With its year-round warm weather and significant events such as Modernism Week, Coachella, and Stagecoach, Palm Springs has established itself as a top getaway destination. However, recent measures by the city authorities to regulate services such as Airbnb and Vrbo have significantly impacted the local housing market.
The concerns of permanent city residents, who were increasingly troubled by the effects of short-term visitors, prompted this change. An influx of complaints, ranging from noise disturbances to soaring house prices, compelled the city to take action. In 2022, the city drafted an ordinance limiting the issuance of short-term rental permits to 20% of homes in any neighborhood in the city.
High-demand neighborhoods, which previously exceeded this cap, have had to adjust to this new reality. Ten neighborhoods were already over the limit, leading to a halt in the issuance of new rental licenses. The city grandfathered in homeowners with licenses before the restriction, and their rentals contribute to their neighborhood’s cap. So now, prospective hosts face extended waiting periods for licenses, which are expected to take years to obtain. Many homebuyers who envisioned renting out their properties in those neighborhoods are now dealing with the consequences.
As a result, certain neighborhoods are experiencing a significant freeze in real estate activity. Short-term rentals, previously a driving force behind rising property prices, instilled confidence in buyers looking to generate income. Michael Slate, a local real estate agent, told the Los Angeles Times that in neighborhoods exceeding the rental cap, many agents don’t bother hosting open houses, as they don’t expect anyone to come. “No one shows up,” Slate explained. “Buyers are aware of the cap, and properties on the market in those neighborhoods don’t get a lot of activity.”
Despite concerns about the potential impact on the city’s tourism industry, Palm Springs has maintained its strong position. However, the broader effect on the housing market is evident. According to Realtor.com, the median listing price in Palm Springs declined over five percent year-over-year in January 2024. While not an incredibly drastic shift, this decrease signals a potential stagnation in the market due to the regulatory changes.
Still, many Palm Springs residents welcome the reduced number of guests in their residential neighborhoods. Late-night parties, tenant-landlord disputes, and general disorder were common complaints. The decision to cap rentals reflects the city’s commitment to managing its tourism industry and preventing the concentration of rentals in specific areas. Despite a slight tightening in the market, Palm Springs remains a highly sought-after destination for buyers.
