Tennessee Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Tennessee?

Short-term rental regulations in Tennessee are governed by the Short-Term Rental Unit Act, which provides guidance on how municipalities can regulate short-term rentals. The act defines short-term rentals and sets parameters for local authorities, ensuring they do not unduly hinder short-term rental businesses except when public health and safety are at stake.

Under the act, any ordinance, resolution, regulation, rule, or other requirement that prohibits or regulates the use of property as a short-term rental unit does not apply to property that was being used as a short-term rental unit prior to the enactment of such regulations. This "legacy clause" protects existing short-term rentals from new regulations, provided they meet certain criteria.

However, individual cities and counties in Tennessee have their own specific regulations for short-term rentals. For example:

In Chattanooga, short-term rentals are allowed in specific zones, such as commercial zones that allow hotels and residential zones in the existing short-term vacation rental overlay. Operators must obtain a license and remit occupancy taxes.

In Nashville, property owners must obtain permits from the Metro Codes Department before listing their properties on platforms like Airbnb and HomeAway. There are two types of permits: owner-occupied and non-owner occupied, each with specific rules and regulations. Non-owner occupied permits are only permitted in specific non-residentially zoned areas.

Starting a Short-Term Rental Business in Tennessee

To start a short-term rental business in Tennessee, follow these general steps:

• Check your property's zoning and local regulations to ensure short-term rentals are allowed.
• Obtain the necessary licenses and permits from your local government.
• Ensure compliance with all local regulations, such as building and fire safety codes, maximum occupancy rules, and having a responsible party available 24/7.
• Remit required occupancy and sales taxes.
• List your property on short-term rental platforms like Airbnb and VRBO.

However, it's important to note that some cities, like Nashville, are becoming stricter in enforcing short-term rental regulations. Hosts have reported facing penalties for operating without proper permits or violating other rules.

One Nashville host shared their experience on BiggerPockets, stating they lost their short-term rental permit after quit claiming their property to an LLC5. Despite appealing, they ultimately decided to sell the house due to the difficulty of staying compliant with regulations and pressure from neighbors trying to shut down short-term rentals.

Before starting a short-term rental business in Tennessee, thoroughly research the specific regulations in your city and county, and carefully weigh the potential risks and challenges. While the state's legal framework is generally favorable to short-term rentals, local regulations and enforcement can vary significantly.

Short-Term Rental Licensing Requirement in Tennessee

To legally operate a short-term rental (STR) in Tennessee, property owners must obtain the necessary permits and licenses from their local government. Requirements vary by city and county, but generally include the following:

1. Zoning Compliance: Ensure your property is located in an area zoned for short-term rentals. In Nashville, non-owner occupied STRs are only permitted in specific non-residentially zoned areas.
2. Business License: Obtain a city or county business license. In Chattanooga, a City of Chattanooga Business License is required.
3. STR Permit: Apply for a short-term rental permit with your local government. Nashville has two types of permits: owner-occupied and non-owner occupied, each with specific requirements. In Chattanooga, there are Homestay (owner-occupied) and Absentee (non-owner-occupied) permits.
4. Proof of Ownership or Lease: Provide a warranty deed, tax assessor card, or lease agreement.
5. Proof of Insurance: Submit proof of liability insurance coverage for your STR3.
6. Site Plan: Provide a detailed floor plan showing each room, windows, smoke/carbon monoxide detectors, and parking.
7. Emergency Contact: Designate a local contact person available 24/7 to respond to issues.
8. Safety Compliance: Ensure your STR meets all building, fire, and safety codes, including having working smoke alarms and fire extinguishers.

Permit applications are typically submitted to the city or county's Codes Department or Land Development Office. Processing times vary but generally take around 30 days.

Fees also differ by location. In Nashville, permit fees range from $50 to $313 depending on the type of permit1. Chattanooga charges $250 for Homestay permits and $500 for Absentee permits, with annual renewal fees of the same amounts.

Operating an STR without proper permits and licenses can result in significant fines and penalties. In Nashville, fines can reach $50 per day. Chattanooga's administrative hearing officer can charge up to $500 per day for violations. Repeat offenders may be prohibited from obtaining an STR permit for an extended period.

It's crucial for Tennessee STR operators to thoroughly research and comply with their local regulations to avoid costly penalties and ensure the legal operation of their rental business. Consulting with local officials and experienced STR owners can provide valuable guidance in navigating the licensing process.

