Ocean City ordinance would set 10 percent cap on short-term rentals in neighborhoods

OCEAN CITY, Md. — After months of debate on short-term rentals, Ocean City council members are set to discuss a new ordinance that would limit the number of short-term rental licenses in certain residential areas and give priority to city residents seeking new licenses.

The proposal would cap short-term rental licenses in the R-1 and MH zoning districts at 10 percent of all improved properties in those areas. The cap would apply collectively to both districts.

According to city data, there are currently 320 licensed short-term rentals among 3,753 improved properties in the two districts. Under the proposed cap, up to 375 licenses would be allowed, leaving 55 new licenses available if the ordinance is approved.

The ordinance comes as locals believe they are heading to another referendum to have voters possibly nix town decisions regarding rental properties. A new petition targets the council's moratorium on new licenses. 

In July, voters successfully overturned short-term rental restrictions such as a minimum-night stay requirement. 

Ordinance prioritizes locals 

Existing licenses would remain valid as long as they remain in good standing, though licenses would generally be nontransferable. The ordinance would also limit residents to one priority license per person.

Under the proposed timeline, renewal applications for existing license holders would be accepted from March 1 through April 30.

According to town documents, license applications would be divided into two phases. Ocean City residents would receive first priority, with applications opening March 9 in the first year and March 1 in future years. Resident applicants would be required to apply in person and provide proof of homestead status and an Ocean City address. Only one license would be allowed per homestead property.

Applications from nonresident applicants would be accepted from April 1 through April 30, also on a first-come, first-served, in-person basis, with one license allowed per applicant.

If available licenses are exhausted, applicants would be placed on a numbered waitlist, which would be posted online. Applicants would not be required to pay license fees unless a license is issued.

City officials said the in-person application requirement is intended to avoid the need for a lottery system and is reasonable given that all license holders must have a local resident agent.

To take effect for the 2026 short-term rental season, the ordinance would need to pass its second reading no later than March 2.