Anaheim, California, a vibrant city known for Disneyland and a bustling tourism industry, has become a focal point for real estate investors, particularly those interested in short-term rentals (STRs). The rise of platforms like Airbnb and VRBO has transformed the way property owners utilize residential spaces, offering lucrative opportunities to cater to tourists. However, the city’s evolving regulatory landscape has significantly shaped the Anaheim real estate market, especially for STR investors. This blog post explores the history of short-term rental regulations in Anaheim, their impact on property owners, investors, and the broader housing market, and key considerations for navigating this dynamic environment.
The Evolution of Short-Term Rental Regulations in Anaheim
Early Days and the 2016 Ban
The short-term rental market in Anaheim gained traction in the early 2010s, fueled by the city’s proximity to Disneyland and a steady influx of tourists. However, as STRs proliferated, residents raised concerns about noise, parking, and disruptions in residential neighborhoods. In response, the Anaheim City Council imposed a moratorium on new short-term rental permits in September 2015, followed by a complete ban on STR operations in June 2016. Existing permitted STRs—numbering 363 at the time—were given an 18-month phase-out period, ending in February 2018, to cease operations. The city aimed to curb “mini-hotels” in residential zones, citing impacts on housing availability and neighborhood quality of life. Violators faced severe penalties, including potential utility shutoffs for unpermitted operations.
Legal Challenges and Pushback
The 2016 ban sparked significant pushback. Property owners, represented by groups like the Anaheim Rental Alliance, argued the phase-out period was too short to recoup investments, with some having purchased homes at premium prices (e.g., $1.7 million for properties valued at $1–1.2 million in a residential context) specifically for STR purposes. Airbnb and HomeAway filed lawsuits in 2016, claiming the ordinance violated the Communications Decency Act and constitutional rights to free speech and equal protection. By August 2016, Airbnb dropped its suit after the city clarified platforms wouldn’t face fines for unpermitted listings. Despite this, the ban held, and new STRs were prohibited.
The 2019 Policy Shift
In June 2019, the Anaheim City Council reversed course, adopting an ordinance (Chapter 4.05 of the Anaheim Municipal Code) that allowed existing STRs to continue operating under strict regulations. This shift acknowledged the challenges of enforcing the 2016 ban and the economic value of STRs for tourism near Disneyland. The new policy permitted 277 existing STRs to operate, requiring a Short-Term Rental Permit and a Business License. However, the opening of entirely new STRs remained banned, balancing tourism benefits with residential concerns. Key rules included a minimum stay of three nights to reduce neighborhood disruptions and adherence to “good neighbor” policies, with permit revocation for non-compliance.
Impacts on the Anaheim Real Estate Market
Property Owners and Investors
The regulatory rollercoaster has reshaped the calculus for property owners and investors in Anaheim. Here’s how:
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Existing STR Operators: The 2019 ordinance provided relief for the 277 permitted STR owners, allowing them to continue earning income. For example, a 2-bedroom apartment in Anaheim can generate up to $31,500 annually via Airbnb, with tourist-heavy areas near Disneyland averaging $7,065 monthly for STRs. However, strict rules—such as the three-night minimum, 10% Transient Occupancy Tax (TOT), and compliance with HOA or community guidelines—add operational costs and complexity. Failure to follow “good neighbor” rules risks permit loss, impacting profitability.
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New Investors: The ban on new STRs limits opportunities for fresh entrants. Investors eyeing Anaheim for short-term rental income must pivot to long-term rentals or other property types, such as multi-family units or condos for traditional leasing. This restriction has cooled demand for single-family homes (SFRs) specifically bought for STR purposes, potentially stabilizing prices in residential zones but diverting investment elsewhere, like nearby Garden Grove.
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Property Values: The 2016 ban initially threatened to flood the market with former STR properties, with estimates of 346–500 homes potentially for sale. If a home bought for $1.7 million as an STR was resold at a residential value of $1–1.2 million, owners faced significant losses. The 2019 reversal mitigated this, preserving value for permitted STRs, but the ban on new ones may temper future appreciation in tourist-adjacent neighborhoods compared to unrestricted markets.
