Tennessee has entered into a major debate over the future of Airbnbs and other short-term rental properties. State lawmakers heard three hours of conflicting testimony on Thursday while considering upcoming legislative action, which could overrule local ordinances.
The question has drawn out a range of viewpoints from hotel operators, tourism officials, local officials, property rights activists, neighborhood associations and two of the biggest players in the industry: Airbnb and HomeAway.
1. Property Rights And Zoning
Arguments about property rights came up often. A sticking point is what property owners are allowed to do: Does someone have the right to make money with a short-term rental if it is located in a residentially zoned area?
State lawmakers are looking closely at Nashville, where the answer had been “no.”
But last year, Metro officials carved out an allowance for short-term rentals. They created a permit system, began more aggressive tax collection, and limited short-term rentals run by property owners who don’t reside on site.
Metro Councilwoman Burkley
Allen says residential zoning has long been established, so allowing short-term rentals amounts to a “privilege,” not a “right.” That triggered a telling exchange with Sen. Mark Green, R-Clarksville.
“I understand zoning and how it imposes on an individual’s property rights,
“
Green said.
“
B
ut I will tell you that in this General Assembly, I’d be real careful about saying somebody who owns a piece of property doesn’t have a right to use that property how they want to.”
“I hear that,” Allen said. “But I do feel like — I think everybody agrees that we have a difference between residential and commercial. We do decide that there are rules.”
The Libertarian-leaning Beacon Center of Tennessee sued Metro over its permit process, arguing it arbitrarily restricts property rights. The group appeared with two permit-holders from East Nashville who described the benefits of the income they were earning.
“The strict Airbnb regulations, red tape, and high taxation, are enormous challenges to individual hosts,” said Alece Ronzino. “Especially those of us purposefully choosing to do things the right way. These laws enable — and in a way even encourage — lawbreakers.”
2. State Vs. Local Control
The zoning question also ups the tension over which level of government should regulate short-term rentals.
Zoning has historically been delegated to local governments, said Chad Jenkins, deputy director of the Tennessee Municipal League.
“It’s up to each community to decide what’s best for it,” he said. “There is no one-size-fits-all … that’s the design of local zoning.”
Sen. Jack Johnson, R-Franklin, also questioned how a state law would function.
“Planning and zoning — that for decades has been a very clear responsibility … delegated … to local governments,” Johnson said. “So when you’re talking about short-term rentals or property use, having some type of … statewide authority, would be a change.”
Also speaking against state control was Shauna Billingsley, city attorney for Franklin. She described a multi-month process that led to Franklin’s ordinance. The city has now issued 27 permits. None have been revoked.
“The ordinance is working,” she said.
3. Wrestling With The ‘Sharing Economy’
Several lawmakers compared the short-term rental industry to ride-hailing apps Uber and Lyft, voicing an interest in encouraging the “sharing economy.”
“This is a new market, not unlike Lyft or Uber, where the government or regulators are trying to figure out: How do we ensure public safety? … How do we ensure consumers are treated fairly?” said Sen. Bo Watson, R-Hixon.
”They’re challenging old structures.”
Yet several who testified cautioned against the term.
Troy Flanagan, a vice president with the American Hotel and Lodging Association, said the companies he represents don’t oppose traditional homesharing — but do have concerns about property owners with multiple listings.
“The occasional rental of a primary residence — the true spirit of the sharing economy — is the type of activity that generates positive benefits for tourism,” he said. “However, we are concerned about the growing number of commercial operators that use short-term rental websites to essentially operate multi-unit, full-time lodging businesses that undermine the communities and flout the most basic zoning guidelines.”
He cited Austin, Texas, where more than half of short-term rental revenues are from hosts who have units rented at least half the year.
“It’s clear, that’s not homesharing. That’s a business,” Flanagan said. “And it’s a business that is competing unfairly.”
Sen. Jeff Yarbro, D-Nashville, said the legislature should study how short-term rentals are actually operating instead of leaning on
“
abstract free market principles
” — and that he worries about creating regulations that simply shift incentives toward running short-term properties at the expense
of long-term rentals.
“
My instinct right now is to give cities some space
,
” Yarbro said.
“
T
he particulars of local zoning are tricky and thorny and involve lots of different property rights, that make this even more of a challenging issue that urges more caution than in the Uber
or Lyft
scenario.
“
4. How Many Are Too Many?
Several cities, including Nashville, have created different rules for different types of short-term rentals.
For example, Nashville doesn’t limit homeowners who rent out a room at a primary residency, but does put a cap on investors who run multiple properties full-time without living on site.
Jillian Irvin, policy director for Airbnb, said some cities now require owners of multiple listings to go through additional inspections. And she described two other types of caps:
- A limit on the number of nights in a year that a short-term rental can be rented
- Density limits within a single apartment building or condo
5. Tax Collection And Enforcement
In response to Johnson, the senator, Irvin also discussed hotel, occupancy and sales taxes.
“The correct amount is most likely not being collected,” Irvin said.
Disparities between Nashville’s number of city-issued permits and the quantity of online listings show that hundreds of short-term rentals are likely not remitting taxes.
“Short-term rentals are fundamentally no different than normal lodging properties,” said Greg Adkins, president of the Tennessee Hospitality and Tourism Association. “It’s only fair … to pay all state and local applicable taxes.”
Senator Green agreed.
“The playing field,” he said, “should be the same.”
On Air - 90.3 WPLN-FM