Hot Springs Regulations 400 Permits: Clerks, Not Occupancy Ranking

Hot Springs is one of the most actively regulated short-term rental markets in the inland Southeast — a heritage spa town where the city chose to cap residential STR permits rather than let supply run open. That regulatory choice makes compliance a competitive moat: holding a valid permit in a capped market is itself a marketing and resale advantage, while buyers who purchase without verifying license status risk owning real estate without the right to operate at all.

This guide explains Ordinance O-21-26, the residential cap's tightening from 700 to 500 to 400 licenses, the divide between owner-occupied and non-owner-occupied paths, and how the rules differ inside city limits versus the Garland County lake shoreline. Before closing on any Hot Springs STR property, verify current cap utilization and waitlist status directly with the City of Hot Springs Finance Department — the residential cap is already full, and an agent's assurance is no substitute for a written answer from the office that issues the license.

The Ordinance Framework: O-21-26

The regulatory foundation dates to the City of Hot Springs's May 18, 2021 Board of Directors meeting, when the board passed Ordinance O-21-26, establishing the policies, rules, and regulations that now govern short-term residential rental businesses citywide, effective June 1, 2021. O-21-26 didn't arrive in a vacuum — it followed Ordinance 6375, passed in March 2021, which had already created the STR business-license category and imposed a study-period abeyance on new applications while the city worked out its permanent framework. Under that framework, a short-term residential rental business is defined as renting, leasing, or furnishing a house, cabin, condominium, apartment, or similar accommodation within city limits for periods less than 30 days — the trigger that pulls a property into the licensing system covered below.

The 400-Permit Residential Cap (Down From 700)

The centerpiece of O-21-26 is a hard numeric ceiling, though the number itself has moved twice since the ordinance took effect. The original 2021 ordinance set the residential-zone maximum at 700 licenses; the city cut that ceiling to 500 later in 2021, and has since reduced it again to 400. That 400-license cap is not a blanket limit on every parcel in Hot Springs — it applies specifically to residential zoning districts, which is the distinction that trips up buyers who assume the number caps the whole market.

Several categories sit outside that residential math. STRs in nonresidential zones — commercial, downtown, industrial, and certain mixed-use districts per the ordinance text — follow a separate track, as do historic preservation overlay exceptions and condominiums recorded before January 18, 2022. Where the cap does apply, Conditional Use Permits are required for STRs in residential zones, specifically the RR, RS, and RN-1 through RN-6 districts, per city materials.

For underwriting purposes, treat 400 as the current headline residential cap, and treat it as full: as of 2025 the city confirmed the residential-zone cap had been reached, R-zone STR licenses are not being issued for the remainder of the cap period, and no waitlist exists. Non-residential zones and condominiums platted before January 18, 2022 remain exempt from the cap and are still accepting new applications, which is where the realistic path to licensing now runs for buyers without an existing transferable license. Confirm current status directly with Planning and Finance before committing to any non-owner-occupied residential purchase.

Permit Mechanics Hosts Actually Need

Once a property clears the cap and zoning hurdles, the mechanics of holding a license are straightforward but unforgiving on timing and cost. Every STR property needs an annual business license, due January 1 each year, and the initial application fee plus the subsequent annual business and occupation tax runs $50 per bed within the licensed property per city STR guidance — a bed-count-based structure that rewards accurate declarations and penalizes hosts who under-report.

Before that first license is issued, the property must pass a life-safety inspection, and every licensed STR is required to keep a local property manager on-call 24/7 with the ability to be on-site within 60 minutes to respond to reported issues — a response-time standard that effectively rules out fully remote, out-of-state management without a local partner.

Operational limits follow the same specificity: maximum occupancy is capped at two guests per bedroom plus two, off-street parking must comply with city codes HSC 16-2-103 through 16-2-104, and hosts must comply with the solid waste ordinance and noise codes while keeping the STR consistent with neighborhood character.

