Can You Rent Your ADU on Airbnb or VRBO in California?

Can You List Your California ADU on Airbnb or VRBO?

One of the most common questions homeowners ask after building an Accessory Dwelling Unit (ADU) is whether they can rent it out on platforms like Airbnb or VRBO. The short answer is: it depends entirely on your city and county's short-term rental (STR) ordinances. California state law does not outright ban short-term rentals in ADUs, but many local jurisdictions have enacted their own rules that can significantly limit or prohibit the practice.

In this comprehensive guide, we will walk through the state-level framework that governs ADU rentals, how individual cities regulate short-term rentals, what permits and taxes you may need, and practical strategies for maximizing your ADU rental income whether you pursue short-term or long-term tenants.

California State Law and ADU Short-Term Rentals

California has been a national leader in ADU legislation. Starting with landmark bills like AB 68, SB 13, and more recently AB 1033, the state has consistently pushed to make ADU construction easier and faster. However, when it comes to short-term rentals, the state's position is nuanced.

What State Law Actually Says

Under California Government Code Section 65852.2, local jurisdictions cannot impose unreasonable restrictions on ADU construction or use. However, the law does include a specific provision regarding short-term rentals. As of January 1, 2020, state law explicitly allows local governments to prohibit short-term rentals (rentals of 30 days or fewer) in ADUs. This means that while the state encourages ADU construction for housing supply, it leaves the short-term rental question up to each city and county.

The key provision states that ADUs must have a rental term longer than 30 days, unless the local jurisdiction specifically allows shorter terms. This is an important distinction. The default under state law is that ADUs are intended for long-term housing, but cities can choose to allow short-term use if they wish.

Why the State Favors Long-Term Rentals

The California Department of Housing and Community Development (HCD) has been clear that the primary purpose of ADU legislation is to increase the state's long-term housing supply. California faces a shortage of approximately 3.5 million homes, and ADUs are seen as a critical tool for closing that gap. Allowing widespread short-term rental use could undermine this goal by converting potential long-term housing into vacation rentals.

That said, the state recognizes that homeowners need flexibility. Some homeowners may want to use their ADU for short-term guests during part of the year while living in or renting it long-term during other periods. This is why the state defers to local jurisdictions rather than imposing a blanket ban.

City-by-City STR Regulations for ADUs

Understanding your specific city's rules is the single most important step before listing your ADU on Airbnb or VRBO. Here is a breakdown of how some of the major California cities handle ADU short-term rentals.

Los Angeles

The City of Los Angeles enacted its Home Sharing Ordinance (Ordinance No. 185,931), which took effect on July 1, 2019. Under this ordinance, short-term rentals are allowed only in a host's primary residence. Since an ADU is a separate dwelling unit from the main house, listing an ADU as a short-term rental is generally not permitted unless you are living in the ADU as your primary residence and renting rooms within it.

Key requirements under LA's ordinance include:

• Registration with the City of Los Angeles and obtaining a Home Sharing Registration number
• The unit must be the host's primary residence
• Maximum of 120 days per year for entire-home rentals (with an Extended Home Sharing permit, this can increase)
• Transient Occupancy Tax (TOT) of 14% must be collected and remitted

San Francisco

San Francisco has some of the strictest short-term rental laws in the state. Under the city's Short-Term Residential Rental Ordinance, only units that serve as the host's primary residence can be rented short-term. ADUs that are separate from the host's primary residence cannot be listed on Airbnb or similar platforms. The city requires registration with the Office of Short-Term Rentals and limits unhosted rentals to 90 nights per year.

San Diego

San Diego updated its short-term rental regulations significantly in 2022. The city now issues a limited number of Short-Term Residential Occupancy Licenses (STROLs). ADUs may qualify for a STROL, but the city caps the total number of licenses in each community planning area. As of 2026, the cap is approximately 1% of the housing stock in each area, making licenses competitive and difficult to obtain.

Permits, Taxes, and Insurance for ADU Short-Term Rentals

Even in cities where short-term ADU rentals are allowed, you will need to navigate a series of permits, tax obligations, and insurance requirements. Failing to comply with any of these can result in fines, penalties, or even forced removal of your listing.

