Short-term rental rules in SLO County, town by town

The City of San Luis Obispo is the county’s clearest case. Under municipal code section 17.86.160, short-term rental of a home the owner does not live in is a prohibited use inside city limits. There is no cap to join and no waitlist to sit on, because the use itself is not allowed.

What the city does permit is a homestay: renting rooms inside an owner-occupied primary residence, capped at four adult overnight guests, after obtaining a homestay permit and a business licence. Operators pay transient occupancy tax at ten percent, plus a two percent tourism business improvement district assessment and a one percent tourism marketing district assessment, and verify annually that the home remains their primary residence.

For buyers, this is the one town where the answer does not depend on the parcel. If the plan is to buy a house in the city and rent the whole of it out by the night, the plan does not work, whatever a listing or a previous owner suggests. As of our September 2, 2026 review the prohibition stands.

Paso Robles adopted its short-term rental ordinance, number 1082, on August 6, 2019, with the numerical limits set separately by council resolution. Non-hosted rentals are capped at 325 citywide, with a sub-cap of 75 inside the R-1 single-family zone. Both caps have been full for years: the city reached the R-1 limit on October 9, 2019 and the citywide limit on May 24, 2021, and has run a waitlist for each since.

Homeshares, where the owner lives on the property and rents part of it, are not capped at all. That is the practical route into the Paso market for an owner who wants to host, and it is the distinction most buyers miss when they hear the word "capped".

Transferability is where Paso differs from its neighbours, and it differs internally too. Permits have moved with the property in the Town Centre zones and not in R-1, where a sale closes the permit and returns it to the pool. The city was weighing an end to those transfers when it last reported publicly, so treat any claim that a permit conveys as something to confirm in writing with the city before it becomes part of your offer. Waitlist positions do not transfer to a new owner in any zone.

Atascadero is the one city in the county without a dedicated short-term rental ordinance. Hosts operate under the general home-occupation business licence, with transient occupancy tax collected through the city’s third-party administrator, and the city’s vacation rental handout carries the operating standards.

That has been on the verge of changing for a year. The council directed staff to draft a comprehensive ordinance in September 2025, the city ran a public workshop on February 5, 2026, and staff brought the results back on February 24, 2026 asking the council to decide whether to continue toward a municipal code amendment and what it should contain. The minutes record that the council provided direction to staff. No ordinance was introduced and no vote was taken, and two council members recused themselves from the discussion. As of our September 2, 2026 review nothing has been adopted.

For buyers this is the county’s largest open question. An Atascadero property bought today on the strength of today’s permissive rules could be operating under a new ordinance within a year, and the debate has included an owner-occupancy requirement, which would be the change that matters most to an investor. Anyone underwriting Atascadero rental use should re-check the council agenda before removing contingencies.

Morro Bay adopted its short-term rental ordinance in 2020 and the Coastal Commission certified the coastal-zone half of it on September 9, 2021. In residentially zoned areas the city allows a maximum of 175 full-home rentals and requires 175 feet between them, measured property line to property line. Applicants beyond the cap join a waitlist.

Two carve-outs matter. Home-share rentals in residential zones are not subject to the cap, and as of January 2025 the city sets no limit on them. Short-term rentals in commercial and mixed-use zones sit outside both the cap and the buffer, which is why a downtown condominium and a house three streets inland can be under different rules.

Permits renew annually, with the renewal due 60 days before expiry, and the city inspects every four years. After an audit year the council authorised staff in January 2026 to contact five waitlisted properties identified as eligible for a full-home permit, which is the only movement the cap has seen recently.

For buyers, the load-bearing fact is that a Morro Bay permit does not come with the house. Verify the cap, the buffer against neighbouring permits and the waitlist position with the city before you write an offer that depends on any of them.

Pismo Beach uses two separate categories, and conflating them is the most common mistake made about this town. A "short-term rental" is a rental of under 30 consecutive days permitted primarily in residential zones. A "vacation rental" is a rental permitted in the C-1, RR and R-4 zone districts in the downtown core, and it does not require the owner to live there.

Under ordinance O-2023-006, new short-term rental licences have not been issued since November 7, 2023. Properties licensed before that date continue to operate, and the city publishes the list of currently approved short-term rentals on its own website, which makes verification unusually easy here: if an address is not on the city’s list, it is not licensed. The freeze has no published sunset.

The downtown vacation rental path was not closed by that ordinance. A buyer of a property in those zones applies to the Planning Division for their own vacation rental permit, because permits do not transfer with the sale of a property in Pismo Beach in either category. The seller’s licence is not part of what you are buying.

Arroyo Grande amended its short-term rental regulations by ordinance 718 on October 11, 2022. The total number of approved vacation rentals in the city may not exceed 90, and the city states on its own short-term rental page that it has exceeded that cap and is granting no additional approvals at this time. That is a de facto freeze, and it is a materially different situation from a cap with room in it.

Both categories carry the same separation standard: a vacation rental may not be established within 500 feet of an existing short-term rental or a school, and neither may a homestay. Both need a minor use permit with plot plan review under section 16.16.080, plus a business licence.

One number gets misread here. The 300-foot figure in the city’s application materials is the radius for the mailing labels an applicant must supply so neighbours receive notice. It is a procedural requirement, not a second separation standard, and it does not constrain where a rental may go.

Grover Beach adopted ordinance 19-04 on June 17, 2019, codified at Development Code section 4.10.185, and amended it on February 26, 2024 to clarify waitlist procedure and local-contact requirements and to prohibit rentals in accessory dwelling units. The Coastal Commission certified the coastal-zone half of that amendment on May 9, 2024, so it is in force on both sides of the line.