Application materials include the owner's name and contact information, a list of every STR address the owner holds within city limits, and a local emergency contact person, and should be submitted to the City of Hot Springs Finance Department at 324 Malvern Avenue, 2nd Floor, or through the cityhs.net business license portal.

Owner-Occupied vs Non-Owner-Occupied Paths

Hot Springs draws a meaningful line between homestay-style owner-occupied rentals and non-owner-occupied investment STRs, and the distinction matters enormously for anyone shopping the market. The cap and the CUP burden land hardest on non-owner-occupied residential conversions — exactly the buyer segment that types "Hot Springs Airbnb investment" into search and assumes a purchase automatically comes with the right to rent it out short-term.

Owner-occupied operators may follow a different compliance path depending on the zone and the occupancy pattern involved, so it's worth verifying directly with Planning whether a given scenario is homestay-exempt or requires full STR licensing and a CUP.

Non-owner-occupied purchases in residential zones that lack an existing transferable license should be treated as high-risk until the city confirms otherwise — absent that confirmation, a buyer may be acquiring real estate without the right to operate it as a short-term rental at all.

Sub-Markets Where Rules Play Out Differently

In the historic district near Bathhouse Row and Central Avenue, operators get a genuine walkability premium, but that comes bundled with heightened scrutiny from the city over parking and neighborhood compatibility.

Along the Lake Hamilton and Lake Catherine shorelines inside city limits, dock-marketed homes face the exact same STR license and bed-tax stack as anywhere else in town — and the lakefront ADR premium, which runs $300 to $525+, only pencils out if the property is actually permitted to operate.

The Majestic and Park Avenue corridors sit in residential zoning with strong spa-weekend demand, which means CUP competition in those corridors is fierce.

Step outside city limits into unincorporated Garland County, and the calculus changes again: much of the lake shoreline there carries no equivalent 400-license cap (the city's figure, down from an original 700, then 500) and no CUP regime, but state and county taxes still apply regardless. Arkansas Business and Visit Hot Springs materials reference 1,000+ county STRs not remitting local lodging tax — a compliance and tax-remittance gap that represents a real opportunity for professional operators willing to do it correctly, and a real risk for anyone assuming county STRs are simply unregulated.

Tax and Remittance Stack

The tax stack layers state, city, and county obligations, and hosts need to budget for all three. At the state level, Arkansas frameworks reference a 6.5 percent sales tax, a 2 percent statewide tourism tax, and 1 percent STR tax components on short stays — roughly 9.5 percent before any local levies are added on top.

Hot Springs itself adds local sales tax plus A&P/HMR lodging taxes; the Greater Hot Springs Chamber cites 3 percent A&P on lodging and prepared food, though hosts should reconcile the exact stacking with Finance rather than assume the published rate is the full local picture. Garland County layers on its own additional sales tax, and once every component is counted, the effective all-in tax loads often exceed 12 percent.

Marketplace platforms collect state taxes in many cases, but local A&P may remain the host's own responsibility on direct bookings — a distinction that catches operators who assume Airbnb or Vrbo is handling everything. Budget for registration and for monthly or quarterly filing regardless of which platform generated the booking.

Why the Cap Holds Economic Value

The reason the cap holds real economic value comes down to the shape of the demand curve. Hot Springs runs trimodal demand — Oaklawn racing from December through May, summer Tri-Lakes boating, and October foliage paired with the documentary film festival — which produces flatter seasonality, roughly a 2.2x swing, than pure lake towns that live and die on a single summer season. A permitted lakefront or downtown STR is positioned to capture that demand across all three windows; an unpermitted operator, by contrast, risks fines and delisting at exactly the moment demand peaks.

Market-wide ADR runs $258 to $276, with the top decile pushing above $471, and revenue per listing averages to. Given those numbers, the permit itself functions as part of the asset — it belongs in resale packages the same way a liquor license would in a liquor-heavy town, because it converts a property from a house that could maybe rent short-term into a documented, compliant income-producing asset.