Housing Availability and Affordability
Critics of STRs argue they exacerbate housing shortages by converting residential units into tourist accommodations. Anaheim, with a population of 335,451 and a severe housing crunch in California, felt this pressure. The 2016 ban aimed to return homes to the long-term market, potentially easing rent and price increases. However, the 2019 policy, by allowing 277 STRs to persist, may still limit inventory. Median home prices in Anaheim rose 4.9% over the past year, with homes in affluent areas like Anaheim Hills averaging $1.3 million. While STRs are a small fraction of the market, their presence in high-demand zones near Disneyland can drive up local rents, affecting affordability for residents.
Tourism and Economic Benefits
Anaheim’s economy thrives on tourism, with Disneyland drawing millions annually. STRs offer an alternative to hotels, often at competitive rates, and the 2019 policy reflects a recognition of their value. A Councilmember’s comment, “Anaheim is supposed to be the city of kindness, not the city of bans,” underscores this shift. The 10% TOT collected from STR guests bolsters city revenue, supporting services and infrastructure. However, the three-night minimum and ban on new STRs may cap this growth, pushing tourists to hotels or nearby cities with looser rules.
Navigating the Market: Key Considerations
For Property Owners
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Permits and Compliance: Existing STR owners must secure a Short-Term Rental Permit ($250) and Business License ($260), renewable annually. Applications are submitted in person (8 a.m.–5 p.m., Monday–Friday) or mailed to the Planning Department at Anaheim City Hall. Include proof of ownership or authorization, and pay the 10% TOT per stay. Non-compliance risks fines or permit revocation.
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Good Neighbor Policies: Adhere to noise curfews (10 p.m.–9 a.m.), limit guest impacts, and designate a local contact for 24/7 complaint response within 45 minutes. If your property is in an HOA community, check for bans—STRs must close by December 2022 where prohibited.
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Financial Planning: Factor in permit fees, taxes, utilities (covered by owners, not guests), and maintenance. While STRs near Disneyland can yield $4,508 monthly for entire homes, inconsistent bookings pose risks compared to stable long-term leases.
For Investors
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Alternative Strategies: With new STRs banned, consider long-term rentals. Single-family homes suit families, while multi-family units (duplexes, triplexes) reduce vacancy risks. Condos in tourist areas may work for long-term tenants or future STR potential if regulations ease. Annual returns in Anaheim range from 4% to 6%, bolstered by a 4.9% appreciation trend.
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Location Matters: Focus on neighborhoods like West Anaheim for affordable, family-friendly rentals or Anaheim Hills for high-end, long-term tenants (median income $130,865). Proximity to Disneyland boosts demand but check zoning and HOA rules.
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Research Regulations: Consult the Anaheim Municipal Code (Chapter 4.05) and contact the Business License Division (714-765-5194, bus_license@anaheim.net) for clarity. Work with local real estate agents or property managers to stay compliant.
For Residents and Policymakers
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Balancing Act: Residents face parking, noise, and safety issues from STRs, fueling opposition. The 2019 rules aim to mitigate this, but ongoing enforcement is key. The city monitors compliance, issuing 116 citations since August 2016 for violations. Policymakers must weigh tourism revenue against housing needs, especially amid California’s shortage.
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Future Outlook: The ban on new STRs and strict rules suggest a cautious approach. If demand for lodging grows or resident complaints subside, regulations could loosen. Conversely, pressure from anti-STR activists or housing advocates may tighten them further.
Conclusion
Anaheim’s short-term rental regulations have reshaped its real estate landscape, balancing tourism’s economic boost with residential stability. The 2016 ban and 2019 reversal highlight the city’s struggle to address property rights, housing availability, and neighborhood concerns. For existing STR owners, the current framework offers opportunity—albeit with strict compliance—while new investors must pivot to long-term strategies. The broader market sees steady appreciation and demand, but STRs’ role in housing and affordability remains debated. Whether you’re an owner, investor, or resident, staying informed via the Anaheim Municipal Code, City Hall (714-765-5194), or local experts is crucial. As Anaheim evolves, its real estate market will continue to reflect this dynamic interplay of regulation, economics, and community needs.
