Connecticut packs a surprising amount of short-term rental opportunity into a small state. You have the Long Island Sound shoreline pulling $400+ ADRs in summer. Fairfield County’s proximity to New York City drives 69% occupancy in Stamford year-round. And college towns like New Haven deliver consistent demand from Yale parents, visiting professors, and medical travelers. The catch: Connecticut’s 15% room occupancy tax is one of the highest in the country, and a patchwork of municipal regulations means the rules change every time you cross a town line.
This guide covers the exact permits, tax obligations, revenue benchmarks, and market-by-market breakdown you need to launch rental arbitrage in Connecticut — from Mystic’s waterfront cottages to Hartford’s urban apartments.
Connecticut’s STR Landscape — Coastal Gold and Urban Opportunity
Connecticut’s short-term rental market splits into three distinct segments, and each one rewards a different operator strategy.
The Shoreline (Mystic, Stonington, Old Saybrook, Madison) is vacation rental territory. Old Saybrook properties average a $428 ADR with 54% occupancy. Mystic listings pull $357 ADR at 50% occupancy, with top-performing waterfront properties generating $44,000+ annually. These are seasonal markets — Memorial Day through Labor Day drives 60-70% of annual revenue, with a secondary bump during fall foliage season. Operators who thrive here stock up cash in summer and manage lean winters strategically.
Fairfield County (Stamford, Greenwich, Norwalk) operates on New York City spillover demand. Corporate relocations, consulting engagements, and weekend getaways from Manhattan fuel consistent occupancy. Stamford’s 241 active listings average 69% occupancy with a $144 ADR, generating roughly $38,000 in annual host income. The proximity to NYC means your guest base is higher-income and expects a cleaner, more professional operation than budget travelers.
College and cultural towns (New Haven, Hartford, Middletown) offer event-driven spikes layered onto steady baseline demand. Yale graduation, parents’ weekends, football games, and the constant stream of hospital visitors to Yale-New Haven create demand that doesn’t follow typical tourism patterns. These markets reward operators who master dynamic pricing around academic and medical calendars.
State-Level Regulations and the 15% Room Occupancy Tax
Connecticut imposes a 15% state room occupancy tax on all short-term rentals of 30 days or fewer. Bed-and-breakfast operations pay a reduced 11% rate, but standard STR listings on Airbnb and Vrbo pay the full 15%. This is collected and remitted by the platforms in most cases, but hosts listing on direct booking sites or niche platforms must register with the Connecticut Department of Revenue Services and handle remittance themselves.
That 15% matters for your pricing strategy. A guest paying $200/night is actually paying $230 after tax. If your competitors price at $200 and you price at $215, the tax-inclusive gap ($247 vs. $230) is wider than it looks. Smart operators in Connecticut bake the tax reality into their pricing models rather than treating it as an afterthought.
Incoming statewide registry: House Bill 7238, introduced in March 2025, proposes a mandatory statewide STR registry administered by the Department of Revenue Services. The bill originally required all existing operators to register by January 1, 2026, with a $100 annual fee per property and fines up to $1,000 for non-compliance. The bill was amended to first establish a working group studying the registry framework, with a report due by January 2026. Regardless of the final timeline, statewide registration is coming — operators who get ahead of it position themselves as legitimate businesses rather than scrambling to comply retroactively.
The bill also authorizes municipalities to vote on a supplemental sales tax of up to 2.75% on STR bookings. If your town adopts this, your effective tax rate jumps to 17.75%. Watch your local town council agendas.
October 2024 Municipal Authority Law
A new state law effective October 1, 2024, gave Connecticut municipalities explicit authority to regulate short-term rentals — including requiring licenses and permits, imposing caps, establishing buffer zones, and setting operational standards. Before this law, municipal authority was ambiguous. Now it’s clear: your town can regulate you, and more towns are doing exactly that. As of early 2024, only 12 municipalities had formal STR regulations. That number is growing rapidly.
City-by-City Permit Requirements
New Haven
New Haven requires a $285 short-term rental license plus compliance with the city’s Residential Rental Business License program. Hosts must provide photo ID with the property address and a utility bill as part of the application. The city imposes a 6% local occupancy tax on top of the state’s 15%, bringing the total tax burden to 21% — the highest effective STR tax rate in Connecticut. Building and safety codes, noise ordinances, and zoning regulations all apply. New Haven’s proximity to Yale keeps demand strong, but that 21% tax load means your pricing needs to account for a significant guest-facing cost.