Due Diligence Script for Buyers and Sellers

Due diligence on a Hot Springs STR purchase should be conducted in writing, not taken on faith from a listing description. Ask the seller or the city finance office directly: Is there an active STR business license for this address? Is the property in a residential zone requiring a CUP? Does the license transfer on sale? How many beds are licensed, and what is the annual bed tax? Who is the designated local manager? And is the property counted against the 400 residential cap — which is currently full, with no new R-zone licenses being issued and no waitlist?

If the answers come back vague or unverifiable, that's the signal to pause earnest money until they're not. It's also worth remembering that Garland County lake parcels outside city limits follow an entirely different regulatory stack — confirm municipal limits on GIS before assuming a property enjoys the city's cap protection, or is burdened by its CUP requirement, at all.

Common Host Mistakes in Capped Markets

The mistakes that trip up hosts in capped markets tend to repeat: operating after a CUP denial while hoping to list quietly, under-reporting bed count on the license, missing the January 1 renewal deadline, hiring an out-of-area manager who cannot realistically meet the 60-minute response rule, and failing to remit city A&P on direct bookings while assuming platforms have already covered the full tax obligation when they've only collected state tax. Any one of these can turn a compliant-looking listing into a licensing or tax liability.

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Frequently Asked Questions

What is the Hot Springs STR permit cap?

Ordinance O-21-26 originally set the residential-zone cap at 700 licenses in 2021. The city cut that number to 500 later that year and has since reduced it again to 400 — and as of 2025, that 400-license residential cap is full, with no new R-zone licenses being issued and no waitlist. The cap applies specifically to residential zoning districts (RR, RS, and RN-1 through RN-6) rather than every parcel citywide, which is why properties in nonresidential zones, historic preservation overlay exceptions, and condominiums recorded before January 18, 2022 can follow different pathways and remain open to new applications. Because cap status can change, buyers and hosts should confirm current availability.

How much is the Hot Springs STR license?

Per city guidance, the annual business and occupation tax for an STR license is $50 per bed within the licensed property, in addition to the initial application fees due when the license is first issued. Because the fee scales with bed count, larger properties carry proportionally higher annual costs, and accurately declaring bed count matters both for both budgeting and for compliance — under-reporting beds on the license is one of the most common mistakes hosts make in Hot Springs's capped market. Renewal is due January 1 each year, so hosts should build that date into their annual compliance calendar alongside the life-safety inspection requirement.

Do I need a Conditional Use Permit?

Yes, for any STR located in a residential zone — specifically the RR, RS, and RN-1 through RN-6 districts per city materials, a Conditional Use Permit is required before the property can legally operate as a short-term rental. Nonresidential zones, including commercial, downtown, industrial, and certain mixed-use districts per the ordinance text, follow different rules and generally don't carry the same CUP burden. Because CUP competition is especially fierce in high-demand residential corridors like Majestic and Park Avenue, buyers targeting those areas should confirm CUP status before committing to a purchase, not after.

Does the permit transfer when I buy a house?

Not automatically — permit transfer status needs to be verified directly with the City of Hot Springs Finance Department before closing. Treat the absence of written confirmation as a potential deal killer rather than a minor paperwork detail, because a non-owner-occupied purchase in a residential zone without an existing transferable license can mean acquiring real estate without the legal right to operate it as a short-term rental. This is especially important given the residential cap, now at 400 licenses and already full as of 2025 with no waitlist: if a prior license doesn't convey, there is currently no path to a new residential-zone license, though nonresidential zones and pre-2022 condominiums.

What is the local manager rule?

Every licensed STR in Hot Springs must have a local property manager on-call 24/7 with the ability to be on-site within 60 minutes to respond to reported issues. In practice, this response-time standard rules out fully remote or out-of-state management arrangements unless a local partner is retained, and using an out-of-area manager who cannot meet the 60-minute window is one of the recurring compliance mistakes the city sees in capped markets. Hosts should treat the local-manager requirement as a real operational commitment, not a box to check on the application.

What is maximum occupancy?

