Palm Springs May Vote to Limit Short Vacation Rentals

Palm Springs has a vote next week that could dramatically limit the number of vacation rentals in the city.

Per Vacation Rental Work Group (a Palm Springs citizen’s body), they may recommend a citywide cap of 2,500 permits.

Consider that Palm Springs has 2,445 vacation rental permits currently in use. That leaves 500 left to fill under the potential new limit, i.e. only 2% left to go.

Per Desert Sun, “short-term rentals make up over a quarter of the homes [in just four communities]: Racquet Club Estates at 39%; Sunmor at 28%; and Twin Palms and El Rancho Vista Estates at 27%..”

While the vote isn’t a ban, it’s described as a temporary moratorium.

How will this affect the value of current short-term rental permits? Consider the taxi medallion system.

New York, and several other cities, implemented the taxi medallion system. These were government-issued permits to operate taxis. The number of permits were limited. As a result, medallions in New York at one point sold for over $1 million. With the advent of ride-sharing services such as Uber though, they dropped to $180,000.

The difference between the taxi medallion system and Palm Springs’ short-term rental permits is that these short-term rental permits can’t be transferred by the same owner to another property. Even so, if Palm Springs limits the number of short-term rental permits, that could make each vacation rental home more valuable. Less competition, in theory, would make these homes more valuable.

Palm Springs rentals currently gross a median about $260 per night or a median revenue annually of $95,244. These figures are under a no-limit policy.

Could they increase, and by how much, under a restricted system?