Milford
Milford runs one of Connecticut’s most restrictive STR regimes. The city requires a permit application through the Department of Permitting and Land Use, with a $150 annual fee. Key restrictions include:
- A 300-foot buffer zone between short-term rental properties — no two STRs can operate within 300 feet of each other
- A citywide cap of 30 total STR permits
- Non-owner-occupied residential properties are prohibited from operating as STRs
- Owner-occupancy is required
This effectively kills rental arbitrage in Milford. You cannot lease a property and sublet it as an STR. The 30-permit cap and 300-foot buffer create artificial scarcity that benefits existing permit holders but blocks new entrants. If you’re looking at Milford, pivot to nearby Stratford or West Haven instead.
Hartford
Hartford requires a zoning permit valid for three years for short-term rentals in owner-occupied properties. The city limits STRs to an owner-occupied principal structure or an owner-occupied accessory structure, with no in-room kitchen facilities allowed in the accessory structure. Rental frequency and length limitations apply. Hartford’s regulatory framework is moderate — not as open as Stamford, not as locked down as Milford. The market itself is driven by insurance industry professionals (Hartford is still the “Insurance Capital”), state government activity, and UConn Hartford campus visitors.
Stamford and Fairfield County
Stamford does not require a specific short-term rental license, but all rental properties must be registered with the city and pass yearly inspections. Required documentation includes a Rental Dwelling Registration form, Certificate of Apartment Occupancy, and Certificate of Code Compliance. Stamford imposes a 7.5% hotel occupancy tax on rooms rented for fewer than 30 days, which hosts collect and remit on top of the state’s 15% (22.5% total).
Greenwich, the wealthiest town in Connecticut, has a less formalized STR regulatory framework. Demand is strong for luxury accommodations — think $300+ ADR for waterfront properties and estate-style homes. The guest profile skews corporate and affluent, which means higher revenue per booking but also higher guest expectations for property quality and responsiveness.
Connecticut Shoreline Markets
Mystic and Stonington
Mystic is Connecticut’s marquee vacation rental market. The Mystic Seaport Museum, Mystic Aquarium, and the village’s maritime character pull tourists from across the Northeast. Stonington (the town that includes Mystic) was among the first 12 Connecticut municipalities to formally regulate STRs.
Revenue benchmarks for Mystic/Stonington:
| Market | Avg Annual Revenue | Occupancy | ADR | Active Listings |
|---|---|---|---|---|
| Mystic | $44,000 | 50-65% | $357 | 458 |
| Stonington | $31,000 | 68% | $250 | 261 |
Stonington’s higher occupancy (68%) compared to Mystic (50-65%) reflects a mix of vacation and local demand. Mystic’s higher ADR reflects pure tourism pricing. Peak season runs Memorial Day through Labor Day, with fall foliage providing a strong secondary season through October. Winter occupancy drops sharply — budget for 25-35% occupancy from December through March.
Old Saybrook and Madison
Old Saybrook sits at the mouth of the Connecticut River on Long Island Sound, and its STR market is built on beach cottage rentals. The numbers are strong: $428 ADR with 54% occupancy and over 100 active listings in Old Saybrook Center alone. Nearby Westbrook adds another 260+ listings.
Madison, further west along the shoreline, offers a quieter alternative with less listing density and a loyal repeat-guest base. Both markets are heavily seasonal — operators who succeed here often pair a shoreline property with an urban or Fairfield County property to balance cash flow across the year.
The shoreline market rewards properties with water views, beach access, or walkability to town centers. A two-bedroom cottage within walking distance of Old Saybrook’s main street can gross $35,000-$45,000 annually. Add a kayak, beach chairs, and a fire pit, and you differentiate from the hotel-style competition without spending much.
Revenue Benchmarks and Seasonal Patterns
Connecticut’s STR revenue varies dramatically by location and season. Here’s what the data shows across the state’s primary markets:
| Market | Avg Annual Revenue | Occupancy | ADR | Best Season |
|---|---|---|---|---|
| Mystic | $44,000 | 50-65% | $357 | Jun-Oct |
| East Hampton | $42,169 | 38% | $372 | Jun-Sep |
| Stamford | $38,000 | 69% | $144 | Year-round |
| Old Saybrook | $35,000-$45,000 | 54% | $428 | Jun-Sep |
| Stonington | $31,000 | 68% | $250 | Jun-Oct |
| Wilton | $30,898 | 44% | $344 | May-Oct |
| New Haven | $25,000-$32,000 | 55-62% | $140-$175 | Sep-Jun (academic) |
| Hartford | $22,000-$28,000 | 50-58% | $120-$150 | Year-round |
Notice the pattern: shoreline markets produce high ADRs with moderate occupancy, while urban markets produce moderate ADRs with higher occupancy. Stamford is the outlier — strong on both metrics thanks to NYC proximity. The smartest Connecticut operators run one coastal property and one urban property, letting summer beach revenue and year-round city revenue smooth out the overall income curve.
