One year after state lawmakers blocked the city’s plan to phase out non-owner-occupied short-term rentals by 2021, Metro Nashville officials are revisiting not only where rentals can operate, but also the industry’s burden on city resources by increasing the annual permit fee by more than 600%.
Short-term rental, or STR, properties are classified as homes or rooms rented for less than 30 consecutive days to the same guest. STRs, also known by the company name Airbnb, are categorized by owner-occupied units and non-owner-occupied units.
As of May, Southwest Nashville accounted for more than half of the city’s 7,367 STRs, according to AirDNA, a short-term rental data analytics firm. Of the 3,752 properties in the area, 92.9% are non-owner-occupied STRs, AirDNA reports, meaning the owner does not live on-site.
An ordinance sponsored by District 18 Council Member Burkley Allen seeks to limit non-owner-occupied STRs to commercial areas, prohibiting them in neighborhoods zoned for single-family and multifamily residences.
“Homeowners expect a certain quality of life, but that isn’t always the case when their neighbors are people in town for the weekend to have a really good time,” Allen said.
If approved, the law would allow owner-occupied STRs and existing non-owner-occupied STRs grandfathered in by state law to continue operating in residential zoning, but would prohibit any new rentals from coming online.
Allen said the changes would likely go into effect in May 2020. A public hearing is scheduled for July 2 at 6:30 p.m. at the Metro Nashville Courthouse.
One of the areas most affected by this proposed change is residential zoning in the southwest region of Nashville—Hillsboro Village, Green Hills and neighboring communities—which has proven to be a hotbed for the city’s short-term rental industry.
“In residential areas, the purpose is to reside there,” Allen said. “This [ordinance]would draw the line by saying residential areas should be for those who live in the home or rent long-term.”
The city’s department of codes and building safety estimates there are 1,100 STRs operating without a permit, according to Public Information Officer Sean Braisted, which means renters have signed up to operate through a company website but have not paid for permits to the city.
To help rein in noncompliance, in 2017 the department contracted with San Francisco-based company Host Compliance to assist with the city’s enforcement efforts for an annual cost of $195,000 for five years. Host Compliance identifies illegally operating STRs and reviews complaints submitted through a 24-hour hotline and website.
However, Braisted said the department lacks the resources it needs to identify all unpermitted STRs and address the backlog of complaints.
To this end, a second city ordinance proposes an increase to the existing annual $50 required permit fee for each rental unit to $313. City officials said the fee increase will generate an additional $1.1 million in revenue, which will in part fund six new positions related to inspecting, monitoring and financing STRs.
The six new positions recommended include three fire inspectors for a combined $265,900; one finance staff member to collect related taxes for a cost of $64,100; and two property standards inspectors for a combined $128,100.
“The two proposed inspector positions would help address the backlog of complaints we have dating back four months,” Braised said. “The positions will not only help us more quickly address those concerns, but also make sure hosts are complying with the law.”
Nashville resident and public school teacher Tom Occhipinti, who operates a owner-occupied short-term rental in Green Hills, asked council members at the May 21 meeting to reconsider the increase.
“Come speak to my wife and I about the challenges we face as Airbnb hosts and teachers. … I think you would see the 3% [cost-of-living adjustment for employees in the proposed Metro Nashville operating budget] should go to raising the permits and the 600% should go to teachers’ salaries,” Occhipinti said.
While many council members have faced constituent complaints regarding STRs, they remain a moneymaker for the city. A breakdown of Metro Nashville’s proposed operating budget for fiscal year 2019-20 reveals the city expects STRs to generate $2.7 million in permit fees and hotel occupancy taxes next fiscal year.
Alece Ronzino, a board member with the Nashville Area Short Term Rental Association, said the permit increase feels like a “punishment” to hosts who are legally operating rentals.
“We feel like we don’t have our city backing us even though we’re the ones doing it the right way,” Ronzino said. “It’s the bad actors, the unlawful hosts, who are giving us a bad name.”
Ronzino suggested local officials strike a deal with Airbnb allowing the company collect and remit local taxes. Airbnb automatically collects and remits the 7% state sales tax as well as 2.25% local sales tax, but it does not collect the city’s 6% short-term rental occupancy tax as it does for cities such as Memphis.
“The city plans to add new positions to address unlawful short-term rentals, but it’s the lawful hosts who will be paying those fees,” Ronzino said. “If Nashville could come to an agreement to let the rental platforms collect and remit taxes, we would then have 100% tax compliance,” Ronzino said.
As Nashville continues to further regulate STRs, some cities in Southwest Nashville have taken steps to keep them out altogether. Satellite cities including Belle Meade, Forest Hills and Oak Hill have each passed legislation banning both owner-occupied and non-owner-occupied STRs.
Belle Meade City Manager Beth Reardon said the board of commissioners’ decision to ban STRs in October did not arise from complaints but rather as a preventive measure.
“Most citizens in Belle Meade did not want short-term rental properties in the area,” Reardon said. “As of now, we don’t get any reports from any other neighbors saying there are short-term rentals being operated without our knowledge.”
Despite the ban, Reardon said one known short-term rental host is grandfathered in under the Short-Term Rental Unit Act passed by the Tennessee General Assembly in 2018. If the owner were to sell the property, Reardon said the right to operate a STR will not transfer to the new owner.
“Our residents invest a lot of money in their homes here,” Reardon said. “They were nervous that out-of-town hosts would fail to upkeep the property or cause other problems that nearby neighborhoods surrounded by short-term rentals often face.”