Vacation Rentals in Annapolis Now Face Tight New Restrictions

Annapolis Sets Cap on Short-Term Vacation Rentals: The Details

On a typical stroll down Main Street in Annapolis, there’s an unmistakeable small-town character that locals and visitors hold close. That genuine community spirit is part of what draws travelers from across the country—and what many in town want to fiercely preserve for future generations. Against this backdrop, 2025 brought a significant shift in how vacation rentals like those on Airbnb and VRBO operate locally.

New Legislation Puts Limits on Short-Term Rentals

This week, Annapolis City Council passed Ordinance 17-25, marking a new chapter for property owners, investors, and residents alike. The law restricts licenses for short-term rental properties across the city, aiming to balance thriving tourism with community roots.

The heart of the legislation: if short-term vacation homes account for more than 10% of units on a specific blockface—the term used for one side of a city block—the city will not issue new licenses for vacation rentals on that stretch. The ordinance directly affects properties looking to get listed—or stay listed—on popular platforms.

What Prompted the Cap?

The regulation was introduced by Alderman Harry Huntley, who represents the historic downtown district. Huntley modeled the legislation on approaches seen in cities with similar challenges, including New Orleans and Charleston, South Carolina. Local leaders argue that a sensible balance is needed: while vacation rentals bring economic wins, too many can tip neighborhoods away from the long-term residents who give Annapolis its character.

“Short term rentals can be part of our community, but they can’t be all of our community, or we won’t have a community,” Huntley remarked during council discussions.

The decision wasn’t unanimous. Some city officials, like Alderwoman Karma O’Neill, supported reducing the presence of short-term rentals, but pushed for stronger enforcement rather than just tighter regulations. O’Neill cited a persistent problem: many vacation rental properties operate without proper licensing, creating both an enforcement headache and an uneven playing field.

Current State of Short-Term Rentals: By the Numbers

At any given time, Annapolis hosts approximately 560 short-term rental units, but just a little over half—50.5%—of these properties are legally licensed according to city staff reports. This gap between operating rentals and compliance fueled urgency for council action.

Breaking it down further, a recent staff report found 42 blockfaces already exceed the new 10% threshold:

30 blockfaces over the cap are in Ward 1 (the city’s historic core)
5 sit in Ward 2
7 are in Ward 8

For these areas, the city’s new restrictions won’t take immediate effect, offering property owners transition time—but the landscape is set to tighten over the next few years.

How Will the Rules Work in Practice?

The new rules carry several important details that property owners and would-be hosts need to digest:

Licensing Freeze on Crowded Blockfaces: If 10% or more of the units on a blockface are already used as short-term rentals, no new licenses will be granted on that blockface.
Exemptions for Owner-Occupied Rentals: Vacation rentals where the owner lives on site do not count toward the 10% cap, making it easier for residents to rent a room or shared space without impacting neighborhood totals.
Special Event Exceptions: During periods of heavy demand—specifically the U.S. Naval Academy’s Commissioning Week and the city’s annual boat shows—the cap will not be applied, accommodating the surge in visitors for these signature Annapolis events.
Transition for Over-the-Limit Areas: Property owners on blockfaces already above the cap can renew existing licenses until November 2027. After that, if demand exceeds the allowed number, the city will hold a lottery to decide which owners keep their short-term rental licenses on those blockfaces.
Local Prioritization: During the lottery, preference will go to existing license holders who live in Annapolis or Anne Arundel County.
Small Blockfaces Get Stricter Limits: Any blockface with fewer than 10 residential units will be limited to just one short-term rental license—so smaller residential stretches will see the tightest restrictions.

For full legal language, amendments, and procedural steps, property owners can review the ordinance text online.

Balancing Tourism, Community, and Long-Term Stability

Supporters of the new ordinance point to Annapolis’ reliance on tourism. Short-term rental homes keep dollars flowing from out-of-town guests and broaden lodging options during high season. But an unchecked surge in vacation rentals can put pressure on housing availability and drive up prices for locals. Residents and leaders are now working to prevent entire blocks from becoming revolving doors of temporary guests.

Property owners face new questions. Will regulations similar to New Orleans and Charleston create lasting stability? Can a cap and lottery system truly balance neighborhood continuity with opportunity for investors and hosts?

For owners committed to staying compliant, the path forward involves careful planning—and no shortage of paperwork. Understanding the rules and planning well ahead of deadlines will be important for anyone hoping to operate vacation rentals in Annapolis after 2027, especially in popular waterfront districts or historic neighborhoods.

What This Means for the Future of Annapolis Rentals

By 2025, the market for short-term rentals in Annapolis had reached a crossroads. The new regulations represent an effort to keep the historic city vibrant and livable—for both longtime residents and visitors—without pushing out the character that makes Annapolis unique. Whether you’re a homeowner considering a rental, an out-of-town investor, or simply a neighbor noticing more “guests” next door, these changes will shape the way the city welcomes visitors for years to come.