Business License and STR Permit

Most cities that allow short-term rentals require a specific STR permit or business license. The application process typically involves:

• Submitting proof that your ADU has a valid certificate of occupancy
• Providing evidence of adequate liability insurance
• Paying an annual permit fee (typically $100 to $500 depending on the city)
• Agreeing to comply with occupancy limits, noise regulations, and parking requirements
• Displaying your permit number on all online listings

Transient Occupancy Tax (TOT)

California cities impose a Transient Occupancy Tax on short-term rentals, similar to the hotel tax. This tax is collected from guests and remitted to the city. Rates vary widely, from around 8% in smaller cities to 14% or more in major metropolitan areas. Platforms like Airbnb and VRBO may collect and remit TOT automatically in some jurisdictions, but you are ultimately responsible for ensuring compliance.

State and Federal Income Tax

All rental income from your ADU, whether short-term or long-term, must be reported on your state and federal income tax returns. Short-term rental income is generally reported on Schedule E (Supplemental Income and Loss) or Schedule C (Profit or Loss from Business) if you provide substantial services to guests. Consult with a tax professional to understand your specific obligations and potential deductions.

Insurance Considerations

Your standard homeowner's insurance policy almost certainly does not cover short-term rental activity. You will need to obtain either a specific short-term rental insurance endorsement or a separate commercial policy. Many hosts rely on Airbnb's Host Protection Insurance, but experts recommend having your own standalone policy as well. See our guide on ADU insurance coverage for detailed recommendations.

Long-Term Rental: The More Profitable Alternative?

While the allure of Airbnb income is strong, many California homeowners find that long-term renting their ADU actually produces better financial results when you account for the full picture. Here is why.

Comparing Short-Term vs. Long-Term ADU Rental Income

As the table shows, once you factor in management time, cleaning costs, furnishing expenses, utilities, platform fees (typically 3% for hosts), and higher wear and tear, the net income from short-term rentals can be comparable to or even less than long-term renting. For many homeowners, the simplicity and consistency of a long-term tenant makes it the smarter financial choice.

For a deeper look at rental income potential, check out our guide on how much you can charge for ADU rent in Los Angeles.

The Medium-Term Rental Strategy

A growing number of ADU owners are discovering a middle ground: medium-term rentals (30 to 90 days). This approach avoids short-term rental regulations entirely while still commanding premium rates. Medium-term tenants often include:

• Traveling nurses and healthcare professionals on temporary assignments
• Corporate relocations and employees on project-based work
• Graduate students and visiting professors
• Families in transition (between homes, during renovations, etc.)
• Insurance-displaced families needing temporary housing after a disaster

Medium-term rentals in Los Angeles typically command $3,000 to $5,000 per month for a furnished 1-bedroom ADU, which is significantly more than unfurnished long-term rents. You still benefit from the furnished premium without the constant turnover and regulatory headaches of Airbnb hosting.

Platforms that specialize in medium-term rentals include Furnished Finder, Zillow (with 30+ day filters), and Facebook Marketplace. Airbnb also allows you to set minimum stays of 30 days or more, which can be an effective way to reach medium-term tenants.

Setting Up Your ADU for Short-Term Rental Success

If your city allows short-term ADU rentals and you decide to pursue this path, here is how to set up your listing for maximum success.

Furnishing and Design

Short-term rental guests expect a fully furnished, move-in-ready space. At minimum, your ADU should include:

• Quality mattress and bedding (invest in a good mattress; guests review sleep quality heavily)
• Complete kitchen setup: cookware, dishes, utensils, coffee maker, toaster
• High-speed WiFi (at least 100 Mbps download)
• Smart TV with streaming capabilities
• Washer and dryer (in-unit preferred, or clear access to laundry)
• Quality towels and linens
• Basic toiletries for the first night
• Dedicated workspace with a desk and comfortable chair

The total furnishing budget for a well-appointed 1-bedroom ADU short-term rental typically runs between $8,000 and $15,000. Higher-end furnishings can command higher nightly rates and better reviews.

