Louisville, Kentucky, approves new restrictions for short-term rentals

The Metro Council in Louisville, Kentucky, approved a new law that restricts short-term rentals.

The new rules require non-owner-occupied short-term rentals to be located at least 600 feet away from each other in residential areas. Current short-term rental properties are grandfathered in, and future short-term rental applicants may apply to have the density requirement waived.

The ordinance also prohibits short-term rental hosts from advertising unlicensed short-term rentals on hosting platforms such as Airbnb, HomeAway, and VRBO. The city can ask hosting platforms to remove listings and to provide general monthly data, such as how many properties were rented out on the platform.

While there are more than 2,000 Louisville listings on Airbnb, only about 500 of those are registered with the city.

Under the new rules, vacation rental hosts must keep their registrations active in order to keep their short-term rental permits. The city's planning director can revoke short-term rental permits of properties that are the subject of two or more substantiated civil or criminal complaints in one year. 

The new ordinance also increases annual short-term registration fees from $25 to $100 and outlines penalties for violation of the law. Fines start at $125 for a first offense, $250 for a second offense, $500 for a third offense, and a $1,000 fine for any additional offense.

While the ordinance goes into effect immediately, it shouldn’t affect vacation rentals already booked for the upcoming Kentucky Derby, which brings major demand. Last year, Airbnb said 5,700 visitors stayed in its short-term rental properties for Derby weekend.

The latest law updates rules originally passed in 2016 that hold short-term rental hosts responsible for collecting lodging taxes. Hosts must register with the Louisville Metro Revenue Commission, collect room taxes from guests, and file monthly tax returns.

While the rules allow hosting platforms to collect and pay those taxes for their hosts, hosts are still required to register and file returns. Short-term rental hosts must also collect lodging taxes for the state of Kentucky.

While Airbnb collects state and local lodging taxes on behalf of its Louisville hosts, other platforms, such as HomeAway and VRBO, do not. Hosts using these platforms or offering rentals privately must take care of all lodging taxes themselves. MyLodgeTax can help short-term rental hosts automate and simplify all lodging tax obligations. For more information on short-term rental taxes in Kentucky, see our state Vacation Rental Tax Guide.