Cape May Short-Term Rental Regulations

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Permit & Licensing

Mercantile License – Residential Short Term Rental Unit

This permit type does not require primary residence.

Application Process

Complete the Mercantile License Application from the City Clerk's Licensing Office in full, including Block and Lot, and indicate New/Renewal/Not Renting. Attach proof of insurance (a declaration page showing policy period, property address, property owner(s), and coverage levels), and schedule the rental for inspection by the Fire Prevention Bureau under Section 2479. Ensure all taxes, water/sewer charges, and other municipal assessments are current, then submit the application with payment to the City Clerk's Licensing Office, 643 Washington Street, Cape May, NJ 08204-2397. The license year runs May 1 to April 30, and fees must be paid before April 30 to avoid late charges.

Tax Obligations

Combined rate: 14.625% of gross rental income.

Filing: Monthly (Form HM-100, due the 20th day of the month following the month for which tax is due)

Rental Limits

Cape May does not impose an annual cap on the number of nights you can rent. Individual-stay rule: Up to 174 consecutive days per lease/tenancy (a lease of 175+ consecutive days falls outside the city's short-term rental definition and licensing chapter).

Occupancy & Density Limits

No maximum-guest-count limit specified; kitchens, uninhabitable spaces, and interior public areas may not be used as sleeping spaces

Zoning & Restrictions

No STR-specific zoning restrictions identified; the short-term rental licensing chapter applies citywide to all rental properties (including resort houses)

Insurance & Safety

Insurance

Operators must maintain at least $300,000 minimum combined liability (multifamily rental property of 4 or fewer units, one of which is owner-occupied); $500,000 minimum combined liability (all other rental units) in insurance covering the property's use as a short-term rental.

Safety & Operating Requirements

• The rental must be scheduled for inspection by the Fire Prevention Bureau pursuant to Section 2479.
• All licenses are conditioned on continuing compliance with the Uniform Fire Safety Act and Chapter 247 of the City Code.

Penalties for Non-Compliance

Operating a short-term rental without a current mercantile license results in a summons to appear in municipal court and is subject to a fine. Separately, if the annual license is not paid before April 30, a late charge applies: 10% of the required fee (excluding the Tourism Assessment/Parking Trust Fund) for each 30-day period late; for short-term rental licenses specifically, the late fee equals the applicable square-footage-tier license fee multiplied by each calendar month the payment is late. Late fees are non-refundable. Each day a tenant occupies an unlicensed rental unit is a separate violation.

Compliance Checklist

Follow these steps to legally operate a short-term rental in Cape May:

1. Meet safety requirements. The rental must be scheduled for inspection by the Fire Prevention Bureau pursuant to Section 2479. All licenses are conditioned on continuing compliance with the Uniform Fire Safety Act and Chapter 247 of the City Code.
2. Obtain liability insurance. $300,000 minimum combined liability (multifamily rental property of 4 or fewer units, one of which is owner-occupied); $500,000 minimum combined liability (all other rental units) minimum.
3. Apply for Mercantile License – Residential Short Term Rental Unit. Submit application + $125-$300 fee.
4. Register for tax accounts. Set up lodging tax accounts with New Jersey Division of Taxation (Department of the Treasury).
5. Collect and remit taxes. 14.625% on all bookings.
6. Renew annually. $125-$300 renewal fee.

Frequently Asked Questions

Do you need a permit to run an Airbnb in Cape May?

Yes. Operating a short-term rental — including an Airbnb or Vrbo — in Cape May requires a Mercantile License.

Does Cape May require a short-term rental to be your primary residence?

No. Cape May allows non-owner-occupied short-term rentals, so investment properties can qualify provided you hold the required permit.

How many days a year can you short-term rent in Cape May?

Cape May does not cap the number of nights per year you can short-term rent, though permitting, zoning, and occupancy rules still apply.

What taxes do you pay on a short-term rental in Cape May?

Short-term rental stays in Cape May are subject to a combined 14.625% in lodging taxes. This combines 6.625% New Jersey Sales Tax + 5% New Jersey State Occupancy Fee + 3% Cape May Municipal Occupancy Tax (Transient Accommodations). The host is responsible for collecting and remitting them.

What happens if you run a short-term rental without a permit in Cape May?

Operating without a permit can cost up to $1,000 (first offense, upon conviction); $1,000–$2,000 (second or subsequent offense).