5 things to know about Nashville's new ban on some short-term rentals

Nashville Metro Council has set a hard end date for new investor-owned short-term rental permits in residential areas, citing concerns about negative impacts on affordable housing and quality of life. 

Investors and developers now have about two more years to pull permits for residential non-owner-occupied Airbnbs and other vacation rentals before they are banned.

Council members approved the measure in a 25-5 vote Tuesday night. New non-owner-occupied permits were outlawed last year from single and two-family residential zones, and this rule expands that to include multifamily residential areas. 

Existing permit holders will be allowed to keep them, thanks to a state law approved last year.

These bans don't affect owner-occupied permits that allow residents to rent out rooms in their homes.

Here are five things to know about the new law: 

It's contentious

Councilwoman Burkley Allen faced widespread opposition from investors after she introduced the ban in May.

She then added a provision allowing future owners of permitted properties to continue to get short-term rental permits, after hearing arguments that the ban would be devastating to their business plans. 

But neighborhood groups balked at entitling non-owner-occupied short-term rental properties for future owners. 

"The biggest message we heard after our last meeting is to change the ability of future owners to transfer permits," Allen said. "The goal of this bill is so that you cannot have non-owner-occupied permits in (residential areas) in the future."

On Tuesday, council members approved a substitute bill that included most of Allen's language but deleted the transfer provision. 

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There's a grace period

The ban will take effect Jan. 1, 2022 so those in the process of building projects can finish their developments. 

"We have heard loud and clear from the citizens of Nashville that non-owner-occupied permitted (rentals) are having a negative effect on neighborhoods and the quality of life and our affordable housing," said Councilwoman Angie Henderson. She sponsored the approved substitute bill with council members Larry Hagar and Mina Johnson. 

"Everyone who made an investment in a home never did that thinking they might have a 24/7 mini-hotel next to them," Henderson said. 

Investor-owned short-term rentals have values up to 30 percent more than residential properties because of the high profits they can bring. This has prompted some investors to build complexes devoted to vacation rentals. Some have small closets and kitchens, making them hard to resell for family housing. 

Affordable housing is a key issue

Council members and community groups argued that the rentals are too profitable and are discouraging developers from investing in new homes. 

The proliferation of short-term rentals in residential areas reduces the housing stock and pushes up prices.

Metro officials have said Davidson County needs to add about 31,000 new homes by 2025 to avoid widespread displacement from a lack of affordable housing. 

"Are we going to have the housing supply we need in the city so people can actually stay in the city?," Councilman Fabian Bedne said. "(This ban will) help us stop the bleeding."

Council fears loss of community

Councilman Colby Sledge said a large townhome rental complex recently built next to an elementary school in his district turned out to be short-term rentals.

His district includes 12South, Edgehill and Wedgewood Houston, which have some of the highest concentrations of Airbnbs. 

"So we have an entire complex at the top of a hill next to an elementary school where our kids go to school," Sledge said. "I'm tired of it. Can we at least get our communities back?"

There are about 5,500 active short-term rental permits in Davidson County now, and roughly 10 percent of those are for non-owner-occupied properties in residential areas. 

Many residents have complained about loud partying, bad behavior, parking shortages, and piles of trash around the rentals. 

Metro Codes officials are struggling to keep up with the volume of short-term rental complaints and violations. New investigations have delays of about four months, but two new investigators are in the process of being hired. 

"So many neighbors said: 'Please help us, we like peace and quiet in residential neighborhoods,'" Councilwoman Mina Johnson said. "That's what neighborhoods really appreciate and championed."

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It will settle lawsuits against Metro

In January, Metro Codes officials acknowledged accidentally permitting more than 100 short-term rentals that didn't comply with new restrictions. 

Two-family homes in residential zones, such as duplexes and so-called tall-and-skinnies, were blocked from getting non-owner-occupied rental permits in a January 2018 Metro law. 

But some of those properties continued to receive permits by mistake, officials said. 

The permits were then cancelled. But dozens of permit holders sued the city to keep them, and were allowed to remain operating until the case was decided. 

In March, a Chancery Court judge issued a contempt charge against Metro Government for continuing to send cease-and-desist letters to those properties. 

A provision in this bill settles the suits by allowing those permit holders to keep them. 

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Sandy Mazza can be reached via email at smazza@tennessean.com, by calling 615-726-5962, or on Twitter @SandyMazza.