Short-Term Rental Laws in Cape May, NJ (2026)
Short-term rentals (any lease under 175 consecutive days) are legal throughout Cape May, but every rental unit must be inspected and licensed annually through the City Clerk's mercantile/rental license program, with square-footage-based fees of $125-$300 per unit plus a $50 tourism assessment and $25 parking surcharge (license year May 1-April 30). The biggest obligations are the annual Fire Prevention Bureau inspection, mandatory liability insurance ($500,000 for typical non-owner-occupied rentals), and a Cape May County-resident managing agent; there is no owner-occupancy rule, night cap, or minimum stay. Lodging taxes total about 14.625% (6.625% sales tax + 5% state occupancy fee + 3% municipal occupancy tax) on marketplace bookings, which platforms like Airbnb collect, while traditional realtor-brokered rentals are tax-exempt. Always confirm current requirements with the city before operating.
Cape May STR rules at a glance
| Legal status | Allowed with permit |
|---|---|
| Permit required | Yes |
| Permit name | Rental License (Mercantile License - Residential Short Term Rental Unit) |
| Permit fee | $125 |
| Renewal | Annual |
| Owner occupancy required | No |
| Primary residence only | No |
| Total occupancy taxes | ~14.63% of gross revenue |
| Insurance | Yes (state-mandated, registered with the city). Under P.L. 2022, c. 92 as codified at section 310-30E: owners of rental units (other than owner-occupied multifamily of 4 or fewer units) must maintain liability insurance of at least $500,000 for negligent acts and omissions; owner-occupied multifamily properties of 4 or fewer units need at least $300,000. The certificate of insurance must be registered annually with the mercantile license application; failure carries a minimum $500 penalty. The application checklist requires proof of insurance (declaration page). |
| Enforcement | Enforced by the Police Chief, Construction Code Official, Fire Official, Licensing Clerk, Code Enforcement Official, Zoning Official, designated employees, and the Cape May County Department of Health. Each licensed unit must display a city-issued decal visible from the exterior. Annual Fire Prevention Bureau inspection required before license issuance; municipal taxes and water/sewer must be current. In 2025 the city bought STR-tracking software and moved to an active enforcement phase: in March 2025 the city manager warned owners and offered amnesty (license up, no added penalties); by August 2025 officials initially reported up to 900 non-compliant properties, corrected in September 2025 to roughly 90 unlicensed of about 900 total STR sites (possibly closer to 45 after refinement). Operating without a license draws a court summons. |
| Current rules effective | 2022-02-01 |
What will guests pay in taxes on a Cape May stay?
Itemized occupancy taxes for Cape May, NJ — enter your nightly rate to see the real cost breakdown.
Cape May occupancy tax calculator
| Gross rent | $450.00 |
| New Jersey Sales Tax (6.625%)· collection varies | $29.81 |
| New Jersey State Occupancy Fee (5%)· collection varies | $22.50 |
| Cape May City Municipal Occupancy Tax (3%)· collection varies | $13.50 |
| Total tax (14.63%) | $65.81 |
| Guest pays | $515.81 |
Estimate only. Platform collection varies by listing site and agreement; verify rates with the taxing authorities.
Permits & licensing
Cape May requires Rental License (Mercantile License - Residential Short Term Rental Unit) to operate a short-term rental — the fee is $125, renewed annual.
Tiered by square footage on the official 2025 mercantile license application: $125 (0-1,000 SF and 1,001-2,000 SF), $200 (2,001-3,000 SF), $250 (3,001-4,000 SF), $300 (4,001-5,000 SF and 5,000+ SF), per rental unit. Plus mandatory annual assessments: $50 Tourism Assessment Fee and $25 Parking Trust Fund per business license. License year runs May 1 to April 30; fees due by May 1. Late fee for STRs equals the full applicable square-footage fee multiplied by each calendar month late (the general 10%-of-fee-per-30-days late charge applies only to non-STR mercantile licenses). Some older sources cite the pre-2023 flat fees ($300 under 4,000 SF / $1,000 over), which the current official application supersedes.
