When the sun sets beyond the mountains, the desert air quickly becomes gentle. Many people around me have been dreaming about buying a villa to use on weekends and rent out on Airbnb during the week.

But wait! If you start looking at houses first, you're doing it in the wrong order. In Palm Springs, you need to check the neighborhood's permit ratio before looking at property photos.

A while ago, a friend of mine fell in love with a mid-century home in Racquet Club Estates. It had the low roofline, pool, and mountain view that they were looking for.

Just before signing the contract, they checked the city data and called me. "They say no new permits are being issued in this neighborhood." Their voice was filled with disappointment.

The reason is due to the cap regulations for neighborhoods in Palm Springs. The city allows only up to 20% of the homes in an Organized Neighborhood to have general vacation rental permits.

Once that 20% cap is reached, no new general permits will be issued. You can apply, but you'll be placed on a waiting list, and your turn will come when a spot opens up based on the order of completed applications.

According to city data compiled in early November 2025, Racquet Club Estates had the highest rate at 34.45%. Out of 537 homes, 185 had received permits.

Sunmor had 26.43%, El Rancho Vista Estates had 25.89%, and Desert Park Estates had 21.72%. At the same time, the overall city rate was only 7.57%.

This contrast is key. While the city as a whole may seem to have room, it means that popular neighborhoods where people flock may already be closed off.

So, can't you just buy a house that already has a permit? I thought that at first too.

But wait! This is where many people stumble. The permit is attached to the person, not the house, so when the house is sold, the permit does not transfer.

The new owner must apply for a new permit from scratch. During escrow, no applications are accepted, and if the neighborhood has reached its cap, you go straight to the waiting list.

In the end, you could find yourself in a situation where you bought a property advertised as "generating rental income" and have to wait years. Just thinking about it is frustrating.

A house with an existing permit will not be canceled even if the neighborhood's ratio exceeds 20% later. Therefore, in popular neighborhoods, existing permits tend to be maintained for a long time, and new spots rarely open up.

Interestingly, the total number of permits is actually decreasing. According to local media reports, registered rentals dropped from 2,927 on June 2, 2024, to 2,777 by October 2025.

There is one way to navigate neighborhoods that have hit their cap. It's called a junior permit, which is not subject to the neighborhood cap.

However, you can only receive six contracts per year with this type of permit. The annual fee is set at $1,046 for a general permit and $523 for a junior permit.

General permits also have a limit on the number of contracts. Since November 2022, new general permits can only be issued up to 26 per year.

Permits that existed before that were supposed to be reduced to 26, but the city council voted on October 23, 2025, to eliminate that reduction and maintain a limit of 36.

Whether you receive bookings through Airbnb or Vrbo, the city counts the number of contracts without regard to the platform. Listing on both may make reservations easier, but you need to manage the count more carefully.

It's also important to note that each person can only hold one permit. Planning to buy multiple properties and rent them all out short-term won't work from the start.

You also need to factor in taxes. There is an 11.5% occupancy tax and a 1% tourism improvement district fee, and you must report monthly.

Regulations are still being refined. The city council adopted Ordinance 2133 on July 8, 2026, which amended some vacation rental regulations.

So, here's the order I recommend. First, find out which neighborhood your desired address belongs to using the neighborhood ratio map on the city website.

Next, directly ask the city department whether that neighborhood has hit its cap and how many people are on the waiting list. If it's a community with an HOA, check whether the HOA rules allow short-term rentals.

Finally, calculate whether the six contracts allowed under a junior permit make financial sense. If not, that house is best enjoyed as a vacation home only.

Conditions are complex and change frequently, so before signing a contract, be sure to confirm the latest information with the city's Special Program Compliance department and a local real estate expert.

If I had to share my choice, I would look at the neighborhood ratio chart before the pool in the photo. The desert sunset is equally beautiful in any neighborhood, but permits vary from one neighborhood to another.

Which side are you on? A general permit in a lesser-known neighborhood without a cap, or a junior permit in a popular neighborhood? Cast your vote in the comments.