Your vision, your home, our expertise.
Cave Creek and Carefree both require a separate town license for every short-term rental, and both added a 2023 rulebook on top of state law. In Cave Creek, that means a $50 business license plus a $250 permit per property each year, $500,000 in liability coverage, and an emergency contact who can be at the door within one hour when police or fire ask. If you are buying in the foothills with rental income in mind, those rules belong in your numbers before you write an offer.
What the rules say
- Who regulates: Arizona law says a town may not prohibit short-term rentals but may require a permit, with a fee capped at the lesser of actual cost or $250, issued or denied within seven business days (A.R.S. 9-500.39, checked November 14, 2026)
- Cave Creek license cost: $50 annual business license plus a $250 annual short-term rental permit per property; rentals of less than 30 days count (Town of Cave Creek Short Term Rental License page, checked November 14, 2026)
- Carefree license cost: $250 nonrefundable annual license per dwelling unit, required since March 10, 2023 (Carefree Town Code 6-8-3, Ordinance 2022-03)
- Insurance: at least $500,000 in liability coverage per rental in both towns unless a booking platform provides primary coverage of at least that amount (Cave Creek Town Code 112.16; Carefree Town Code 6-8-4)
- Town lodging taxes: Cave Creek hotel sales tax and bed tax 5% each since February 1, 2026 (Town of Cave Creek Finance page); Carefree 3% hotel plus 3% additional bed tax (Arizona Department of Revenue city profile, checked November 14, 2026)
- Market context: 238 Cave Creek listings and 619 sales in 12 months at a median of $865,000; 51 Carefree listings and 134 sales at a median of $1,112,000 (site Cave Creek and Carefree pages, ARMLS via Flexmls, as of November 12, 2026)
The license, step by step
Both towns stack the same building blocks. In Cave Creek, the town page lays out four steps. First, get a transaction privilege tax license from the Arizona Department of Revenue. Second, register the home with the Maricopa County Assessor, because state law makes it illegal to rent a property before it is registered. Third, get the town's $50 annual business license. Fourth, apply online for the town's short-term rental license, with its $250 annual fee for each property. The details sit in Chapter 112 of the town code, adopted unanimously on July 17, 2023 as Ordinance O2023-02. Start your search on our Cave Creek homes for sale page, which also shows the town's current supply and pricing.
Carefree's process is similar, with a few extra steps. The application asks for the owner's and a local designee's contact details, a 24 hour emergency contact who must be a real person, proof of the state tax license and county registration, an attestation that no owner or designee is a registered sex offender or has a qualifying felony within five years, and a copy of a fire safety evacuation map. The town also schedules a compliance inspection that checks smoke and carbon monoxide alarms, tagged fire extinguishers, a posted evacuation map on each floor, a working landline, and the posted use notice. Licenses are issued within seven business days of a complete application. You can browse Carefree homes for sale to see what is on the market now.
What owners have to do once they are renting
Emergency response
When police, fire, or other public safety personnel respond to a call at the rental, including a nuisance party, the designated contact must arrive in person within one hour if asked. In Cave Creek, failing to respond carries a minimum $500 fine, arriving late a minimum $250, and the owner faces a minimum $500 fine if the contact misses more than once in 12 months. Carefree uses the same structure and also requires answers to non emergency complaints within 24 hours.
Neighbor notice and advertising
Before first offering a home for rent, owners in both towns must notify every single family home next to the property and directly and diagonally across the street, then file a signed attestation listing the license number, the addresses notified, and how notice was given. Cave Creek requires a fresh notice within 15 business days whenever the contact information changes. Every listing ad must show the town license number, and Carefree also requires the state tax license number and the occupancy statement. Missing the license number on an ad carries a minimum $500 fine in both towns, which a court may reduce to $100 once the owner comes into compliance.
Health and safety
Both codes require working smoke alarms maintained under NFPA 72, a posted floor plan showing exits and fire equipment, cleaning between stays, at least bi-monthly pest control, and pool or spa barriers that meet the town code. Both require a laminated notice of at least 14 point bold type inside the front door and the main backyard door that bans events, commercial uses, and nuisance gatherings. Owners must run a sex offender registry check on guests within 24 hours of the booking or stay, keep the printout for 12 months, and face a mandatory minimum $1,000 fine for skipping it. State law waives the check when the booking platform runs it.
Occupancy and events
Carefree caps occupancy at a single family of up to six adults 18 and older plus their related dependent children, and it requires the whole property to be rented together, so a casita cannot be rented separately from the main house. Neither town allows a short-term rental to host a special event that would need a permit, or to operate as an event center, banquet space, restaurant, or retail business.