Zoning & location rules
No STR-specific zoning districts or zone-based bans appear in the licensing ordinance; rentals are licensed citywide, and the city acknowledges most rental units sit in residential neighborhoods. The mercantile application requires the applicant to certify that all necessary zoning approvals have been secured, and the Zoning Official signs off on each license. A 2024 workforce-housing ordinance for the C-1 Business District encourages long-term apartments over retail in lieu of short-term rentals but does not prohibit STRs.
Taxes
| Tax | Rate | Who collects |
|---|---|---|
| New Jersey Sales TaxApplies to transient accommodations obtained through a transient space marketplace (Airbnb/Vrbo collect and remit) or that are professionally managed units (owner offering 3+ units collects on direct bookings). Exempt: rentals executed by a licensed NJ real estate broker with offsite key handoff; direct-from-owner rentals (no marketplace, fewer than 3 units) since Aug 9, 2019; leases of 90+ consecutive days. | 6.625% | varies |
| New Jersey State Occupancy FeeImposed at 5% on transient accommodation rentals that are subject to Sales Tax; same marketplace-collection rules and broker/direct-owner exemptions apply. | 5% | varies |
| Cape May City Municipal Occupancy TaxCity hotel/motel occupancy tax (3% since 7/1/2004) extended to transient accommodations effective 1/1/2022 per the NJ Division of Taxation municipal tax list. Collected alongside state taxes: by the marketplace for platform bookings, otherwise by the person collecting the rent. Combined burden on taxable STR bookings is approximately 14.625%. | 3% | varies |
Enforcement & penalties
Enforced by the Police Chief, Construction Code Official, Fire Official, Licensing Clerk, Code Enforcement Official, Zoning Official, designated employees, and the Cape May County Department of Health. Each licensed unit must display a city-issued decal visible from the exterior. Annual Fire Prevention Bureau inspection required before license issuance; municipal taxes and water/sewer must be current. In 2025 the city bought STR-tracking software and moved to an active enforcement phase: in March 2025 the city manager warned owners and offered amnesty (license up, no added penalties); by August 2025 officials initially reported up to 900 non-compliant properties, corrected in September 2025 to roughly 90 unlicensed of about 900 total STR sites (possibly closer to 45 after refinement). Operating without a license draws a court summons.
Fine up to $1,000 for a first offense; minimum $1,000 and up to $2,000 for second or subsequent offenses, in addition to any other penalties provided by law. Each day a tenant occupies an unlicensed rental unit is a separate violation. Late license payment for STRs adds the full applicable square-footage fee for each calendar month late (non-STR licenses instead incur 10% of the required fee per 30-day period). Failure to register the required insurance certificate carries a minimum $500 penalty.
⚠️ HOA/condo rules may prohibit STRs regardless of city law.
Getting legal in Cape May: the playbook
Generated from this market's verified rules — each step traces to the sources at the bottom of this page.
- 1
Verify your zoning
Location rules apply: No STR-specific zoning districts or zone-based bans appear in the licensing ordinance; rentals are licensed citywide, and the city acknowledges most rental units sit in residential neighborhoods. The mercantile application requires the applicant to certify that all necessary zoning approvals have been secured, and the Zoning Official signs off on each license. A 2024 workforce-housing ordinance for the C-1 Business District encourages long-term apartments over retail in lieu of short-term rentals but does not prohibit STRs. Confirm your parcel's zoning with the city before applying.
- 2
Check the covenant layer
HOA/condo rules may prohibit STRs regardless of city law.
- 3
Apply for the Rental License (Mercantile License - Residential Short Term Rental Unit)
Budget $125 (annual renewal). Tiered by square footage on the official 2025 mercantile license application: $125 (0-1,000 SF and 1,001-2,000 SF), $200 (2,001-3,000 SF), $250 (3,001-4,000 SF), $300 (4,001-5,000 SF and 5,000+ SF), per rental unit. Plus mandatory annual assessments: $50 Tourism Assessment Fee and $25 Parking Trust Fund per business license. License year runs May 1 to April 30; fees due by May 1. Late fee for STRs equals the full applicable square-footage fee multiplied by each calendar month late (the general 10%-of-fee-per-30-days late charge applies only to non-STR mercantile licenses). Some older sources cite the pre-2023 flat fees ($300 under 4,000 SF / $1,000 over), which the current official application supersedes. Apply through the city — the official application page is linked in the sources below.
