On August 19, 2025, Cape May City Manager Paul Dietrich told the City Council that new tracking software had turned up roughly 900 short-term rental properties operating without the required mercantile license. Fines were coming, he said, within a couple of weeks.
Two weeks later, at the September 2 meeting, Dietrich stood up again. He had misspoken. The 900 figure was the total number of short-term rental sites in the city, licensed and unlicensed combined. The actual number without a license was closer to 90. City Clerk Erin Burke said her office was still refining the count, and the final figure subject to enforcement might land closer to 45.
That is a twenty-fold correction, delivered by the city's own management, in front of its own council, about its own enforcement data.
If you are weighing a Cape May property as a short-term rental investment, this is not a footnote. It is the whole lesson. The number of "unlicensed rentals" in Cape May is not a fixed fact you can look up once and trust. It moves depending on who is counting, what software they are using, and how recently they last corrected themselves. If City Hall got its own compliance count wrong by an order of magnitude, a buyer relying on a seller's rental history, a listing agent's assurance, or last year's news story is standing on the same shaky ground.
What the correction actually reveals
The city hired a detection service, sold under the name Deckard and marketed to municipalities as a way to cross-reference online listings against local rental license rolls. That kind of software is good at flagging discrepancies. It is not good at resolving them on its own, which is exactly what played out here: a headline number of 900 that turned out to describe the entire licensed and unlicensed universe of short-term rentals in the city, not the violation count Dietrich initially presented it as.
Mayor Zach Mullock had already told owners back in March that the city would not hesitate to fine unlicensed rentals, and Dietrich had offered an amnesty window that spring for anyone who wanted to get current before enforcement began. Both of those statements were sincere and both still stand as policy. What changed was the scale of the problem, once someone actually cross-checked the raw output against real license records.
For a buyer, the takeaway is not that Cape May's enforcement is toothless. It is the opposite: the city is actively counting, correcting, and pursuing licensing compliance, which means the compliance status of any specific address is a live, changeable fact rather than a settled one. You cannot infer it from a rental platform listing, from what the seller tells you about past income, or from a news article that is a year old by the time you read it.
The license itself is not a one-time hurdle
Cape May's mercantile license fee for a residential short-term rental is tiered by size. Properties under 4,000 square feet pay $300 annually. Properties over 4,000 square feet pay $1,000. On top of the base fee, every applicant pays a $25 parking trust fund surcharge and a $50 tourism fee surcharge, both baked into the city's licensing ordinance.
| Property size | Annual mercantile license fee |
|---|---|
| Under 4,000 sq ft | $300 |
| Over 4,000 sq ft | $1,000 |
| Add-on: parking surcharge | $25 |
| Add-on: tourism fee | $50 |
Before the license is issued or renewed, the unit has to pass a fire inspection through the city's Fire Prevention Bureau, and the license stays conditioned on continuing compliance with the Uniform Fire Safety Act. Once issued, the owner is required to affix a decal to the unit's main entry door or a visible window, so the license is verifiable from the outside without anyone needing to ask.
State law layers on a separate insurance requirement. Owners of a multifamily rental property of four units or fewer, with one owner-occupied, need liability coverage of at least $300,000 for combined property damage and bodily injury. Every other rental unit owner needs at least $500,000 in coverage, and that certificate of insurance has to be registered annually as part of the mercantile license application, with its own $500 minimum penalty for failing to file it.
None of this is exotic. What it means practically is that a Cape May short-term rental carries three separate compliance layers, license, fire inspection, and insurance registration, each renewed annually and each capable of lapsing independently. A property that was fully licensed the year the current owner bought it can be non-compliant today for reasons that have nothing to do with the sale.
The C-1 wrinkle that can undercut a rental business plan
If the property you are considering sits in Cape May's C-1 Business District, which covers the area around the Washington Street Mall, there is a more consequential issue moving through City Council. In November 2025, Council was amending a workforce housing ordinance affecting apartments in that district. One of the amendments on the table would bar apartments that are not already operating as short-term rentals from converting to short-term use going forward, and those units would not be eligible for a mercantile license for that purpose.
As of the last public record on this measure, from November 2025, Council had sent the ordinance back to the Planning Board for review against the city's master plan, with reintroduction anticipated in early 2026. The boundary of which C-1 properties the rule would cover had already shifted more than once during drafting, from the Washington Street Mall blocks specifically, to the entire C-1 district, to all of C-1 except the mall itself. Given how much time has passed since that filing, the ordinance may well have been reintroduced, amended again, or adopted by now, and the only way to know where a specific address stands is to ask the city directly.
If your investment plan for a mixed-use or apartment building in that corridor depends on converting existing long-term units to nightly or weekly rentals, that plan may not survive contact with this ordinance, whichever final boundary Council lands on. This is a case where the fact that matters most, whether a specific unit is grandfathered in or locked out of short-term conversion, cannot be answered from a listing sheet. It has to be confirmed with the city, on that address, before you write an offer.
What to actually check before you make an offer
- Ask the seller or listing agent for the mercantile license number itself, not just a statement that the property "is licensed." A license number is the only way to verify current status directly.
- Confirm the license category and fee tier match the property's actual square footage. A property licensed at the smaller tier when it should be in the larger one is a compliance gap you would inherit.
- Request documentation of the most recent Fire Prevention Bureau inspection tied to the license.
- Verify the liability insurance certificate on file matches the state minimum for that property type, and confirm it has been renewed within the current license year.
- If the property sits in or near the C-1 Business District, call the city directly to ask whether the specific unit is grandfathered for short-term use under the pending ordinance, rather than relying on its current listing status.
FAQ
Does a licensed short-term rental history guarantee the property is compliant today? No. Licenses renew annually and can lapse for reasons unrelated to the sale, including a missed inspection or an expired insurance certificate. Past compliance is not current compliance.
Is the mercantile license fee the only cost of operating a Cape May short-term rental? No. The base fee is layered with a parking surcharge, a tourism fee, required liability insurance, and an annual fire inspection, each with its own renewal cycle and its own way of falling out of compliance.
Where can I verify a property's actual license status? Directly with the City of Cape May, not through a listing platform or a seller's representation. Given how much the city's own count of unlicensed properties has moved over the past year, the only reliable source is the city itself.
If you are weighing a Cape May purchase for short-term rental income, or you already own a licensed rental here and are wondering what it would bring on today's market, Dorothy Phillips has spent more than two decades working this exact stretch of the Jersey Shore and can walk through both the numbers and the compliance picture with you before you commit. Reach out for a free home valuation, or to talk through what a specific Cape May address would take to operate cleanly from day one.
