Nashville votes to phase out non-owner-occupied short-term rentals

Nashville’s Metro Council has passed a law phasing out short-term vacation rentals that aren’t occupied by their owners from residential neighborhoods. These properties will be required to cease doing business as short-term rentals by June 28, 2020.

The new regulations apply mainly to single-family homes and duplexes. The rules also limit the number of sleeping rooms in short-term rental properties to four, and  the number of people allowed in a short-term rental to two for each sleeping room, plus four other people.

Another provision in the law prohibits owner-occupied short-term rental operators from registering as a commercial entity, including a corporation, LLC, partnership, joint venture, or trust. Operators must instead be registered as a natural person.

Short-term rentals are still allowed to operate in areas zoned for multifamily units or mixed use, as well as in areas subject to the Downtown Code. Short-term rental properties occupied by their owners are also allowed to continue doing business in any neighborhood.

The new rules were drafted to address neighborhood activists’ complaints that rental properties in which owners aren’t present invite neighborhood disruption, negate zoning laws by introducing commercial businesses into areas meant for residential use, and take up core housing stock that should go to residents rather than investors.

According to the Coalition for Nashville Neighborhoods, there are 27 cities in Tennessee that prohibit non-owner-occupied short-term rentals in residential areas, including Belle Meade, Berry Hill, Brentwood, Collierville, Forest Hills, Gatlinburg, Germantown, Knoxville, Oak Hill, and Smyrna. Last year, Memphis, Chattanooga, and Knoxville all passed laws regulating various aspects of short-term rentals.

A proposal currently in motion in the Tennessee General Assembly would put severe restrictions on the ability of cities to regulate short-term rentals. It passed the House last year but died in the Senate. Its sponsor, Senator John Stevens, said he is thinking about adding a provision to the bill that would require cities to offer financial compensation to short-term rental owners if the city limits short-term rental activity.

Nashville requires short-term rental operators, both owner-occupied and non-owner occupied, to get permits and pay city lodging taxes. Airbnb recently made a deal with the state to collect state and local sales taxes on Airbnb bookings, effective March 1. This means that Airbnb will collect these taxes from guests on behalf of Tennessee hosts.

However, Airbnb does not collect city lodging taxes, so Nashville hosts must take care of collecting these taxes themselves. Tennessee hosts who use other booking services, such as VRBO, or HomeAway, are responsible for collecting all taxes due on accommodations.