Photography and Listing Optimization

Professional photography is non-negotiable. Listings with professional photos receive 40% more bookings than those with amateur photos. Budget $200 to $400 for a professional real estate or Airbnb photographer. Make sure to photograph every room, highlight unique features, and capture natural light.

Pricing Strategy

Use dynamic pricing tools like PriceLabs, Beyond Pricing, or Wheelhouse to automatically adjust your nightly rate based on demand, seasonality, local events, and competitor pricing. These tools typically charge $15 to $30 per month but can increase your revenue by 15-30% compared to static pricing.

Risks and Penalties of Unlicensed STR Operations

Operating an unlicensed short-term rental in a city that prohibits or restricts them carries serious consequences. Many California cities have dedicated enforcement teams that monitor platforms like Airbnb for unlicensed listings.

Common Penalties

• Fines: Cities like Los Angeles impose fines of $500 for the first violation, $1,000 for the second, and $2,000 for subsequent violations. Santa Monica can fine up to $2,000 per day.
• Back taxes: You may owe all unpaid TOT plus interest and penalties
• Listing removal: Platforms are increasingly cooperating with cities to remove unlicensed listings
• Legal action: In extreme cases, cities may pursue legal action against repeat offenders
• Insurance voidance: Operating an unlicensed STR could void your homeowner's insurance

The risk simply is not worth it. If your city does not allow short-term ADU rentals, focus on long-term or medium-term strategies that are both legal and profitable.

HOA and CC&R Restrictions

Even if your city allows ADU short-term rentals, your Homeowner's Association (HOA) may have additional restrictions. Many HOAs have CC&Rs (Covenants, Conditions, and Restrictions) that either prohibit or severely limit short-term rentals. Before listing your ADU, review your CC&Rs carefully and consult with your HOA board.

Note that California's ADU laws do preempt some HOA restrictions on ADU construction, but short-term rental restrictions in CC&Rs may still be enforceable. This is an evolving area of law, so consult with a real estate attorney if you are unsure.

Frequently Asked Questions

Can I rent my ADU on Airbnb in Los Angeles?

Generally no. Los Angeles requires that short-term rentals be in the host's primary residence. Since an ADU is a separate dwelling unit, it typically does not qualify unless you live in the ADU itself as your primary residence. You can, however, rent your ADU to long-term tenants (leases of 30+ days) without restriction.

What happens if I get caught running an illegal Airbnb in my ADU?

Penalties vary by city but can include fines ranging from $500 to $2,000+ per violation, back taxes, listing removal, and potential legal action. Repeat offenders face escalating penalties. Your homeowner's insurance may also be voided if you are operating an unlicensed short-term rental.

Can I do medium-term rentals (30+ days) in my ADU?

Yes. Rentals of 30 days or longer are considered long-term under California law and are not subject to short-term rental restrictions. This is true statewide, regardless of your city's STR ordinance. Medium-term rentals can be a very profitable strategy for ADU owners.

Do I need to collect hotel tax (TOT) for my ADU rental?

If you are renting your ADU for fewer than 30 days and your city allows it, yes, you must collect and remit Transient Occupancy Tax. The rate varies by city. Airbnb and VRBO may collect this automatically in some jurisdictions, but you are ultimately responsible for compliance.

Is it more profitable to Airbnb my ADU or rent it long-term?

It depends on your market, occupancy rates, and how much time you are willing to invest in management. In many California markets, the net income from long-term or medium-term rentals is comparable to short-term rentals once you account for all expenses, management time, and lower occupancy rates.

Can I rent my JADU on Airbnb?

Junior ADUs (JADUs) have an additional restriction: the owner must occupy either the JADU or the primary residence. This owner-occupancy requirement makes it impractical to use a JADU as a standalone short-term rental. Check your local ordinances for specific JADU rules.

What insurance do I need for an Airbnb ADU?

You need a short-term rental insurance policy or endorsement, in addition to your standard homeowner's policy. Airbnb offers Host Protection Insurance, but experts recommend having your own standalone policy with at least $1 million in liability coverage. See our detailed guide on ADU insurance coverage.