast. With a resident population of roughly 4,000, it has long been associated with storybook architecture, white-sand shoreline, a thriving arts scene, and an eclectic cast of celebrity and artistic residents. Best known for its walkable downtown of whitewashed cottages, art galleries, and tasting rooms, Carmel also serves as a gateway to the broader Monterey Peninsula and to the dramatic Big Sur coastline stretching south along Highway 1. It sits about 120 miles south of San Francisco and roughly 330 miles north of Los Angeles, both reached by car via scenic coastal or inland routes.

Carmel Beach anchors the village, a long crescent of soft white sand that feels almost Mediterranean and is famously dog-friendly. Visitors come for sunset walks, tide-pooling, and the cypress-lined bluffs that overlook Carmel Bay. The beach is just a few blocks from the center of town, easily reached on foot within minutes.

Just a few minutes' drive south of Carmel lies Point Lobos State Natural Reserve, often called the "crown jewel" of the California state park system. The reserve protects rugged headlands, hidden coves, and one of the richest marine habitats on the West Coast, where sea otters, harbor seals, sea lions, and migrating gray whales can often be seen from the shoreline trails.

A short distance to the north and west of town, the gated 17-Mile Drive winds through Pebble Beach and the Del Monte Forest, passing iconic landmarks such as the Lone Cypress, Fanshell Beach, and the manicured fairways of Pebble Beach Golf Links. The route is one of the most scenic drives in the country, and several pullouts are open to the public even without a resort reservation.

About five miles northeast, the city of Monterey offers the celebrated Monterey Bay Aquarium on Cannery Row, where kelp forests, sea otters, and jellies draw visitors year-round. Closer to home, the historic Mission San Carlos Borromeo de Carmelo — founded in 1770 and once home to the Junípero Serra — anchors the south end of the village and remains an active parish and museum.

Carmel is a compelling base for short-term rentals because it pairs small-town charm with an extraordinary concentration of coastal, cultural, and culinary draws within a tight radius. Guests can spend the morning walking the village, the afternoon at Point Lobos or the aquarium, and the evening dining at a wine country restaurant — all without long drives, which keeps occupancy steady across weekends, holidays, and shoulder seasons.