Multifamily and Duplex Properties for Sale in Pacific Grove: Zoning and Rent Rules

What multifamily in Pacific Grove looks like

Pacific Grove’s rental housing is mostly small and old. You will find duplexes and cottages on narrow lots in the Retreat area, small apartment buildings and fourplexes near downtown and Lighthouse Avenue, apartments over downtown shops, and many houses with a second unit or ADU. Large complexes are rare. For financing, see financing 2-4 unit properties and apartment building loans.

Three local rules shape most deals. The seller must get a City residential building record before closing. Short-term rental licenses are capped. And water, not zoning, usually limits added units.

Where the zoning allows it

Residential districts are in Title 23 of the Municipal Code. The R-3 chapter was amended by Ordinances 26-002 (January 21, 2026) and 26-009 (May 5, 2026).

R-3 minimum density. Since May 2026, new multifamily projects in R-3 must reach at least 20 units per acre. A buyer planning a low-density rebuild on an R-3 lot should check this first. Projects of five or more units need 200 square feet of open yard per unit, and three or more units need a garbage enclosure.

R-2 parking. Duplex units need 1.5 spaces if under two bedrooms and 2 spaces otherwise, with one covered space per unit (see Chapter 23.20). On small Retreat lots, parking often decides whether a duplex works.

Commercial districts. The commercial use table permits mixed use and multifamily outright in C-1, C-D and C-FH. Upper-floor apartments downtown are a common income layer.

ADUs and SB 9. ADUs follow Chapter 23.80 and are also listed as permitted in R-3. See our ADU investment guide and SB 9 lot split guide. Condo conversions are regulated separately in Chapter 23.29.

Rent rules: state law only

Pacific Grove’s code index shows no local rent or tenant chapter. The Attorney General’s rent cap page, updated July 16, 2026, places Monterey County in All Other Counties. Covered units may be raised up to 8.6% for increases from August 1, 2026 through July 31, 2027. In Monterey County, the AG lists only Salinas as having local rent stabilization. State just cause rules also apply to covered tenancies. See our AB 1482 guide and just cause eviction guide.

Pacific Grove rental property rules

• Residential building record at sale. Under Chapter 23.78, adopted in 1986, a seller must get this report from the City before closing and give it to the buyer, who signs a receipt. The City reviews its files and inspects the exterior within 10 business days. The report lists the zone, authorized use, occupancy shown by permits, variances and use permits, special restrictions, and any code violations. Probate and other court sales are exempt. For a multifamily buyer, it is the quickest official check on whether every unit is legal.
• Business license tax on rents. Rent counts as gross receipts under Chapter 7.04. Owners of three or fewer residential units can exclude that rent. An owner of more than three units pays on all of them, at 0.1% of gross receipts, with a $15 minimum and $3,000 maximum.
• Short-term rentals. Stays under 30 days need a license under Chapter 7.40. The City caps licenses at 250, with one per parcel, a 55-foot buffer and a 15% limit per block. Licenses cannot be transferred, so a buyer cannot assume the seller’s. Affordable units are ineligible.
• Transfer tax. Chapter 7.30 sets a City stamp tax of $0.275 per $500, administered by the County Recorder. Confirm the total with escrow.

Water, coastal permits and older buildings

Water. Adding a unit, a bathroom or an ADU usually needs a MPWMD water permit before a meter can be set or use increased. Cal-Am’s area is under State Water Board Order WR 2009-0060, and Condition 2 restricts new connections and some added use. MPWMD asked the Board in October 2025 to lift that condition, according to the Board’s 2026 hearing notice. Confirm the result before you count on new units.

Coastal zone. The City’s coastal program was fully certified on March 11, 2020, per its LCP page. Shoreline-area projects need a City coastal permit and may be appealable to the Commission.

Building condition. Much of the stock is older wood frame, so a seismic retrofit review makes sense. Older buildings may also fall under the City’s historic preservation chapter. Three-plus-unit buildings with elevated decks or stairs need SB 721 balcony inspections.

Underwriting a Pacific Grove multifamily purchase

1. Read the residential building record for the zone, permitted occupancy and any violations, and match it to the actual unit count.
2. Confirm the district and, in R-3, the minimum density rule before planning a rebuild.
3. Classify each unit under AB 1482 and model increases at or below 8.6% for covered units.
4. Get MPWMD’s water records before planning ADUs or added units.
5. Collect leases, the rent roll and estoppel certificates. Don’t count on short-term rental income unless you can get your own license.
6. Rebuild expenses with reassessed taxes, the gross receipts tax if over three units, and deck inspections in our rental property analysis.

Questions people ask

Sources & notes

1. Pacific Grove Chapter 23.20, R-2 District (GoCodebook, October 2026 edition)
2. Chapter 23.24, R-3 Districts
3. Chapter 23.31, Commercial and Industrial Districts
4. Chapter 23.78, Sale of Residential Buildings
5. Chapter 23.80, Accessory Dwelling Units (index)
6. Chapter 7.04, Business License Tax
7. Chapter 7.40, Short-Term Rental License
8. City of Pacific Grove, Local Coastal Program
9. MPWMD, Water Permits and State Water Board hearing notice
10. California Attorney General, Rent Caps

Note: We did not read the R-4, R-3-M, R-H or ADU chapter text, the building record fee or the Chapter 6.09 TOT rate.

General information, not legal or tax advice. Last reviewed October 2026 by Matthew Martinez.

Related: Pacific Grove real estate guide · Commercial real estate in Pacific Grove · Multifamily investing guide · Investor services