What the penalties can add up to
The fines for verified violations scale with your nightly rate. Under both towns' codes, which follow state law, the first verified violation at a property in 12 months costs up to $500 or one night's advertised rent, the second up to $1,000 or two nights, and the third and any later violation up to $3,500 or three nights, whichever is greater in each case. Violations from the same incident count as one.
Here is how that plays out for a home advertised at $900 a night. The first violation could reach $900, the second $1,800, and the third $2,700, or $5,400 across three incidents in one year. Three verified violations in 12 months can also lead to a suspension of up to 12 months under state law. Separately, Carefree fines operating without a license at least $1,000 per violation, and state law says a rental that does not apply within 30 days after a town opens its application process must stop operating.
Taxes to budget for
Cave Creek raised its hotel sales tax and its bed tax to 5% each, effective February 1, 2026, and its finance page defines a transient guest as someone staying less than 30 consecutive days. On a $4,000 booking, the two town taxes would total $400. The Arizona Department of Revenue lists Carefree's hotel rate at 3% plus a 3% additional bed tax, which would be $240 on the same booking. State and county transaction privilege taxes are collected in addition to these town rates, and some booking platforms collect certain taxes for you, so a tax professional should confirm what you owe and who remits it.
How to plan a purchase around rental income
- Confirm the jurisdiction first. Many homes with a Cave Creek mailing address sit outside the town limits, including parts of the City of Phoenix, and the rules follow the jurisdiction. Check the parcel on the Maricopa County Assessor's site before you model income, especially in the 85331 ZIP code and homes for sale in 85377. See where each town sits on our Northeast Valley map, which has a Cave Creek and Carefree zoom.
- Read the HOA documents. Town law sets the floor, not the ceiling. Planned communities such as Tatum Ranch, The Boulders, and Rancho Mañana each have their own CC&Rs, and an HOA's rental restrictions can be stricter than the town's. Get the current documents during your inspection period.
- Price the insurance before you price the rent. Ask a licensed insurance agent for a quote on a policy that covers short-term rental use with at least $500,000 in liability, and ask how wildfire exposure affects it in foothill locations.
- Budget the startup costs. Smoke and carbon monoxide alarms, extinguishers, a landline, laminated notices, pool barriers, and pest control all come before the first guest. Carefree's inspection checks many of these items.
- Avoid this mistake: assuming a casita or guest house can be rented on its own. In Carefree, the code requires the whole property to be rented as one unit, so a split rental plan will not work there.
The honest caveats
We read the online copies of each town code, which the publisher notes are not the official versions, and town pages can lag behind new ordinances. Carefree's own materials differ on timing in places, for example whether insurance proof and neighbor notice come before or after the license, and a separate $40 application form appears alongside the $250 code fee. Call each town before you apply. This post does not cover the City of Phoenix or unincorporated Maricopa County, where homes with a Cave Creek address may fall, or any HOA rules. Rental income depends on many things these rules do not touch, and nothing here predicts what a home will earn.
Frequently asked questions
Are short-term rentals allowed in Cave Creek and Carefree?
Yes. Arizona law says a city or town may not prohibit vacation rentals or short-term rentals, so neither town can ban them. Both towns instead require a license for each property and set health, safety, insurance, and notice rules that owners must follow.
What counts as a short-term rental in Cave Creek?
The Town of Cave Creek treats a rental or lease of less than 30 days as a short-term rental. Stays of 30 days or more fall outside the short-term rules, although other requirements, such as county rental registration, can still apply.
How much does a Cave Creek short-term rental license cost?
As of November 14, 2026, the town lists a $50 annual business license plus a $250 annual short-term rental permit fee for each property. Owners also need a state transaction privilege tax license and a Maricopa County rental registration before applying.
How much does a Carefree short-term rental license cost?
The Carefree town code sets a $250 nonrefundable fee for the annual license, and the same fee applies at renewal. The license covers one dwelling unit, lasts one year, and cannot be transferred to a new owner.
Do I need insurance to run a short-term rental in Cave Creek or Carefree?
Yes. Both towns require liability insurance of at least $500,000 unless an online lodging platform provides primary coverage of at least that amount. Proof is due within 30 days of getting the license, so talk with a licensed insurance agent about whether your homeowners policy covers rental use.
How fast does the emergency contact have to respond?
In both towns, when police, fire, or other public safety personnel respond to a call at the rental and ask for the contact, that person must arrive in person within one hour. In Carefree, other complaints must be answered within 24 hours, by phone, email, or in person.
Do I have to notify my neighbors before renting?
