Short-term rental legislation makes General Assembly committee rounds

Competing bills dealing with how to regulate home-based short-term rentals continue to wind their way through Tennessee General Assembly committee hearings.

It makes the second year in a row state lawmakers have taken a hard look at a thorny issue, which ground to a halt locally when the Chattanooga City Council wrestled with its own legislation last fall. At its heart, the matter comes down to property rights, with rental hosts claiming they have the right to make a little money with their homes and opponents saying they don’t want strangers checking in and out of their neighborhoods.

The state estimates about 9,000 short-term rental listings are available in Tennessee each year. With a growing number of homeowners able to list their residences for overnight stays through internet-based booking sites such as Airbnb, citizens and lawmakers both have demanded action.

Rep. Gerald McCormick, R-Chattanooga, has said he sponsored House Bill 497 as a means to “give local governments flexibility.” The bill and its companion, Senate Bill 372, let local government increase insurance requirements and otherwise regulate short-stay operators.

Rep. Cameron Sexton, R-Crossville, has said he wants to create “a level playing field” for short-stay businesses with House Bill 1020, and its counterpart Senate Bill 1086. That legislation seeks to prevent the creation of numerous local rules governing short-stay practices across the state.

In a recent meeting, Sen. Jack Johnson, R-Franklin, chairman of the Senate Commerce and Labor Committee, voiced concerns with how both sets of bills would outright prevent local governments from banning short-term stay operations in residential areas.

“I have a problem with this pre-emptive issue related to land use and zoning, because I want to be able to go to my City Council if I have a problem with this, if it’s allowed,” Johnson said. “I don’t want to have to go to my General Assembly for the party that’s taking place next door to me every weekend.”

He acknowledged shortstay hosts have property rights, but he said so do their neighbors who did not expect to be next door to vacation rental houses inhabited by a series of strangers.

“That disrupts the culture and quality of my neighborhood,” Johnson said. “What about my property rights?”

Rep. Kent Calfee, R-Kingston, vice chairman of the House Business and Utilities Committee, has said Sexton’s legislation didn’t excite him, but he did not see banning shortterm operators at the local level as realistic.

Rep. Patsy Hazlewood, R-Signal Mountain, said she worries the legislation might “open a back door to commercialization” in neighborhoods, since it prohibits local governments from banning shortterm rental operations in residential areas.

Sexton said his bill does not prevent governments from enacting any number of restrictions, including limiting the total number of days a residence could be rented over a 12-month period or placing a cap on the number of short-term rentals that could operate within a certain area.

He equated local efforts to ban ongoing short-stay operations to trying “to put the toothpaste back in the tube.”

Sexton said the point of his legislation was not to create “micro-hotels,” but to bring operators “into the light” to regulate them for health, safety and taxes.

Illicit operation of short-term rentals was a hot topic during Chattanooga City Council hearings on the issue. Legally, city homeowners must rezone their properties to a classification that would also allow multiple-family dwellings and offices if they want to use them for short-term rentals. While hundreds of properties in Hamilton County can be found on internet-booking sites, only a small number of those have been properly rezoned, officials have said.

Johnson praised the bills for their attention to revenue collection.

The Tennessee General Assembly Fiscal Review Committee has estimated McCormick’s legislation would annually bring in an additional $739,300 for the state and $827,100 in local revenue. They pegged Sexton’s version, which calls for more hands-on state collection, slightly lower at $700,000 in state revenue and $739,200 in local money. Both would cost about $146,000 for the state to administer.

Comments during the various committee meetings supported recent statements by Sen. Bo Watson, R-Hixson. Watson served on a task force to study the issue last fall and said his colleagues felt “philosophically conflicted” over their involvement in local land-use matters.

Last year, no short-term stay legislation made it to the General Assembly floor for a vote.

If that happens again, city Councilmen Chip Henderson and Chris Anderson have said they plan to take another swing at settling the short-term rental quandary for Chattanooga.