- 4
Line up required insurance
Yes (state-mandated, registered with the city). Under P.L. 2022, c. 92 as codified at section 310-30E: owners of rental units (other than owner-occupied multifamily of 4 or fewer units) must maintain liability insurance of at least $500,000 for negligent acts and omissions; owner-occupied multifamily properties of 4 or fewer units need at least $300,000. The certificate of insurance must be registered annually with the mercantile license application; failure carries a minimum $500 penalty. The application checklist requires proof of insurance (declaration page).
- 5
Set up tax collection & remittance
Platforms don't collect everything here: New Jersey Sales Tax (6.625%), New Jersey State Occupancy Fee (5%), Cape May City Municipal Occupancy Tax (3%) are remitted by the host. Register with the taxing authority before your first booking and calendar the filing deadlines.
- 6
Calendar the renewal before you forget it
This permit renews annual (budget $125 again). Most cities take weeks to process renewals and don't send reminders — our Host plan emails you at 60/30/7 days out.
- 7
Know the cost of getting it wrong
Fine up to $1,000 for a first offense; minimum $1,000 and up to $2,000 for second or subsequent offenses, in addition to any other penalties provided by law. Each day a tenant occupies an unlicensed rental unit is a separate violation. Late license payment for STRs adds the full applicable square-footage fee for each calendar month late (non-STR licenses instead incur 10% of the required fee per 30-day period). Failure to register the required insurance certificate carries a minimum $500 penalty. Enforced by the Police Chief, Construction Code Official, Fire Official, Licensing Clerk, Code Enforcement Official, Zoning Official, designated employees, and the Cape May County Department of Health. Each licensed unit must display a city-issued decal visible from the exterior. Annual Fire Prevention Bureau inspection required before license issuance; municipal taxes and water/sewer must be current. In 2025 the city bought STR-tracking software and moved to an active enforcement phase: in March 2025 the city manager warned owners and offered amnesty (license up, no added penalties); by August 2025 officials initially reported up to 900 non-compliant properties, corrected in September 2025 to roughly 90 unlicensed of about 900 total STR sites (possibly closer to 45 after refinement). Operating without a license draws a court summons.
Recent rule changes in Cape May
September 12, 2025
City corrects unlicensed STR count; enforcement list narrowed
At the September 2, 2025 council meeting, City Manager Paul Dietrich corrected his earlier statement: about 900 is the total number of short-term rental sites in the city, with roughly 90 unlicensed; the City Clerk said the final number subject to enforcement may be closer to 45.
Official source →August 27, 2025material
Enforcement phase begins against unlicensed short-term rentals
Following adoption of STR-tracking software, the city announced it was entering the enforcement phase of its crackdown on short-term rentals operating without the required mercantile license, with fines of $1,000 (first offense) and up to $2,000 (subsequent offenses).
Official source →March 7, 2025material
City warns STR owners to register; amnesty offered
The city manager warned owners of unlicensed short-term rentals that they risked fines, offering amnesty with no additional penalties for owners who paid up, obtained their license, and became current with the ordinance.
Official source →October 4, 2022material
Liability insurance requirement added (Ord. No. 477-2022)
Implementing NJ P.L. 2022, c. 92, the city amended the STR ordinance to require rental owners to maintain liability insurance ($500,000 standard; $300,000 for owner-occupied multifamily of 4 or fewer units) and register the certificate annually with the mercantile license application.
Official source →February 1, 2022material
Short-Term Rental License Regulations adopted (Ord. No. 452-2021)
City Council adopted Chapter 310 Article IV, codifying annual licensing and inspection of all short-term rental units (leases under 175 consecutive days), square-footage-based fees, decal display, occupancy limits, and penalties. The city's 3% occupancy tax was also extended to transient accommodations effective January 1, 2022.
Official source →
Frequently asked questions
›Is Airbnb legal in Cape May?
Yes — Airbnb and other short-term rentals are legal in Cape May, NJ, but you must obtain a Rental License (Mercantile License - Residential Short Term Rental Unit) before operating. Always confirm current requirements with the city before operating.
