The Palm Springs City Council voted Thursday to keep a higher cap on the number of annual contracts allowed for older short-term vacation rentals, opting not to move forward with a planned reduction that was set to take effect at the end of 2025.

In November 2022, the council adopted an ordinance intended to address the impacts of what was then a rising number of short-term rentals operating in residential neighborhoods. The law created a new annual limit of 26 contracts per year for any vacation rental permits issued after the ordinance took effect.

Properties permitted before November 2022, however, were grandfathered under the previous rules, allowing 32 contracts per year plus four additional contracts during the slower third quarter, when high temperatures typically lower demand. That gave legacy rentals a total allowable cap of 36 annual contracts. However, under the 2022 ordinance, that cap was scheduled to fall to 26 contracts after Dec. 31 of this year.

On Thursday, the council voted to remove that scheduled reduction, meaning older, or legacy, vacation rentals will continue to operate under the 36-contract cap. Rentals permitted after November 2022 will remain limited to 26 contracts.

Several vacation rental owners spoke in favor of maintaining the higher cap or extending it to newer permit holders as well.

“We believe a cut to 26 will result in the obvious — fewer tourists, fewer people eating in our restaurants and shopping in our stores, and less TOT revenue,” said Shannon Metcalf, a member of the Vacation Rental Owners and Neighbors of Palm Springs board and owner of a vacation rental business in the city.

Another owner, Mitchell Marks, said he lost money on his vacation rental in 2024 for the first time since starting operations in 2018. He attributed that shift to two factors: “momentum gained by large hotels in Palm Springs” and “the perception that Palm Springs is an undesirable place to visit during the summer months.”

Marks said he reduced his minimum stay from four nights to two this summer to increase bookings but noted that each booking still counts as a contract regardless of length. “I urge you to please oppose any measure to lower the annual cap of stays. In fact, I ask you to please consider raising the cap,” he said.

A few residents spoke more broadly against short-term rentals operating in residential neighborhoods.

“People who use short-term rentals for income, who operate businesses in residential areas, are taking away housing that we could use for people to come here to rent, to buy, and it raises the price of everything because there is not enough housing to go around. It’s an inappropriate combination,” said one commenter.

City staff reported that the overall number of permitted short-term rentals is declining, with 2,777 registered rentals as of this month, down from a peak of 2,927 in June 2024. Citations are also down, and most properties operate well below their caps.

Of the 2,570 properties that submitted contract summaries in 2024, the average number of contracts used was between nine and 12. Only 8.4% of homes used between 33 and 36 contracts. Among the 229 properties permitted after November 2022, which are capped at 26 contracts, just 10% reached 25 or 26.

“I think between the ordinance and code compliance and the market self-monitoring, we’ve seen things have calmed down and improved significantly the last few years,” said Councilmember Jeffrey Bernstein.

“I actually think in terms of saturation, the legacy homes staying on and doing okay would help encourage some of the more Johnny-come-latelys who thought they were going to make a fortune, and realizing that they’re not, to exit the market,” he added. “I think that would benefit the community to have fewer homes doing it well, and other homes going to either full-time rentals or for sale.”

City staff also presented several additional recommendations related to vacation rental policy, including suggestions from the Vacation Rental Owners and Neighbors of Palm Springs and the city’s Administrative Appeals Board. Some of those proposals may return to the council for future consideration.