City Proposes New Short Term Rental Regulations

It’s been almost six months since the city held a public hearing to discuss short term rentals. Starting at that point, city officials took public comment and began formulating a policy to regulate short term rentals. You might call them “AirBnb’s,” but that’s just one of the companies following the new model of leasing private spaces for a night, weekend or a similar short-term period of time. Some people are simply renting rooms or homes independent of any organization, advertising independently online.

Up until this point the practice technically hasn’t been allowed, as these are unregulated businesses often operating in areas zoned residential. While many will see the city’s efforts as making some aspects of the practice illegal, the city maintains it is making the practice legal for the first time, within limits. Any line the city draws is certain to displease someone and that was on full display last week when the city held another public meeting to formally present the proposed ordinance (read it in full, here).

One of the first questions which might be asked is, if there isn’t a problem, why develop a solution? The city felt regulation was needed in order to allow it to continue, while protecting neighborhoods and being fair to hotels. Perceived concerns for neighborhoods are people coming and going who are unknown to the residents, homes being taken off the long-term rental market in favor of the more lucrative short-term rental market (reducing affordable housing), as well as nuisance behavior from those using the service. Hotels are required to prove certain levels of safety (smoke detectors for example) and have to pay a tax. These service put them at a disadvantage if they aren’t similarly regulated.

There are, of course, counters to these concerns. Short term rentals tend to attract more affluent travelers and some of the services do a good job at eliminating problem renters. At times dilapidated properties are bought and improved for this use. And, certainly, in a strong property-rights state, many people feel they should simply be left alone to use their property as they like.

Here are summaries of the salient points according to the press release:

“Short-term rentals (STRs), defined as renting a home or apartment for fewer than 31 consecutive days, are currently prohibited throughout the City of Knoxville, except in commercial establishments like hotels, motels and bed & breakfasts. The draft ordinance loosens those restrictions to allow people to operate STRs in either residential or commercial properties.

  • In residentially-zoned districts, only owner-occupied STRs are permitted. This means that only an owner who is also a full-time resident of the property can operate an STR there. In practice, this often means a separate apartment or carriage house on the same property, although people can also list spare rooms within their own home.
  • Outside residentially-zoned districts – for example, downtown and along most commercial corridors – non-owner-occupied STRs are permitted. For example, the owner of an apartment building could choose to operate a vacant apartment as an STR. One owner or entity can operate up to two non-owner-occupied STRs.
  • All STRs require an STR permit and a City of Knoxville business license. Permit fees are $70 for owner-occupied STRs and $120 for non-owner-occupied STRs. (Business licenses cost $15.) Permits can be renewed annually for $50.
  • All STRs are required to collect and remit the same taxes and fees as hotels and motels – local occupancy taxes and state sales and gross receipts taxes. (These may be paid directly by the operator or by a listing service.)
  • All STR operators must provide a contact person who can be reached 24 hours a day, seven days a week, in the event of a complaint or emergency.
  • STR operators must certify that the property is equipped with smoke alarms, carbon monoxide detectors and a fire extinguisher.
  • STRs are subject to all existing City ordinances including restrictions on noise, street parking and garbage. Any complaints about ordinance violations will be investigated, and if violations are found they could lead to the revocation of an STR permit.”

To say the discussion that followed the presentation was spirited is to do a disservice to the word. The tone quickly became heated. Virtually all those speaking publicly argued against some or all of the restrictions and some accused the city of damaging their rightful income. Various speakers argued that long-term rentals should be subject to the same requirements, though the city representatives countered that long-term renters are residents and, so, fit the definition of “resident” for a residential zone, unlike short-term visitors.

It was pointed out that currently vacant homes which might be used as short-term rentals now will remain vacant. Others said this will drive away people who want to rent a full home and that the city will lose their revenue. Councilman Nick Della Volpe seemed concerned that it be allowed at all, as it is a business operating in a residential zone. The question was raised about the possibility of allowing more than one non-owner-occupied home to accommodate some of the people who have already invested.

Regarding hotels, suggestions were made that if the short term rentals are paying hotel taxes, they should be promoted similarly to the hotels – for example by Visit Knoxville. Additionally, the point was made that hotels can have as many rooms as they can build, while this limits owners of short term rentals.

Clearly, it is a complicated situation for which there are no long-term models as the industry has only exploded in recent years (Airbnb was founded in San Francisco in 2008). There isn’t a solution that will make everyone happy, treat everyone fairly and address the various safety concerns. So, the city has taken a stab at a solution.

But it’s not a done deal. The proposed ordinance goes before MPC on May 11. You are welcome to attend and voice your concerns or opinions. If approved there, it will go before City Council in June. Again, you may attend and express your opinion. If it passes City Council, they will set an effective date. In the interim, you are free to email comments to