5 Worst States To Run an Airbnb in 2025, According to Experts

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At the city, neighborhood and property levels, dozens of factors affect what makes a good short-term rental investment. From occupancy to seasonality, average daily rate to cost basis, available skilled labor and risk factors like insurance volatility, investors have plenty of research to do.

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But at the state level, Airbnb investors tend to look at just one factor: regulatory risk. Watch out for the following states that don’t make it easy to run a vacation rental property.

Hawaii

Unlike most states, nearly the entire state of Hawaii attracts tourists as a destination. That means there’s plenty of demand for vacation rentals, so many property owners shifted their usage from long-term residential to short-term rentals in the early days of Airbnb.

Given the already tight housing inventory, local residents pushed back — hard.

“Hawaii, particularly places like Maui and Honolulu, has cracked down with stricter rules and permit requirements in many areas,” noted real estate expert Ben Mizes of CleverOffers.com. “The high cost of living in Hawaii also means your expenses as a host will likely be higher, impacting your overall profitability.”

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California

While California doesn’t impose statewide bans or restrictions on Airbnb, many of the cities with the highest tourism volume do.

“Many cities like Los Angeles, San Francisco and Santa Monica have implemented significant regulations,” added Mizes. “They often require licenses and restrict short-term rental activity.”

Even if you’re considering a city with no current Airbnb restrictions, it could add them after you buy. Before buying an Airbnb in a regulation-heavy state like California, make sure it pencils well as a long-term rental, too. You may need to convert its usage if the city effectively bans Airbnbs later.

New York

Professional real estate investor Charissa Bright of Bright Buys Houses warned investors thinking about the Empire State.

“Between strict zoning laws, permit limitations, and heavy taxes, it’s easy for hosts to get buried before they’ve even welcomed their first guest,” she said. “New York City has made it nearly impossible to operate legally unless you’re living on-site, which completely defeats the point for most investors.”

That said, there’s more to New York than just “The City.” Airbnb and boutique hotel operator Tim Ensmann of Second Home Stays cautioned investors not to paint with too broad a brush. “Don’t write off the entire state because performance depends so heavily on local market dynamics, property type, local regulations and fundamentals like supply, demand, and price-to-rent ratios.”

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“Just a few hours away from New York City, for instance, Buffalo offers a completely different story,” Ensmann continued. “It has affordable entry prices, healthy appreciation and steady Airbnb demand, making it a potentially attractive market despite the state’s overall regulatory reputation.”

New Jersey

Across the river from The Big Apple, Airbnb regulation doesn’t get much friendlier.

Leon Fisher, real estate advisor with Zook Cabins, sees a bureaucratic nightmare when he looks at New Jersey. “Most municipalities require their own permits, properties must be upgraded to meet fire code, noise ordinances are strictly enforced, and short-term rental insurance is among the most expensive in the country. Working here without legal guidance is nearly impossible.”

Maryland

Another regulation-heavy state, Maryland doesn’t exactly welcome short-term rental hosts with open arms.

Fisher added that after leaving New York, many investors turned to Maryland, hoping for more stability: “In Annapolis, a new law limits the number of short-term rental licenses per city block. In practice, that’s created price spikes, license bottlenecks, and instability in residential neighborhoods.”

Baltimore, too, has effectively banned Airbnb, only allowing it for owners’ primary residences.

While most states don’t impose statewide Airbnb regulations, governments in some states jump to regulation as a first response rather than a last resort. Watch out for investing in cities in regulation-heavy states — you might find your business model outlawed within a year or two of buying.

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