Required Documents for Tennessee Short-Term Rentals

To obtain a short-term rental permit in Tennessee, hosts must provide a comprehensive set of documents to their local government. While specific requirements may vary by city or county, the following are commonly required:

1. Personal Identification: A valid Tennessee driver's license or state-issued identification card to verify the applicant's identity.
2. Proof of Ownership or Lease: A warranty deed, tax assessor card, or lease agreement to demonstrate the applicant's right to use the property as a short-term rental.
3. Proof of Residency: For owner-occupied permits, hosts must provide documentation confirming their primary residence, such as a voter registration card, utility bill, or bank statement.
4. Business License: A valid city or county business license, which must be obtained before applying for the short-term rental permit.
5. Floor Plan: A detailed floor plan of the entire dwelling, showing all rooms, walls, doors, windows, and smoke detectors. In some cities, like Nashville, this plan must be certified by a licensed architect, engineer, or home inspector for single and two-family dwellings.
6. Proof of Insurance: Evidence of homeowner's fire, hazard, and liability insurance, with liability coverage limits of at least $500,000 to $1,000,000 per occurrence, depending on the city.
7. Affidavit: A notarized affidavit confirming the accuracy of all information provided in the application.
8. Neighbor Notification: Proof of notification to adjacent property owners, either in-person or via certified mail, informing them of the short-term rental application.
9. HOA Statement: A statement confirming that operating the short-term rental does not violate any homeowners association agreements, bylaws, or other restrictive covenants.
10. Local Contact Information: The name, address, phone number, and email of a local contact person who will be responsible for responding to issues related to the short-term rental.

These documents must be submitted to the appropriate city or county department, typically the Codes Department or Business Tax Office, along with the completed short-term rental application and any required fees.

It is crucial for Tennessee short-term rental hosts to carefully review their local government's specific requirements and gather all necessary documentation before submitting their application to ensure a smooth permitting process and avoid delays or rejections.

Tennessee Short-Term Rental Taxes

Short-term rental operators in Tennessee are subject to various taxes at the state and local levels. It's crucial for hosts to understand their tax obligations and ensure compliance to avoid penalties. The main taxes applicable to short-term rentals in Tennessee include:

State Sales Tax: Short-term rentals are subject to the 7% state sales tax on the total rental price, including cleaning fees and guest fees, for stays of 89 nights or less.

Local Sales Tax: In addition to the state sales tax, short-term rentals are also subject to local sales taxes ranging from 1.50% to 2.75% of the total rental price, including fees, for stays of 89 nights or less.

Local Occupancy Taxes: Many cities and counties in Tennessee impose local occupancy taxes on short-term rentals. These taxes are typically between 0% and 8% of the total rental price, including fees, for stays of 29-30 nights or less. The specific rates vary by jurisdiction.

Business Tax: The Tennessee business tax is a privilege tax on the sale of tangible personal property or taxable services. Short-term rental operators may be subject to this tax based on their gross sales.

Income Tax: Short-term rental income is subject to federal and state income taxes. Hosts must report their rental income on their tax returns and pay the appropriate taxes based on their tax bracket.

It's important to note that short-term rental operators are responsible for assessing all applicable taxes, even if a marketplace like Airbnb collects and remits some taxes on their behalf. Hosts should review their agreements with rental platforms and familiarize themselves with the occupancy tax provisions.

Tax Deductions and Write-Offs

To reduce their tax liability, short-term rental operators in Tennessee can take advantage of various deductions and write-offs related to their rental business. Some common deductions include:

1. Mortgage interest
2. Property taxes
3. Insurance premiums
4. Utilities
5. Cleaning and maintenance costs
6. Repairs and replacements
7. Depreciation of the rental property and furnishings
8. Advertising and marketing expenses
9. Business travel costs
10. Professional fees (e.g., legal and accounting services)

Hosts should keep accurate records of all income and expenses related to their short-term rental business and consult with a tax professional to ensure they are claiming all eligible deductions and complying with tax laws.

By understanding and complying with Tennessee's short-term rental tax requirements, hosts can avoid costly penalties and maintain a successful rental business.

Does Tennessee Strictly Enforce STR Rules?

Based on discussions among Airbnb hosts on real estate forums like Bigger Pockets and Reddit, it appears that the enforcement of short-term rental regulations in Tennessee can vary significantly by city and county. While the state's legal framework is generally favorable to short-term rentals, local authorities have considerable discretion in implementing and enforcing their own rules.

