Ask a property manager in Pacific Grove about getting a short-term rental license and you'll likely hear that the waitlist is long, the odds are slim, and new owners shouldn't count on it. That advice gets repeated often enough that it has calcified into local wisdom, the kind buyers absorb before they've even looked at a listing.
The city's own short-term rental program page tells a different story. As of the current posting, Pacific Grove has 84 active STR licenses against a citywide cap of 250, and new applications are being accepted on a first-come, first-served basis. There is no waitlist for eligible properties right now. There's room under the cap. What actually stops most buyers isn't scarcity. It's a zoning line that has nothing to do with how many licenses are left.
The rule that decides eligibility before the cap does
A Short-Term Rental license in Pacific Grove, the kind that lets you rent an entire home for stays under 30 days, is only available to properties inside the city's Coastal or Commercial zoning areas. If a home sits in a residential zone, no amount of room under the 250-license cap changes anything. The property simply doesn't qualify for a whole-unit STR license.
Two more conditions narrow the field further. Each qualifying parcel gets one license, and it must clear a 55-foot "Zone of Exclusion" measured from the boundary of any existing STR parcel. That means density is capped street by street, not just citywide. A block that already has a licensed rental on it may have no room for a second, even if the citywide count sits at 84 out of 250.
There's a second, less restrictive license type worth knowing about: Home Sharing, which allows an owner or authorized tenant living on-site to rent out a room. That license is permitted throughout the city, in any zone, with no cap. It's a meaningfully different product than a whole-house vacation rental, but it's the one option that isn't bottlenecked by geography.
How the zone-based system came to be
This structure isn't accidental. It's the direct result of Measure M, a citizens' initiative that Pacific Grove voters passed in November 2018 after a year of city council hearings, a license lottery, and a lawsuit. The measure, put on the ballot by the group Pacific Grove Neighbors United after they gathered more than 1,600 signatures, was built specifically to limit short-term vacation rentals in the city's residential zone while leaving the coastal and commercial districts open.
Before Measure M, the city had already tried to manage rapid growth in STR licenses with a lottery, held in May 2018, that sunset 51 licenses concentrated on overdense blocks. Owners who lost their licenses sued to stop it. A judge let the lottery proceed, and the broader ordinance built around Measure M has since held up to legal challenge. The rule you see today, coastal and commercial zones only, one license per parcel, a 55-foot buffer between properties, is what survived that fight. It reads like caution because it was built during a period when the city was actively working out how much rental density a residential street could absorb.
Where Pacific Grove sits between its neighbors
Pacific Grove's approach is not the norm on the Peninsula, and it isn't the extreme either. Pacific Grove took a different path than its neighbors Monterey and Carmel when it first began licensing short stays: Monterey bans rentals shorter than 30 days in residential zones except for owner-occupants temporarily away from home, and Carmel-by-the-Sea has long prohibited short stays across nearly all of the city to protect its village character.
Compared to those two neighbors, Pacific Grove is the one that still issues whole-unit short-term rental licenses as a matter of course, but only within a defined slice of its map. That middle position gets flattened in conversation into "Pacific Grove allows it, Carmel doesn't," which is true as far as it goes but skips the part that actually matters to a buyer: allows it where.
Reading the zone before you read the comps
If a rental income scenario is part of your decision on a Pacific Grove home, the zoning designation matters more than the square footage or the view. Homes closer to the water, near landmarks like Lovers Point or along the stretch toward Asilomar State Beach, are more likely to fall within the city's Coastal Zone. The grid of inland streets running toward the center of town and the golf links tends to sit in residential zoning, where whole-unit STR licenses are not being issued under the current ordinance.
That's a general pattern, not a guarantee for any specific address. The only way to know for certain is to check the parcel against the city's zoning map and its STR license database before writing an offer with rental income baked into your numbers. A home two blocks apart in either direction can land on opposite sides of the eligibility line.
It's also worth confirming what happens if the home you're buying already holds an active license. Applications require the applicant to be the property's owner of record, and the city's own paperwork asks new owners to submit documentation proving the change in ownership. That's a strong signal a license isn't something you inherit automatically at closing. Confirm the status directly with the city rather than assuming a listing's rental history carries forward with the deed.
What this changes about comparing Pacific Grove to Carmel or Monterey
The conventional shorthand, Pacific Grove allows short-term rentals and its Peninsula neighbors mostly don't, is directionally right and practically incomplete. For a buyer weighing whether Pacific Grove offers more flexibility than Carmel, the honest answer is: sometimes, and it depends entirely on which parcel you're looking at. A Coastal Zone cottage near Lovers Point may qualify for a license with room under the current cap. A nearly identical home a few blocks inland, in a residential zone, has the same rental restrictions Carmel imposes almost citywide.
That distinction is the actual comparison worth making, and it's one the median price and the zoning label on a listing sheet won't tell you on their own.
Frequently asked questions
Does a Pacific Grove short-term rental license transfer to me when I buy a licensed property? Treat it as something to verify, not assume. License applications require the applicant to be the current owner of record, and the city asks new owners to provide proof of the ownership change. Confirm directly with the city's short-term rental program before counting existing rental income into your offer.
What's the difference between a Short-Term Rental license and a Home Sharing license? A Short-Term Rental license covers renting an entire dwelling and is limited to the Coastal or Commercial zone, subject to the 250-license citywide cap and the 55-foot Zone of Exclusion. A Home Sharing license covers renting a room while the owner or an authorized tenant lives on-site, and it's permitted anywhere in the city without a cap.
Is the 250-license cap likely to fill up soon? Based on the city's current program figures, 84 of 250 licenses are active, and new applications are being accepted first-come, first-served for eligible parcels. That could change, so anyone weighing rental income as part of a purchase decision should check the current count and the specific parcel's eligibility before relying on it.
If a Pacific Grove property's rental potential is part of what you're weighing, the zoning designation is the first thing to check, not the last. Susan Clark works with buyers across the Peninsula who need that kind of parcel-level clarity before they write an offer, not after.