The cap is split geographically, which is why summaries of this town disagree with each other. The city allows a maximum of 40 non-owner-occupied rentals on properties inside the coastal zone, generally west of North 4th Street and South 5th Street, and a maximum of 60 on properties outside it. Together that is 100, which is the figure usually quoted, but a property’s eligibility turns on which of the two pools its side of the line belongs to. Owner-occupied permits are not capped at all.

The operating rules are unusually specific. One permit per property, or per building where units share common walls. Rentals are prohibited in accessory and junior accessory dwelling units, deed-restricted affordable units, single room occupancy facilities, tiny homes on wheels, two-unit housing projects, urban lot splits and vehicles. A non-owner-occupied permit requires a city inspection before issuance, written notice to everyone within a 150-foot radius after approval, and a minimum of twelve overnight stays a year or the permit is revoked. Owner-occupied hosts must be in residence between 10pm and 7am and prove the homeowners’ exemption on their county tax bill.

Permits run from August 1 to July 31, renew in July, and are issued to the owner only. They are not transferable, and the city asks to be notified when a home sells. A waitlist for the non-owner-occupied pools is notified in January when openings appear.

Nine of the towns on this page are unincorporated, so San Luis Obispo County regulates them rather than a city council. Whatever the community, a rental needs land-use clearance from Planning and Building, a county business licence, and transient occupancy tax registration. Where a community water or sewer system serves the parcel, the application must include evidence that the provider has been told about the use and has confirmed it has the capacity to serve it. That last requirement has teeth in places such as San Simeon, where the district has its own service constraints.

The county has confirmed that a vacation rental business licence cannot be transferred to a new owner. A buyer who applies before the seller’s licence goes inactive can be issued their own licence with a new zoning clearance. If it has already lapsed, the property has to qualify again from scratch against every current standard, including the separation rules, and a property that was compliant when the seller started may no longer be.

Rentals are not allowed in an accessory dwelling unit, a guesthouse or agricultural worker housing. The Board of Supervisors approved an annual short-term rental review fee beginning January 2026, billed with the vacation rental business licence renewal, citing a register that has grown past 2,200 licence holders.

In the coastal zone, section 23.08.165 of the Coastal Zone Land Use Ordinance governs. A residential vacation rental is the use of an existing residence as a transient rental, which excludes single-tenancy rentals of 30 consecutive days or longer, and no residence may host more than four individual tenancies in a calendar month. Occupancy may not exceed two people per bedroom plus two more, and may not exceed what the on-site parking supports. All parking must be on site; tenants may not use street parking at any time.

Operating standards run through noise and notice. The county measures a noise complaint against a threshold audible 50 feet from the rental’s property lines, and an applicant must notify every property owner within 200 feet, plus the county Sheriff’s Office, the local Sheriff substation and the local fire agency, and name a local contact reachable 24 hours a day.

Four communities carry extra standards inside their urban reserve lines: Cambria, Cayucos, Avila Beach and Los Osos. The first three are separation buffers, the strictest of them Cambria’s at 200 feet, with Cayucos between 50 and 100 feet varying by residential category and Avila Beach at 50 feet measured property line to property line, or unit wall to unit wall for condominiums. Los Osos is the only one with a numerical cap, and it is covered in the table below. Where a parcel misses a location standard, a minor use permit process can modify it.

The permit path is not the same everywhere in the coastal zone. Cambria, Cayucos and Avila Beach can proceed on a zoning clearance where the property complies. The county requires a minor use permit instead in the other coastal communities, naming Los Osos, Oceano and San Simeon, and in rural areas. That permit acts as the coastal development permit, which makes it a discretionary approval rather than a counter transaction.

Templeton, Nipomo and Santa Margarita sit inland, where Title 22 of the county code governs instead and section 22.30.510 covers residential vacation rentals. Hosted homestays are addressed separately in the same title. The inland path is administratively lighter than the coastal one: there is no coastal development permit, so a compliant property proceeds on a zoning clearance and a business licence.

The notice requirements are the part inland buyers underestimate, and they are heaviest in the Adelaida and Willow Creek area west of Paso Robles, where an applicant notifies every property owner within a 1,500-foot radius, along with the Sheriff’s Office, the local substation and the fire agency. A change of ownership there triggers its own notification to owners within 200 feet.

Agricultural parcels carry their own limits on transient occupancy, and a Williamson Act contract adds a further layer, so a rural inland parcel is the case where the general answer is least likely to be the right one. Confirm the specific parcel with Planning and Building before assuming the standard inland path applies.

Oceano is unincorporated, so the county rules govern, and the coastal zone boundary runs through the community. That is the first thing to establish about an Oceano address, because it decides whether Title 23 or Title 22 applies, and with it the permit path, the notice radius and the operating standards.

On the coastal side, the county names Oceano among the communities where a minor use permit is required rather than a zoning clearance, alongside Los Osos and San Simeon. That is a discretionary approval acting as the coastal development permit, not an over-the-counter clearance, and it is the single biggest difference between buying in Oceano and buying in Cayucos.

Oceano does not have the community-specific separation table that section 23.08.165 writes for Cambria, Cayucos, Avila Beach and Los Osos, so the general coastal standards govern: four tenancies a month, two people per bedroom plus two, on-site parking, the 50-foot noise threshold and the 200-foot notice.

For buyers, eligibility here is genuinely parcel-specific and genuinely discretionary. A neighbouring property operating as a rental tells you what was approved for that parcel, not what will be approved for yours, and the county licence does not come with the house.

These come up often enough to be worth stating plainly.

Regulation here moves, which is why this page carries a review date. Four things are genuinely open as of September 2, 2026.