In Nashville, for example, hosts have reported that the city is relatively strict in enforcing its short-term rental regulations. Some have faced penalties for operating without the proper permits or violating other rules, indicating the city's commitment to upholding its STR guidelines. One host shared their experience of losing their short-term rental permit after quit claiming their property to an LLC, despite appealing the decision.

The host also mentioned that neighbors in East Nashville are actively trying to shut down Airbnbs by calling in false reports and that the city is enforcing all Airbnb complaints and issues with "lightning speed". This suggests that Nashville is taking a firm stance on ensuring compliance with its short-term rental regulations.

However, this strict enforcement does not necessarily mean that Tennessee is unfriendly to Airbnb and other short-term rentals. The state's Short-Term Rental Unit Act provides a level of protection for hosts, limiting local authorities' ability to prohibit or unduly regulate short-term rentals except when public health and safety are at risk.

Despite the challenges faced by some hosts, many continue to operate short-term rentals in Tennessee, particularly in areas with more favorable local regulations or by adapting their approach to comply with the rules. The host from the Bigger Pockets forum suggested that Airbnb in Nashville is still viable under certain circumstances, such as in commercially zoned areas or by house hacking one's own home.

In conclusion, while Tennessee's state-level regulations are relatively Airbnb-friendly, the actual enforcement of short-term rental rules can vary significantly at the local level. Cities like Nashville have taken a stricter approach to enforcement, leading to challenges for some hosts. However, many hosts continue to operate successfully in Tennessee by carefully navigating local regulations and adapting their strategies accordingly.

How to Start a Short-Term Rental Business in Tennessee

Starting a short-term rental business in Tennessee requires careful planning, research, and compliance with state and local regulations. Follow these steps to successfully launch your STR venture:

Research local regulations: Thoroughly investigate the short-term rental regulations in your city and county, as they can vary significantly across Tennessee. Ensure your property is located in an area zoned for STRs and familiarize yourself with any specific requirements, such as permit types, occupancy limits, and safety standards.

Develop a business plan: Create a comprehensive business plan that outlines your target market, pricing strategy, marketing approach, and financial projections. Consider factors like your property's unique selling points, local competition, and seasonal demand fluctuations. A well-crafted business plan will help guide your decision-making and increase your chances of success.

Register your business: Choose an appropriate business structure (e.g., sole proprietorship, LLC, or corporation) and register your business with the Tennessee Secretary of State. Obtain a federal Employer Identification Number (EIN) for tax purposes and open a separate bank account for your STR business to streamline financial management.

Obtain necessary permits and licenses: Apply for the required short-term rental permits and business licenses with your local government. Gather all necessary documentation, such as proof of ownership, floor plans, and insurance, and submit your application along with any required fees. Allow sufficient time for processing and be prepared to address any concerns or questions from local authorities.

Prepare your property: Ensure your rental property is clean, well-maintained, and equipped with all necessary amenities to provide a comfortable and enjoyable stay for your guests. Invest in high-quality furnishings, linens, and decor that align with your target market's preferences. Consider hiring a professional photographer to capture appealing images of your property for your listing.

Create a compelling listing: Develop an attractive and informative listing on popular STR platforms like Airbnb and VRBO. Write a detailed description highlighting your property's unique features, amenities, and location. Use high-quality photos and consider adding a virtual tour to showcase your space. Set competitive rates based on your research and business plan.

Establish a management system: Decide whether you will manage the property yourself or hire a professional property management company. If self-managing, implement systems for handling bookings, guest communication, cleaning, and maintenance. Utilize technology tools like smart locks and noise monitoring devices to streamline operations and ensure compliance with local regulations.

Market your property: Develop a multi-channel marketing strategy to attract guests and maximize occupancy. Leverage social media, targeted online advertising, and local partnerships to increase visibility. Encourage satisfied guests to leave positive reviews and consider offering incentives for repeat bookings or referrals.

Comply with tax requirements: Understand and comply with all applicable state and local tax requirements, including sales tax, occupancy tax, and business tax. Keep accurate records of your income and expenses, and consult with a tax professional to ensure proper reporting and compliance.

Continuously improve and adapt: Monitor your performance metrics, guest feedback, and local market trends to identify areas for improvement. Be prepared to adapt your strategy in response to changing regulations, market conditions, or guest preferences. Continuously invest in property upgrades and amenities to maintain a competitive edge and attract positive reviews.

By following these steps and remaining proactive in your approach, you can successfully launch and grow a short-term rental business in Tennessee. Remember to prioritize compliance, guest satisfaction, and continuous improvement to build a sustainable and profitable STR venture.

