Vacation Rental Myths vs. Facts

At Share Morro Bay, we believe in a balanced, fact‑driven conversation about vacation rentals, one that honors our coastal character, supports local families, and protects the future of our small‑town economy. There’s a lot of noise out there. Let’s clear it up.

MYTH: “Morro Bay is overwhelmed by vacation rentals.”

FACT: Short Term Vacation Rentals make up less than 3% of all Morro Bay Housing.

Morro Bay has approximately 6,500 housing units.
Roughly 19-22% (≈ 1,300 units) are second homes.
The city caps STR licenses at 175.
As of 2026, only 145 STRs are active (based on the published information available on the Morro Bay website as of July 2, 2026).
That means:
- Less than 3% of all housing units hold an STR license
- Only ≈2.2% of all housing units operate as active STRs
Roughly 120 licensed STRs are professionally managed.

Independent Research Confirms This

The Mountain States Policy Center (MSCP) found in its 2024–2025 multi‑state STR analysis that: “Short‑term rentals represent a very small share of total housing stock in most communities, far below levels that would constitute saturation.” You can read the MSPC full study and findings in our knowledge base.

Conclusion: Morro Bay is not overrun with STRs. The licensed STR footprint is small, stable, and tightly regulated.

MYTH: “Vacation rentals reduce long‑term housing availability.”

FACT: Independent research shows STRs have no measurable impact on long‑term housing supply and bans do not make housing more affordable.

Across California and the U.S., STR restrictions have repeatedly failed to produce more long‑term housing. In many cases, rents increased, vacancy rates did not improve, and illegal STRs simply replaced regulated ones.

Below are the strongest, data‑verified examples. You can read the complete study conducted in our knowledge base.

Real‑World Evidence

San Diego: STR Restrictions Did Not Improve Housing Availability

San Diego implemented one of California’s most aggressive STR caps in 2023–2024, eliminating thousands of previously legal rentals.

What happened next:

The city removed ~6,000 STR listings from the market.
Housing availability did not increase, vacancy rates remained flat.
Rents continued rising, increasing 5–7% year‑over‑year after the ban.
The city reported no measurable shift of STR units into long‑term rentals.
Illegal STR activity increased, with thousands of unlicensed listings still active on Airbnb and VRBO.

Conclusion: Even removing thousands of STRs did not create long‑term housing. The market did not respond because most STR units were second homes or properties unsuitable for long‑term tenants.

Lake Tahoe: STR Crackdowns Failed to Improve Affordability

South Lake Tahoe and surrounding jurisdictions enacted strict STR bans and caps beginning in 2018.

What happened next:

STR inventory dropped by over 75% in some neighborhoods.
Long‑term rental inventory did not increase.
Median home prices rose sharply, increasing ~35% between 2018–2021.
Median rents increased ~20%, despite the STR ban.
Illegal STRs surged, with hundreds of unlicensed listings continuing to operate.
Local businesses reported declines in visitor spending, harming the local economy.

Conclusion: STR bans did not make housing more affordable. Instead, home prices and rents increased faster than before the ban.

New York City: 90% of STRs eliminated, No Housing Benefit and only Hotels benefited

NYC implemented one of the strictest STR bans in the country (2023-2024), removing nearly all legal short‑term rentals.

What happened next:

Rents increased, reaching ~$4,700 for a one‑bedroom, the highest in city history.
Vacancy rates stayed at ~1%, showing no increase in available housing.
Hotel prices rose ~15%, benefiting hotels—not renters.
The city lost $638 million in guest spending, harming local businesses.

Conclusion: Removing STRs did not free up housing. It simply removed a lodging option and raised costs elsewhere.

Mountain States Policy Center Multi‑State STR Study (2024–2025)

MSPC’s comprehensive analysis across Western states found:

STRs typically represent 1–3% of total housing stock, far below levels that could affect supply.
Communities that restricted STRs saw no measurable improvement in rental availability or affordability.
In some areas, STR restrictions increased housing costs by removing income streams that help homeowners afford their mortgages.
Housing shortages in coastal and resort towns are driven by second homes, zoning limits, and slow construction, not STRs.
STR income helps 43% of hosts stay in their homes, and 11% avoid eviction or foreclosure.

Conclusion: STR bans target the wrong problem. They do not meaningfully change rental inventory or prices and can reduce housing stability for local residents.

Local Reality in Morro Bay

Most Morro Bay STRs are:

Second homes used part‑time or held for future retirement
Properties valued at $1M+, with long‑term rents far above local income levels
Homes that would not become long‑term rentals even if STRs were banned

Conclusion

Short‑term rentals are not the cause of housing shortages: cities that banned or restricted STRs, including San Diego, Lake Tahoe, and New York, saw no increase in long‑term housing, no drop in rents, and in many cases higher housing costs and more illegal STRs. Independent research confirms the same outcome nationwide: STR bans don’t create more affordable housing, they just remove regulated rentals and punish responsible homeowners.

MYTH: “Vacation rentals cause constant nuisances: noise, parties, parking issues.”

FACT: Verified nuisance complaints for licensed STRs are extremely rare.

In 16 years of operation, our licensed STRs have received zero verified nuisance citations. The noise and behavior issues people often blame on “vacation rentals” almost always come from illegal rentals or second‑home owners letting guests use their homes with no rules, no quiet hours, and no oversight. Meanwhile, licensed STRs follow strict regulations, professional management standards, and 24/7 response requirements.

The nuisance problems aren’t coming from the licensed and regulated vacation rentals, they’re coming from unregulated activity. Licensed STRs operate responsibly; illegal rentals do not.

MYTH: “Vacation rentals don’t contribute much to the local economy.”

FACT: Vacation Rentals are one of Morro Bay’s most reliable revenue sources.

STRs are a major economic engine, generating significant tax revenue for local governments and supporting local businesses through visitor spending. To see the full impact, check out our Local Impact page.