A Santa Barbara home that had a long-term tenant at any point in the last two years cannot become a short-term rental under the city's new program. That 24-month lookback is in the October 6, 2026 council agenda report. The same report bars any unit where a tenant was displaced to make room for an STR. For a buyer looking at a property that is leased today, the clock that matters starts when the lease ends.
That rule matters only if the home sits where a license is possible in the first place. On most of the city's single-family streets, it isn't. Eligibility turns on the zone a parcel sits in and which side of the Coastal Zone boundary it falls on.
Where the Program Stands This Week
The City Council unanimously approved the Short-Term Rental Program Ordinances for inland and coastal areas on October 6, according to the city's meeting recap. That vote introduced the ordinances. The city scheduled formal final adoption for October 27, 2026, so check the adopted text on the city's site before relying on any detail below. Zoning amendments need five affirmative votes under City Charter Section 1507.
The code-level details here come from the September 15 drafts and the staff report. On October 6 the council made at least one change to them, removing an additional insurance requirement. It kept the two-night minimum stay and limited each person or entity to one STR license.
The Map That Decides Eligibility
The staff report sorts the whole program by geography. Inland, STRs and homeshares would be allowed only in a license area made up of nonresidential zones. In the Coastal Zone, whole-home STRs would be allowed in nonresidential and multifamily zones, and homeshares would be allowed in every zone except M-1, Light Manufacturing. Both STRs and homeshares are prohibited in all High Fire Hazard Areas, a restriction the Ordinance Committee added in June.
| Location of the home | Whole-home STR | Hosted homeshare |
|---|---|---|
| Inland, nonresidential zones such as O-R, O-M, C-R, C-G, M-C | Eligible for a license | Eligible for a license |
| Inland, single-family and other residential zones | No license path | No license path |
| Coastal, nonresidential and multifamily license area | Eligible for a license | Eligible for a license |
| Coastal, single- and two-unit residential zones | Not permitted | Permitted |
| Any High Fire Hazard Area | Not permitted | Not permitted |
That makes a single-family home near the coast more flexible under these rules than a comparable home inland. The coastal owner who lives in the house can still rent part of it to guests. The inland owner cannot. The staff report counts 953 eligible inland parcels, 596 coastal parcels inside the STR license area, and 1,738 coastal parcels in single- and two-unit zones where only homeshares are allowed. Staff put the maximum at 3,287 eligible parcels citywide. Assuming 5 to 20 percent of them apply, it projects roughly 165 to 657 licenses.
Why the Coast Ended Up as the Looser Side
The split goes back to a court case. Before this program, the city treated STRs as hotels, allowed them only where hotels were allowed, and prohibited them in single- and two-unit residential zones, according to the city's STR ordinance page. Then in May 2021, a California appellate court ruled in the Kracke appeal that the city could not apply that ban in the Coastal Zone without a coastal development permit, a Coastal Commission-certified amendment to its Local Coastal Program, or a waiver.
So the coastal half of the new program has to be certified by the California Coastal Commission. Protecting lower-cost overnight accommodations is a core Coastal Act goal, and the staff report presents homeshares as exactly that kind of option. It also points to an easier license path in West Beach, Lower State, East Beach and Coast Village Road than the current hotel change-of-use process.
The coastal rules are not settled yet. City staff have met with Coastal Commission staff since May 2025, and Commission staff questioned the ban on whole-home STRs in single- and two-unit zones. They noted that some other coastal jurisdictions issue a limited number of residential permits by lottery. The city expects that review to continue into 2027. Noozhawk noted Councilmember Meagan Harmon's role on the Coastal Commission in its coverage of the vote.
The Conditions That Surface During a Purchase
Even in an eligible zone, several conditions in the staff report and drafts can rule out a specific property. These are the ones most likely to come up in a purchase:
- Recent long-term tenancy. A unit cannot become an STR if it was occupied under a long-term rental arrangement in the last 24 months, or if a tenant was displaced.
- Accessory dwelling units. An ADU and its associated primary unit cannot be used as an STR. A homeshare is still allowed in the primary unit of a property with an ADU.
- Deed-restricted units. Deed-restricted affordable housing is excluded from both STR and homeshare use.
- One license per owner. Each person or entity is limited to one STR license, so a buyer who already holds one elsewhere in the city would be at the cap.
- Back taxes. An existing unpermitted STR inside a license area can move to the new license path only after paying all unpaid taxes, fees and penalties.
A seller's rental history therefore affects what a property can be used for after the sale. A home that was leased last year and a home that sat empty last year may look identical on paper, but only the second can be licensed right away.
What a Homeshare Asks of the Owner
On most coastal residential streets, the homeshare is the only option, and the draft makes it an arrangement for someone who lives in the house. The homeshare has to be in the owner's or designated host's principal residence. The host must live there during every rental period and be present in the unit from 10 p.m. to 7 a.m. Guests are capped at four overnight, in no more than two sleeping rooms, with one rental group at a time. A second home that sits empty between visits doesn't meet these conditions.
Whole-home STRs in the license areas come with their own obligations. They need a designated manager and a local contact who can reach the property within 30 minutes. Quiet hours run from 10 p.m. to 7 a.m. A renewal may be denied after more than three verified violations in a year or more than five in two years. The staff report proposes $3,334 for a new license and $2,897 for an annual renewal. Draft fines start at up to $1,500 for a first violation, rise to $3,000 for a second within a year and reach $5,000 for each one after that, with every continuing day counted as a separate offense.
How Far the Coastal Count Is Expected to Fall
The city's own revenue figures show how many rentals the coastal rules would close. Short-term rental operators have paid transient occupancy tax since 2001, and those receipts reached $2.0 million in fiscal year 2024, $2.6 million in fiscal year 2025 and $3.2 million in fiscal year 2026. Much of that growth came after the city stepped up enforcement in 2022.
Once the coastal ordinance is certified, staff estimate that the number of STRs paying TOT will fall from about 265 to perhaps fewer than the 65 already paying inside the coastal license area, because whole-home rentals in single- and two-unit zones would have to stop. Staff don't expect many of those to switch to homeshares and put the annual TOT loss at roughly $2.3 million to $3 million. The Santa Barbara Independent reported a much larger number of active listings, more than 2,300 according to AirDNA, as of its October 7 coverage. The two figures measure different things. One counts listings and the other counts operators paying tax.
The council left room for a change. Noozhawk reported that Councilmember Mike Jordan asked staff to explore allowing multiple STRs on a West Beach parcel. The city's recap says staff will return with options for multiple units on a property once the initial program is running.
The Calendar From Here
- October 27, 2026: formal final adoption, as scheduled by the city.
- January 11, 2027: the inland zoning amendments are expected to take effect, when the city's licensing system is scheduled to open.
- July 10, 2027: the end of a 180-day grace period, by which existing unpermitted STRs must be licensed.
- Through 2027: the coastal amendments go to the Coastal Commission for review and certification.
Before any deal assumes rental income, a buyer would want to know the parcel's zone, which side of the coastal boundary it is on, whether it falls in a High Fire Hazard Area, and its lease history for the past two years.
This post is general information about a city program that is still being finalized. It is not legal, tax or financial advice, so confirm how the rules apply to a specific property with an attorney or tax professional and with the City of Santa Barbara.
If a home you own or are considering depends on occasional rental income, Chris Palme can help you collect the zoning and lease-history details that decide eligibility before you write an offer or set a list price. Let's Connect.