Who to Contact in Tennessee about Short-Term Rental Regulations and Zoning?

When navigating the complex landscape of short-term rental regulations and zoning in Tennessee, it's essential to know who to contact for accurate information and guidance. Here are some key resources and contacts:

Local Government Offices: Start by contacting your city or county's zoning office, planning department, or codes department. They can provide specific information about STR regulations, permits, and zoning requirements in your area.

1. In Nashville call 615-862-6510 for questions about short-term rental permits and regulations.
2. In Chattanooga, contact the Land Development Office at 423-643-5800 for zoning and STR information.
3. In Knoxville, reach out to the Business License & Tax Office at 865-215-2083 for questions about short-term rental permits.

Tennessee Department of Revenue: For questions about state sales tax collection and remittance for STRs, contact the Tennessee Department of Revenue at 615-253-0600.

Tennessee Real Estate Commission: If you have questions about real estate licensing requirements for STR operators, contact the Tennessee Real Estate Commission at 615-741-2273.

Short-Term Rental Advocacy Groups: Connect with local STR host groups and advocacy organizations for support, resources, and updates on regulatory changes.

The Nashville Area Short Term Rental Association (NASTRA) provides education and advocacy for STR hosts in the Nashville area. Join their Facebook group or visit their website at www.nashstra.org.

The Knoxville Short Term Rental Alliance (KSTRA) supports and advocates for STR operators in Knoxville. Find them on Facebook.

Online Forums and Communities: Engage with other STR hosts and professionals on online forums and communities to ask questions, share experiences, and stay informed about regulatory developments.

1. The BiggerPockets STR Forum is a popular platform for discussing short-term rental investing, regulations, and best practices. Visit www.biggerpockets.com/forums/530-short-term-vacation-rental-discussions.
2. The Airbnb Host Community is an official forum where hosts can connect, share insights, and find answers to common questions. Access the community at community.withairbnb.com.
3. Reddit's Airbnb forum (www.reddit.com/r/airbnb) and the /r/Chattanooga subreddit (www.reddit.com/r/Chattanooga) are additional resources for engaging with local hosts and staying updated on regulatory discussions.

By leveraging these contacts and resources, Tennessee STR operators can better understand and navigate the regulatory landscape, ensuring compliance and success in their short-term rental ventures.

What Do Airbnb Hosts in Tennessee on Reddit and Bigger Pockets Think about Local Regulations?

Discussions on real estate forums like Bigger Pockets and Reddit reveal a mix of perspectives from Airbnb hosts operating in Tennessee. Some hosts have expressed frustration with the strict enforcement of short-term rental rules in certain cities, while others appreciate the efforts to regulate the industry.

One host on the Bigger Pockets forum shared their experience in Nashville, stating that they lost their short-term rental permit after quit claiming their property to an LLC1. Despite appealing the decision, they ultimately decided to sell the house due to the difficulty of staying compliant with regulations and pressure from neighbors trying to shut down short-term rentals.

The host also mentioned that neighbors in East Nashville are actively trying to shut down Airbnbs by calling in false reports and that the city is enforcing all Airbnb complaints and issues with "lightning speed". This suggests that Nashville is taking a firm stance on ensuring compliance with its short-term rental regulations.

In a Reddit thread discussing the percentage of Airbnb hosts with multiple listings in Nashville, one user commented on the state legislature's role in limiting local government control over short-term rentals. They mentioned that the Airbnb lobby is deeply involved in the Tennessee legislature, with small-town representatives introducing legislation that primarily affects cities like Nashville.

Another Reddit thread compared Nashville's short-term rental regulations to New York City's recent crackdown on Airbnb. Some users pointed out that Tennessee's state laws are more pro-Airbnb than New York's, making it unlikely for Nashville to implement similar restrictions. Others highlighted the challenges in enforcing existing regulations, with one user stating, "Anyone here ever filed a complaint with a short term property currently violating regulations? I have. It goes nowhere. It's pretty lawless despite the regulations."

However, not all hosts view Nashville's regulations negatively. Some acknowledge that the city's approach, while strict, aims to strike a balance between promoting the short-term rental industry and maintaining the quality and safety of accommodations.

Overall, the opinions of Airbnb hosts in Tennessee on platforms like Reddit and Bigger Pockets reflect the complex and nuanced nature of the state's short-term rental landscape. While some hosts find the rules overly restrictive, others appreciate the role they play in ensuring the integrity of the STR industry in Tennessee.

Disclaimer: While we here at BNBCalc strive to keep all of our regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each area and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.