Maximum occupancy at a licensed Hot Springs STR is two guests per bedroom plus two. That figure works alongside other operational requirements — off-street parking compliant with city codes HSC 16-2-103 through 16-2-104, adherence to the solid waste ordinance and noise codes, and maintaining the property consistent with neighborhood character — all part of the same compliance package hosts sign up for when they take out an annual license.

Are lake houses outside city limits capped?

No — unincorporated Garland County does not use the city's 400-license residential cap (reduced from an original 700, then 500) or its Conditional Use Permit regime, so much of the lake shoreline outside city limits is not subject to those specific restrictions. That said, state and county taxes still apply regardless of whether a property sits inside or outside city limits, and Arkansas Business and Visit Hot Springs materials reference 1,000+ county STRs not remitting local lodging tax, which underscores that uncapped does not mean unregulated. Buyers should confirm municipal limits on GIS before assuming a lake parcel is either protected by the city's cap or exempt from its CUP.

What taxes do Hot Springs STR hosts owe?

Hosts owe a layered stack: state sales tax at 6.5 percent, a 2 percent statewide tourism tax, and 1 percent STR tax components — roughly 9.5 percent before local levies — plus city sales tax and A&P/HMR lodging taxes, which the Greater Hot Springs Chamber cites at 3 percent on lodging and prepared food, plus Garland County's additional sales tax. Once every layer is counted, effective all-in tax loads often exceed 12 percent. Marketplace platforms collect state taxes in many cases, but local A&P may remain the host's responsibility on direct bookings, so hosts should confirm the exact stacking with Finance and budget for monthly or quarterly filing.

What is the ADR and revenue outlook for a permitted Hot Springs STR?

Market-wide average daily rate runs $258 to $276, with the top decile of listings pushing above $471, and revenue per listing averages to annually. Lakefront properties on Lake Hamilton and Lake Catherine can command an even higher ADR premium, from $300 to $525+, but that premium only materializes if the property is actually licensed to operate — an unpermitted lakefront home can't legally capture the rates the market is willing to pay. Because the license itself gates access to that revenue, it functions as part of the asset and should be documented accordingly in any resale package.

Why does Hot Springs have flatter seasonality than other lake markets?

Hot Springs runs trimodal demand rather than a single peak season: Oaklawn racing draws visitors from December through May, summer brings Tri-Lakes boating traffic, and October combines foliage season with the documentary film festival. That three-part calendar produces a seasonality swing of roughly 2.2x, notably flatter than pure lake towns that depend almost entirely on a single summer season for occupancy. A permitted STR is positioned to capture demand across all three windows, which is part of why the city's cap on licenses carries real economic weight — it's protecting access to a genuinely multi-season revenue stream, not just a few peak summer weeks.

Is it true that many Garland County STRs aren't paying local lodging tax?

Yes — Arkansas Business and Visit Hot Springs materials reference 1,000+ county STRs not remitting local lodging tax, a gap that exists primarily in unincorporated Garland County where the city's licensing regime doesn't reach. For professional operators willing to register and remit correctly, that compliance gap represents a real opportunity, since undercutting non-compliant competitors on legitimacy can be a genuine differentiator with guests and with local officials. For buyers, it's also a reminder that state and county tax obligations apply on Garland County lake parcels regardless of whether the city's 400-license cap and CUP regime does.

Why the Cap Holds Economic Value?

Application materials include the owner's name and contact information, a list of every STR address the owner holds within city limits, and a local emergency contact person, and should be submitted to the City of Hot Springs Finance Department at 324 Malvern Avenue, 2nd Floor, or through the cityhs.net business license portal. Every STR property needs an annual business license, due January 1 each year, and the initial application fee plus the subsequent annual business and occupation tax runs $50 per bed within the licensed property per city STR guidance — a bed-count-based structure that rewards accurate declarations and penalizes hosts who under-report.

Work with Crest & Cove Creative

Ready to put Hot Springs permit-verified listing copy, bed-tax transparency, and race-season compliance messaging to work on your property?

Reach out at crestcove.co or (256) 998-7502.