A Primer on Nashville’s Airbnb Regulations
In Davidson County, legislation regulates short-term rentals and short-term rental operators. The pertinent legislation is the Short-Term Rental Property Ordinance 2017-1048. Comprehensive legislation is not yet in place for the rest of Tennessee, and there are currently no statewide laws governing the industry. The prohibition against short-term rentals in a residential district was implemented by Davidson County ordinances and was challenged by homeowners on the basis that they had vested rights in their properties that were affected by the ordinance. The challenge was successful at first, and Davidson County withdrew the ordinance. However, in a ruling by the Davidson County Chancery Court this summer that was unfavorable to Airbnb, the court upheld the constitutionality of the ordinance as long as it did not prohibit short-term rentals entirely . The decision was appealed in August to the Tennessee Court of Appeals. Nashville also permits short-term rental properties in certain designated commercial and mixed-use districts through issuance of a permit upon meeting certain requirements set forth in the ordinance. The permit to operate short-term rentals falls into two classes: (1) owner-occupied short-term rental property temporary permits and (2) short-term rental property temporary permits. Class (1) allows a property owner to rent out their property for periods not to exceed 180 nights per calendar year, to remain classified as owner-occupied. A Class (2) permit allows a property owner to rent out his/her property, regardless of whether the owner resides in the residence. A Class (2) permit is deemed to be a temporary use of commercial property. A fair number of the permits issued throughout Davidson County have been for Class (2) permits.
Zoning Considerations for Short Term Rentals
The Metro ordinance outlines the zoning districts that allow for short-term rentals:
Central Nashville
North Nashville
East Nashville
South Nashville
West Nashville
Franklin
Hermitage
The regulations specify that a short-term rental must be located within Davidson County and in one of the approved metro planning districts.
In addition to these districts, Davidson County is divided up into a number of zoning districts, including:
Table 1, Davidson County Zoning Districts
Zoning District
Also Shown on Map
C Commercial Districts
One and Two Family Residential Districts
Multiple-Family Residential Districts
Business Park Districts
Planned Institutional District
Greer Stadium/Airport District
Agricultural Districts
Rural District
Environmental Lifestyles District
Scenic Hills District
For an application to be granted, it must be for a rental in those districts shaded in blue, green, or purple.
Zoning Companion Forever-Nashville Map Legend
Blue shaded area: Lot-level short-term rental occupancy is permitted in Davidson County, per the Metro short-term rental ordinance. Davidson County zoning regulations also permit short-term rentals in these zoning districts.
Green shaded area: Lot-level short-term rental occupancy as of right is permitted in Davidson County, per the Metro short-term rental ordinance. Davidson County zoning regulations do not permit short-term rentals in these zoning districts.
Purple shaded area: Lot-level short-term rental occupancy is permitted in Davidson County on an individual basis (i.e., through the application and grant of a permit), per the Metro short-term rental ordinance. Davidson County regulations do not permit short-term rentals in these zoning districts.
Gray shaded area: Lot-level short-term rental occupancy is not permitted in Davidson County, per both the Metro short-term rental ordinance and Davidson County zoning regulations.
Accommodation Permit Obligations in Nashville
In order to rent out a property in Nashville, a host must first apply for and obtain a property permit. They also must keep that permit current by renewing it each year. As outlined more fully in this post, Nashville requires a separate permit for each rental property.
The permitting process is designed to ensure both compliance with the rules and requirements outlined by Nashville and the City of Nashville’s ability to track the total number of units permitted for short-term rentals through Airbnb-type platforms. Nashville determines if an applicant meets all of the technical thinking conditions after reviewing the application and attachments.
Once the applicant submits the application, it is reviewed by officials from the Department of Codes and Building Safety and the Metro Health Department. If any questions arise from the review, the reviewer will send a request to the applicant. If the reviewer is satisfied that the applicant meets all the requirements, they will approve the application and issue the permit. If not, the reviewer will send the applicant a request to submit additional information or correct any discrepancies. In addition to meeting requirements set forth by the City, the rental also must comply with building code and zoning requirements.