Yes. Before the home is first offered for rent, both towns require notice to every single family home next to the property and directly and diagonally across the street, then a signed attestation to the town. The notice has to be repeated when the contact information changes, within 15 business days in Cave Creek.
What are the fines for short-term rental violations?
For verified violations at the same property in a 12 month period, both towns follow the state schedule: up to $500 or one night's rent for the first, up to $1,000 or two nights for the second, and up to $3,500 or three nights for the third and later, whichever is greater. In Carefree, operating without a license carries a fine of at least $1,000 per violation.
What lodging taxes apply to short-term rentals here?
Cave Creek raised its hotel sales tax and its bed tax to 5% each, effective February 1, 2026. The Arizona Department of Revenue lists Carefree at 3% for hotels plus a 3% additional bed tax, and state and county taxes apply on top of town taxes, so check with a tax professional.
Does a Cave Creek mailing address mean the town's rules apply?
Not always. Many homes with a Cave Creek address sit outside the town limits, including parts of the City of Phoenix, and the rules follow the jurisdiction, not the mailing address. Confirm which city, town, or county governs the parcel before you plan rental income.
The bottom line
You can run a short-term rental in Cave Creek or Carefree, but each town treats it as a licensed business with real obligations: a $250 town fee, $500,000 in liability coverage, neighbor notice, guest checks, a one hour emergency response, and fines that grow with your nightly rate. Confirm the jurisdiction, read the HOA rules, and get an insurance quote before you count on rental income. If you want help finding a home where the numbers and the rules line up, we are glad to talk it through.
Read more: Phoenix short-term rental rules: the permit, taxes, and penalties before you buy · Cave Creek and Carefree property taxes: why your school district changes the bill
Thinking about buying in Cave Creek or Carefree?
White-glove service at every price point.
Book a Call Get My Home ValueBrowse homes: Cave Creek homes for sale · Carefree homes for sale · Homes for sale in 85331 · Homes for sale in 85377
Related: Explore the Northeast Valley map · See our recently sold properties · More market insights
Your advisors
Kyle Hermann
Associate Broker | Realtor®
602.814.7266
kyle@azluxurypartners.com
License BR665419000
Meet Kyle
Cheryl Solano
CRS® | Realtor®
480.518.0181
cheryl@azluxurypartners.com
License SA541911000
Meet Cheryl
Art Buck
Associate Broker | Realtor® | CCIM
480.510.7689
art@azluxurypartners.com
License BR014102000
Meet Art
Arizona Luxury Partners | Real Estate Group at RE/MAX Fine Properties
Sources
- Town of Cave Creek, Short Term Rental License page, checked November 14, 2026. Link
- Cave Creek Town Code, Chapter 112 Short-Term Rentals (Ordinance O2023-02, passed July 17, 2023), American Legal Publishing online copy, checked November 14, 2026. Link
- Town of Cave Creek, Finance page, hotel sales tax and bed tax at 5% each effective February 1, 2026, checked November 14, 2026. Link
- Arizona Department of Revenue, Cave Creek city tax profile, checked November 14, 2026. Link
- Town of Carefree, Short-Term and Long-Term Rentals page, checked November 14, 2026. Link
- Town of Carefree, STR Registration Guide (revised October 25, 2023), checked November 14, 2026. Link
- Carefree Town Code, Sections 6-8-3 and 6-8-4 (Ordinance 2022-03), American Legal Publishing online copy, checked November 14, 2026. Link
- Arizona Department of Revenue, Carefree city tax profile, checked November 14, 2026. Link
- Arizona Revised Statutes 9-500.39, vacation rentals and short-term rentals, checked November 14, 2026. Link
- Arizona Revised Statutes 33-1902, residential rental property registration, checked November 14, 2026. Link
- Arizona Luxury Partners, Cave Creek and Carefree homes for sale pages, ARMLS via Flexmls, figures as of November 12, 2026. Link
- Penalty example calculated by Arizona Luxury Partners: $900 advertised nightly rate times one, two, and three nights equals $900, $1,800, and $2,700, total $5,400.
- Tax example calculated by Arizona Luxury Partners: $4,000 booking times 5% plus 5% equals $400 (Cave Creek); times 3% plus 3% equals $240 (Carefree); town taxes only.
All information provided is deemed reliable but is not guaranteed and should be independently verified. This article is for general information only and is not financial, lending, legal, or tax advice. Arizona Luxury Partners | Real Estate Group at RE/MAX Fine Properties, 21020 N. Pima Road, Scottsdale, AZ 85255. Brokerage License LC629808000. Equal Housing Opportunity.
