Annapolis Implements Strict New Cap on Short-Term Rentals

In a significant move to preserve neighborhood character and manage growth, the Annapolis City Council has enacted new regulations limiting the proliferation of short-term rentals (STRs) within residential areas. Ordinance 17-25, passed on October 13, 2025, introduces a cap on the number of STRs allowed per blockface, aiming to balance tourism vitality with the quality of life for permanent residents.

Ordinance 17-25: The 10% Blockface Cap Explained

Ordinance 17-25 establishes a strict limit on short-term rental licenses, directly addressing concerns over the increasing number of properties being converted for transient use. The cornerstone of this new legislation is the “10% blockface cap.” This regulation prohibits the issuance of new short-term rental licenses on any residential blockface once 10% of its units are already operating as short-term rentals. A blockface is officially defined as one side of a city block.

The legislation, introduced by Alderman Harry Huntley, was developed with the intent to prevent neighborhoods from becoming dominated by transient commercial activity. As of a May 2025 staff report, Annapolis had approximately 560 short-term rental units advertised at any given time, with only about half of those being licensed. The city identified 42 blockfaces already exceeding the 10% cap, with the highest concentrations noted in the historic downtown area.

Grace Periods and Special Provisions

Recognizing the need for a measured transition, blockfaces currently exceeding the 10% threshold will be afforded a grace period. Property owners on these blocks may continue to renew their existing short-term rental licenses until November 2027. Following this period, the city will implement a lottery system to determine which existing rentals, if any, can continue to operate on blockfaces that remain over the cap. Priority in this lottery will be given to existing licensees who are residents of Annapolis and Anne Arundel County.

Further nuances of the ordinance include:

• Blockfaces with fewer than ten residential units are limited to a maximum of one short-term rental license.
• Short-term rentals that are occupied by the property owner will not be counted towards the 10% blockface cap.
• The strict cap will not be enforced during major events that draw significant visitor numbers, specifically the U.S. Naval Academy’s Commissioning Week and the city’s annual boat shows.

The Debates Shaping the Regulations

The passage of Ordinance 17-25 was not without considerable debate, reflecting divergent priorities within the city. Alderman Huntley and supporters of the bill argued that unchecked growth in short-term rentals was transforming stable residential neighborhoods into transient commercial zones. Resident testimonials highlighted concerns about a loss of community cohesion, with sentiments like “The sound of children laughing on my block has been replaced by the sound of roller bags” being voiced. These proponents emphasized that while tourism is important, it should not erode the daily living experience of year-round residents.

On the other side of the discussion, some council members expressed reservations. Alderwomen Karma O’Neill and Sheila Finlayson voted against the ordinance. Reports indicated that O’Neill felt the measure did not go far enough and anticipated significant challenges with enforcement. This division underscores the complex task of balancing economic development, tourism promotion, and the preservation of residential quality of life.

Broader Implications for Annapolis and Beyond

Annapolis’s approach to regulating short-term rentals, particularly its 10% blockface cap and phased implementation, is likely to be observed as a case study by other municipalities grappling with similar issues nationwide. The ordinance draws inspiration from regulatory models adopted in cities such as New Orleans and Charleston, indicating a trend towards more measured, geographically sensitive control of the short-term rental market.

Potential Economic and Housing Market Adjustments

The new regulations are expected to prompt various economic adjustments within Annapolis. Property owners who have heavily relied on short-term rentals, especially in areas now capped, may need to pivot to long-term rentals, sell their properties, or explore alternative uses. This shift could potentially increase the supply of much-needed long-term rental housing and influence the local housing market dynamics. Concurrently, demand for traditional hotels and legally compliant short-term rentals might experience a moderate increase. The city’s tourism sector will need to adapt, potentially by focusing on local businesses that benefit from visitor spending regardless of lodging type.

An Evolving Landscape of Urban Housing Policy

The development and implementation of Ordinance 17-25 are part of a larger, ongoing discourse on urban housing policy in the 21st century. As cities continue to evolve and new economic models like the sharing economy emerge, policymakers face the continuous challenge of adapting regulations to strike a sustainable balance. This includes fostering economic growth and tourism while ensuring the viability of stable, livable residential communities for their permanent inhabitants. The story of short-term rentals in Annapolis serves as a microcosm of this pervasive societal and governmental challenge, with future refinements in policy likely focusing on data-driven insights and enhanced community engagement.