The Department of Codes and Building Safety charges a non-refundable processing fee of $50 for processing the initial and renewal applications. City Counsel had initially proposed a whopping fee of $50 per day for each violation of the rules and requirements outlined above.
Compliance and Tax Obligations for Nashville Airbnb Hosts
For many, the allure of hosting on Airbnb often comes with the misunderstanding that they’re exempt from taxes that traditional hotels and accommodations are required to pay. The truth is that all hosts in Nashville are required by law to pay taxes like sales tax, hotel occupancy tax, and excise tax. The rates apply to both short and long-term rentals. But here’s how the breakdown works for short-term rentals.
- Hotels, motels, bed and breakfasts, and individual hosts renting their homes on platforms such as Airbnb and VRBO must collect 5 percent occupancy tax.
- Bed and breakfast establishments must collect an additional 5 percent general services occupancy tax.
- Hotels and motels must also collect an additional 1 percent hotel occupancy tax.
- Individual hosts must collect an additional 1 percent stadium hotel occupancy tax.
When you add all of these fees together , hosts in Nashville are supposed to charge guests a combined 12 percent occupancy tax.
When a rental arrangement is less than a month, you are required to collect and remit an amount equal to the business tax due from short-term rental property. The state income tax rate for personal taxes is 1.0%, and the local tax rate will vary by jurisdiction.
It is your responsibility to collect and submit this information as the property owner.
You’ll want to get a city of Nashville business license and a state business tax license. You can obtain the city for free, but the state will charge you a $22 fee.
Enforcement Measures and Penalties for Short Term Rental Violations
Enforcement of the new Davidson County ordinances is largely confined to the codes department. There will be no Airbnb unit inspections unless a complaint is currently being investigated by codes. Persons that wish codes to investigate an alleged violation should first contact a compliance officer with the complaint (this can be done by other departments, but codes appears to be the most frequently involved) before seeking additional enforcement strategies.
The city has also developed the office of "hospitality" as a dedicated operation for Nashville to regulate and control all hotels, motels, inns, short-term rentals, bed and breakfasts, and residential home sharing. This department has been given significant authority to enforce the hotel/motel taxes, and it also has been given the ability to levy substantial civil penalties as well as use "extraordinary legal process." It is unknown what extraordinary legal process may be, but it is likely referring to the ability of the county attorney to file a judgment or eminent domain proceeding against delinquent hotels or other businesses that owe delinquent taxes to the city.
The penalty for a violation of the occupational safety and health requirements is $250 per day per person (OSHA violation). Any landlord or owner that rents a property for less than 30 days may be charged a $50 per day penalty for failure to obtain a rental license. Finally, the penalty for operating a unit without a business license is $50 per day for the first offense, and then $250 per day for subsequent offenses. These penalties are civil in nature, are not grounded in criminal law, and are not indictable. This means that these civil violations can be directly enforced without ever appearing in a criminal court.
Effects of Nashville Airbnb Regulations on Local Residents
The Airbnb regulations that affect Nashville have far-reaching effects on the local economy and community. Airbnb advocates argue that short-term rentals address the various housing shortages in the city while creating opportunities for local entrepreneurship and generating millions in tax revenue. Nashville has the lowest housing vacancy rate in the United States, which is driving up the cost of living. Airbnb provides a platform for people to earn passive income by renting out part or all of their residences to tourists and business travelers.
Those that oppose short-term rentals in Nashville, however, point to Airbnb’s role in increasing housing costs and pushing people out of the city. Since local governments have little authority over the housing market , they unlikely have the power to effectively address the problem. Airbnb may also be making Nashville a less affordable and accessible option for visitors. Criticism for having a strict registration process is often directed at local and state governments. Those who live outside Davidson County pay a higher registration fee to simply avoid restriction and enforcement measures.
Overall, it is impossible to paint a clear picture for the effects of Airbnb regulation. The issue is complicated further by the lack of available data to support the claims of supporters and detractors. For now, Nashville continues to evolve in a housing market that is driving out low-income residents and attracting visitors seeking short rentals.