›Do I need a permit for a short-term rental in Cape May?
Yes. Cape May requires a Rental License (Mercantile License - Residential Short Term Rental Unit) to operate a short-term rental, which costs $125 and must be renewed every year. Always confirm current requirements with the city before operating.
›How much does a Cape May short-term rental permit cost?
The Rental License (Mercantile License - Residential Short Term Rental Unit) costs $125 (annual renewal). Tiered by square footage on the official 2025 mercantile license application: $125 (0-1,000 SF and 1,001-2,000 SF), $200 (2,001-3,000 SF), $250 (3,001-4,000 SF), $300 (4,001-5,000 SF and 5,000+ SF), per rental unit. Plus mandatory annual assessments: $50 Tourism Assessment Fee and $25 Parking Trust Fund per business license. License year runs May 1 to April 30; fees due by May 1. Late fee for STRs equals the full applicable square-footage fee multiplied by each calendar month late (the general 10%-of-fee-per-30-days late charge applies only to non-STR mercantile licenses). Some older sources cite the pre-2023 flat fees ($300 under 4,000 SF / $1,000 over), which the current official application supersedes.
›Can I Airbnb a non-primary residence in Cape May?
Yes — Cape May does not limit short-term rentals to primary residences. Zoning and other restrictions may still apply. Always confirm current requirements with the city before operating.
›What taxes do short-term rental hosts pay in Cape May?
Hosts in Cape May are subject to: New Jersey Sales Tax (6.625%), New Jersey State Occupancy Fee (5%), Cape May City Municipal Occupancy Tax (3%) — roughly 14.63% total on gross rental revenue. Platforms like Airbnb collect some of these automatically; check each line's collection method on this page.
›What happens if I operate a short-term rental illegally in Cape May?
Fine up to $1,000 for a first offense; minimum $1,000 and up to $2,000 for second or subsequent offenses, in addition to any other penalties provided by law. Each day a tenant occupies an unlicensed rental unit is a separate violation. Late license payment for STRs adds the full applicable square-footage fee for each calendar month late (non-STR licenses instead incur 10% of the required fee per 30-day period). Failure to register the required insurance certificate carries a minimum $500 penalty. Enforced by the Police Chief, Construction Code Official, Fire Official, Licensing Clerk, Code Enforcement Official, Zoning Official, designated employees, and the Cape May County Department of Health. Each licensed unit must display a city-issued decal visible from the exterior. Annual Fire Prevention Bureau inspection required before license issuance; municipal taxes and water/sewer must be current. In 2025 the city bought STR-tracking software and moved to an active enforcement phase: in March 2025 the city manager warned owners and offered amnesty (license up, no added penalties); by August 2025 officials initially reported up to 900 non-compliant properties, corrected in September 2025 to roughly 90 unlicensed of about 900 total STR sites (possibly closer to 45 after refinement). Operating without a license draws a court summons.
Cape May's STR rules changed 3 times recently.
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Related
Nearby covered markets
- Ocean City, MDPermit required
- Philadelphia, PAPermit required
- Washington, DCPrimary residence only
- New York, NYPrimary residence only
- Virginia Beach, VARestricted
Sources
- City of Cape May Code, Chapter 310 Article IV: Short-Term Rental License Regulations (eCode360)retrieved July 11, 2026
- City of Cape May 2025 Mercantile License Application and Fee Schedule (City Clerk's Office)retrieved July 11, 2026
- NJ Division of Taxation: Municipal Hotel/Motel and Transient Accommodations Tax Rate Listretrieved July 11, 2026
- NJ Division of Taxation TB-81R2: Taxes Imposed on the Rental of Transient Accommodationsretrieved July 11, 2026
- NJ Division of Taxation: Transient Accommodations FAQretrieved July 11, 2026
- Cape May County Herald: Cape May to Crack Down on Rental License Scofflaws (Aug 27, 2025)retrieved July 11, 2026
- Cape May County Herald: Cape May Corrects Statement on Unlicensed Short-Term Rentals (Sep 12, 2025)retrieved July 11, 2026
This page is informational only and is not legal, tax, or financial advice. Rules change and enforcement varies — verify current requirements with Cape May and a qualified professional before operating.