Morro Bay, California Short Term Rental Regulations Guide for Airbnb hosts

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.

What do Airbnb hosts actually earn in Morro Bay?

Morro Bay hosts earn a median $63,349/year with $311 ADR and 73% occupancy.

Top performers pull in $91,528+ per year.

See the full Morro Bay market breakdown

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:

STR Permit (City-issued)
- Initial application with inspection
- Annual renewal required
- Re-inspection every 4 years
Business License
- Required before operating
- Annual renewal
- Must be current to remain operational
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

City of Morro Bay STR Information: www.morrobayca.gov/1085/Short-Term-Vacation-Rentals
Municipal Code - Short-Term Rental Ordinance: library.municode.com/ca/morro_bay/codes/code_of_ordinances?nodeId=TIT17ZO_DIVIIICIRE_CH17.30STSPUS_17.30.220SHRMVAREIP
Application Portal: morrobay.hdlgov.com/Home/Home/MorroBay.hdlgov.com
Master Fee Schedule: www.morrobayca.gov/259/Master-Fee-Schedule
Business Licenses/TOT Information: www.morrobayca.gov/82/Business-Licenses
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.

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Ask the AI Advisor about Morro Bay

Morro Bay is a small coastal city in San Luis Obispo County, California, with an approximate population of around 10,500 residents. Set along the Central Coast roughly halfway between Los Angeles and the San Francisco Bay Area, it sits about 230 miles northwest of Los Angeles and a similar distance southeast of San Francisco, with the larger college town of San Luis Obispo only about 13 miles to the southeast. The town has a relaxed, working-harbor atmosphere, shaped by a fishing fleet, sea otters drifting in the bay, and the iconic volcanic plug known as Morro Rock rising 576 feet above the harbor entrance. It serves as a popular stop along Highway 1 and a gateway to some of the most scenic stretches of the California coast, including the famous elephant seal rookery and Hearst Castle in San Simeon.

Dominating the waterfront is Morro Rock, one of the ancient volcanic peaks known as the Nine Sisters that line the San Luis Obispo coastline. The rock is a protected peregrine falcon nesting site and a beloved symbol of the town, drawing photographers and visitors who stroll the Embarcadero to view it from the harbor's edge, often with sea otters and sea lions visible in the surrounding water.

Just south of the harbor lies Morro Bay State Park, which extends along the bay and inland toward a chain of volcanic hills. The park features a campground, a golf course, walking trails, a kayak launch, and the Museum of Natural History at its heart, where visitors can learn about the estuary ecosystem, the Chumash people, and the area's bird life. The park is just a few minutes' drive from downtown and is a popular spot for birdwatchers, especially during winter migrations along the Pacific Flyway.

About a 20-minute drive south of Morro Bay, Montaña de Oro State Park offers a wilder experience with rugged coastal bluffs, eucalyptus-shaded canyons, and several miles of trails leading to quiet coves. Its name, meaning "Mountain of Gold," comes from the golden wildflowers that blanket the hills in spring, and it remains one of the less-crowded natural escapes along this stretch of coast.

Roughly 35 to 40 miles up Highway 1, near the town of San Simeon, Hearst Castle is one of California's most visited historic landmarks. The hilltop estate built by newspaper magnate William Randolph Hearst contains ornate guest houses, sweeping terraces, and a collection of art and antiquities, with guided tours showcasing the property's grand architecture and Pacific views. The drive itself winds through some of the most dramatic coastal scenery in the state, often passing the elephant seal viewing area near San Simeon along the way.

With its mix of harbor-front charm, accessible outdoor recreation, and proximity to both Hearst Castle and the broader Central Coast, Morro Bay offers visitors a varied and distinctly Californian experience. For short-term rental owners, that combination of natural beauty, year-round mild weather, and steady tourist traffic from Hearst Castle day-trippers, Highway 1 road travelers, and weekend visitors from Los Angeles and the Bay Area makes the city a quietly dependable coastal market.