Connecticut’s seasonal compression is extreme compared to southern states. Shoreline properties generate 60-70% of their annual revenue between Memorial Day and Labor Day. If your business model can’t survive a $500/month winter, don’t enter the shoreline market without a backup revenue source. Check our profitable Airbnb cities guide for markets with more balanced seasonality.
Startup Costs for Connecticut Rental Arbitrage
Connecticut is not a cheap state to launch in, but the revenue ceiling justifies the investment in the right markets.
Fairfield County (Stamford, Norwalk): $10,000-$18,000 to launch. One-bedroom apartments rent for $2,000-$2,800/month. Security deposits are typically one to two months’ rent. Furnishing runs $4,000-$7,000 for a professional-grade setup. Registration, inspections, and insurance add $1,500-$2,500. At $38,000 annual revenue and $2,400/month rent, you’re looking at positive cash flow by month four if occupancy holds.
Shoreline (Mystic, Old Saybrook): $8,000-$15,000 for arbitrage on a year-round lease, or $12,000-$20,000 for a seasonal lease with heavier furnishing investment. Summer-only leases (May-September) reduce risk but cap your revenue window. Year-round leases let you capture shoulder season and holiday demand that seasonal operators miss. Factor in beach-specific amenities (outdoor showers, beach gear, grills) at $500-$1,000.
Urban (New Haven, Hartford): $6,000-$12,000 to launch. Lower rents ($1,400-$2,000/month) and simpler furnishing requirements make these the most accessible entry points. New Haven’s $285 license fee and 21% total tax rate eat into margins, but the Yale-driven demand floor provides consistency that seasonal markets can’t match.
Across all Connecticut markets, budget for short-term rental insurance ($1,200-$2,400/year), a dynamic pricing tool ($100-$200/month), professional cleaning ($120-$200 per turnover), and consumables. Review our full rental arbitrage startup costs breakdown for detailed budgeting.
Frequently Asked Questions
How much tax do I pay on Airbnb income in Connecticut?
The state room occupancy tax is 15% on all rentals of 30 days or fewer. Some municipalities add local taxes on top: New Haven charges 6% (21% total), Stamford charges 7.5% (22.5% total). If HB 7238’s supplemental tax provision passes, municipalities could add up to 2.75% more. Airbnb and Vrbo collect and remit the state 15% automatically, but local taxes and direct booking income may require manual remittance through the CT Department of Revenue Services.
Is rental arbitrage legal in Connecticut?
Yes, in most municipalities. Connecticut has no statewide ban on rental arbitrage. However, some cities restrict STRs to owner-occupied properties — Milford and Hartford both have owner-occupancy requirements that effectively prohibit arbitrage. Stamford, New Haven (with proper licensing), and most shoreline towns allow arbitrage as long as you have landlord permission and the required permits. Always verify your specific municipality’s rules before signing a lease.
Do I need a permit for a short-term rental in Connecticut?
It depends on your municipality. Connecticut has no statewide STR permit (yet — HB 7238 may change this by 2026). At the local level: New Haven requires a $285 license, Milford charges $150, Hartford requires a 3-year zoning permit, and Stamford requires rental dwelling registration plus annual inspections. Some smaller towns have no STR-specific requirements. The October 2024 municipal authority law means more towns are adopting regulations each quarter — check with your town’s planning or zoning department before listing.
What is the best market for Airbnb in Connecticut?
For year-round consistency, Stamford leads with 69% occupancy and $38,000 annual revenue driven by New York City demand. For highest gross revenue, Mystic and Old Saybrook generate $35,000-$44,000 annually with $350-$430 ADRs, but you need to survive winter lows. For lowest startup costs, New Haven and Hartford offer affordable entry with steady academic and business demand. The ideal Connecticut portfolio combines one urban and one coastal property for year-round cash flow balance. The 10XBNB program teaches exactly this kind of multi-market portfolio strategy.
