What's new with short-term vacation rentals?
After 13 months and 27 drafts, the City of Chattanooga adopted a new policy for VRBO and Airbnb rentals earlier this year. These are the biggest changes.
By William Newlin
This screenshot shows some of the local short-term rentals available in Chattanooga on airbnb.com.
Local officials discussed nearly 30 versions of Chattanooga's Short-Term Vacation Rental Policy before they adopted the city's new policy in May.
“(Short-term renting) is an industry we have. It's an industry to some point we need,” said Chris Anderson, one of Mayor Kelly’s senior advisors. “We just have to create a framework in which they can operate and not harm the city.”
Previously, residents expressed that “absentee rentals” — Airbnb and VRBO listings that weren’t the owner’s main residence — were negatively impacting communities and eating up the housing supply. The updated policy bans new absentee rentals from residential neighborhoods, unless they are first approved for a zoning change.
“Frankly, I think we had a lot of speculative investment here,” Mayor Tim Kelly said during the Aug. 3 State of the City event. “Our short-term vacation rental regulations, or the lack thereof, definitely hurt housing (affordability).”
By excluding new absentee STVRs from operating in neighborhoods and beefing up enforcement of the new ordinance, city leaders expect to see greater housing availability for residents. They also think the new policy will give Chattanoogans an avenue to reap the economic benefits of the STVR market themselves.
Here’s what changed.
The green overlay shows which areas are approved for owner-occupied short-term vacation rentals. Absentee rentals are allowed only in commercial zones that are approved for hotels.
STVR locations
The green overlay shows which areas are approved for owner-occupied short-term vacation rentals. Absentee rentals are allowed only in commercial zones that are approved for hotels.
New absentee rentals can only go in commercial zones that also allow hotels. The rules for owner-occupied or “homestay” STVRs also changed slightly. They can operate in any commercial zone allowing hotels or in any residential zone within the “overlay,” covering downtown and its surrounding neighborhoods, as well as some of Lookout Valley.
Why the change?
The change allows for absentee STVRs in commercial corridors outside the overlay and tries to keep houses that come onto the market in residential zones available as local housing. Absentee rentals that are already operating in neighborhoods will be permitted to stay.
Application and renewal costs
Absentee STVR certificate applications now cost $500 and carry a $500 annual renewal fee. Homestay applications and renewals cost $250. Previously, applications and renewals cost $150 for both types of rentals.
Why the change?
Anderson said the cost isn’t meant to be a discouragement. Rather, it reflects the labor and paperwork involved in the application process. The previous cost was “arbitrary,” he said.
Rezoning for absentee rentals
If property owners want to rezone their land to create an absentee STVR (for example, rezoning to one of the specified commercial zones), there’s now an 18-month waiting period before they can apply for the rental certificate. The old ordinance had no waiting period provision.
Why the change?
Given that STVRs are now limited to certain zones, the waiting period prevents property owners from quickly buying and rezoning property to create a new absentee STVR. It's another effort to increase owner-occupied housing.
Limits on STVR apartments
Only 25% of the units in a multi-family complex can be used as STVRs. For example, one unit in a quadplex could be a short-term rental.
Why the change?
The multi-family residence limit is meant to both protect affordable, long-term housing and keep large chunks of a building or neighborhood from being empty when not rented.
“You don’t want ghost towns for neighborhoods,” Anderson said.
Enforcing the rules
The City of Chattanooga hired Mike Mallen as the city’s administrative hearing officer (AHO) to hear cases about violations of city codes, including the new STVR ordinance. Mallen can levy fines of up to $500 per day for STVR operators who violate the ordinance. Three STVR inspectors are in charge of keeping STVRs in compliance and recommending cases to Mallen.
If you have a complaint or suspect there’s an unlicensed STVR in your neighborhood, you can contact 311.
Why the change?
The previous STVR ordinance had blind spots when it came to enforcement. Before, violators had to go to city court, which cost them about an $180 fine and was treated as a cost of doing business, Anderson said. Now the fines are steeper, and the AHO is meant to streamline determining violations.
No opposition hearings
Property owners no longer have to alert neighbors of their STVR application, and neighbors aren’t able to voice opposition at a public hearing. As long as applicants meet the STVR requirements, they will receive a certificate.
Why the change?
Anderson described the old application method as a “broken, cumbersome process” that encouraged STVR owners to operate without a license.
Who’s impacted the most?
On the one hand, the ordinance opens more of Chattanooga to absentee STVR owners. Anywhere there’s a hotel, there could also be a rental. On the other hand, absentee owners are excluded from residential neighborhoods, have to comply with the 18-month rezoning waiting period, and face pricier applications and renewals.
Yet Anderson said Chattanooga residents will feel the biggest impact of the new ordinance, which was the goal from the start. For residents looking to turn their home into an STVR, a streamlined application process and more zoning options potentially make part-time renting a more attractive investment.
And fewer homes turning into rentals can mean a cheaper, more accessible housing market for Chattanoogans.