Nashville council approves Airbnb phase-out bill for residential neighborhoods

After a furious yearlong debate over the future of Nashville's neighborhoods, the Metro Council took sweeping and controversial action Tuesday to combat the rise of short-term rentals in Nashville's residential communities.

In the face of increasing lobbying from Airbnb, HomeAway and other online lodging companies, the council voted 25-5, with seven abstentions, to phase out short-term rentals that aren't occupied by their owners from residential-zoned neighborhoods.

The vote, which applies primarily to traditional single-family homes and duplexes, came on a final of three required council readings. The rollback on permits for this type of short-term renting is slated to occur over the next three years and be completed by June 28, 2020.

It marks the city's most aggressive step to date to curb a rapidly growing alternative to hotels that has exploded in Nashville amid the city's tourism boom.

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Neighborhood groups have alleged non-owner-occupied short-term rentals, often operated by investors, has turned residential homes into party houses, brought businesses into areas zoned for houses, and displaced longtime residents from neighborhoods closest to the city's urban core.

"We've heard from neighbors and neighborhoods all over Nashville concerned about this industry's intrusion into residential life in our city," said Councilman Freddie O'Connell, whose Germantown and Salemtown-area district has more short-term rentals than any other council district.

Owner-occupied short-term rental properties are unaffected by the policy change. The same goes for non-owner-occupied short-term rentals that are in multi-family high-rises or in areas that are zoned to allow commercial uses.

The move could invite intervention from the Republican-led Tennessee state legislature, where an industry-backed bill to overturn Nashville's ban of non-owner-occupied short-term rentals from residential neighborhoods is already drafted. The state preemption bill passed last year in the House and now needs just Senate approval.

State preemption threat weighs among some in council

Councilman Jeremy Elrod, who abstained from voting, raised the threat of state preemption, pointing to a host of other Nashville policy decisions that have been overturned by the legislature in recent years.

But his colleagues framed the vote as fulfilling a basic duty of the council to protect neighborhoods.

"We do have precedent and authority to ensure the sanctity of one's home and one's neighborhood through zoning," Councilwoman Sheri Weiner said.

►More: Nashville's emotional and divisive Airbnb debate

The bill needed 21 votes to pass on third reading.

Council members Scott Davis, Robert Swope, Steve Glover, Davette Blalock and Jason Potts voted against the ordinance.

Council members Jim Shulman, Sharon Hurt, Ed Kindall, Burkley Allen, Tanaka Vercher, Nancy VanReece and Elrod each abstained.

More than two dozen cities have similar restrictions over investor-owned short-term rentals in Tennessee, according to lead sponsor Councilman Larry Hagar, including Knoxville. The council defeated an amendment that would have lengthened the phase-out of affected permits to June 2025.

With the ordinance now passed, Hagar said he plans to eventually file an "overlay" legislation that would allow affected short-term rental operators to apply individually to be allowed to operate.

Competing short-term rental legislation — put forward by a special Ad Hoc Committee and sponsored Shulman — was indefinitely deferred following the vote of the phase-out legislation. Shulman's bill, which outlined less restrictive rules, was pitched as a "compromise" between the two sides, but neighborhood activists opposed the measure while the industry supported it.

Airbnb considering 'all options' after vote

A top executive of Airbnb said the company would be exploring "all options" following passage of the phase out of investor-owned short-term rentals from residential neighborhoods.

"We’ve worked in good faith with the Metro Council and the Ad Hoc committee for months now and in light of today’s disappointing outcome we will consider all options to defend our host community in Nashville and throughout Tennessee," Laura Spanjian, the Tennessee director for Airbnb, said in a statement.

Philip Minardi, a spokesman for HomeAway, called the vote "a dangerous step in the wrong direction for the city and chooses to disregard the clear benefits traditional vacation rentals have brought to Nashville for decades."

A statement from the Nashville Area Short-Term Rental Association said the organization is "devastated."

"This bill is far from a compromise and just pulled the rug out from under law-abiding STRP owners," the group said. "Not only will this hurt STRP owners, it will hurt our local businesses, our tourism and overall, it will hurt Nashville."

Short-term rental debate has exploded in Nashville

Mayor Megan Barry, who stayed out of the council's short-term rental talks and stayed neutral on their proposals, said her administraiton will work with departments to strengthen the enforcement of short-term rental rules.

"Neighborhoods should be for neighbors, and I hope these new regulations will help correct some of the unintended consequences of non-owner occupied short term rental properties," she said.

Nashville's debate over short-term rental has intensified over the past year.

Neighborhood activists have complained that short-term rentals in which owners live elsewhere are often operated by out-of-town investors who have no interest in being good neighbors. They've told horror stories of backyard sex parties. They've also said that allowing short-term rentals — a business — into residential neighborhoods abandons the principle of land-use zoning.

Short-term rental hosts have countered by saying they are simply capitalizing on their rights as property owners. They've called it unfair for Metro to suddenly change the rules after many of them made substantial financial investments in their properties. They contend short-term rentals have also provided an affordable lodging option as rates at hotels in Nashville have skyrocketed.

In a surprise twist before the council's decision, Nashville Police Chief Steve Anderson entered the debate with a letter to the council last Friday that said complaints about short-term rentals "cannot, or at least, should not, be ignored." He said his comments were not meant to be an endorsement for any bill, but he appeared to be sympathizing with short-term rental critics.

Seeking a compromise on the issue, Vice Mayor David Briley appointed the Ad Hoc Committee last year to explore a path forward. But the legislation that came out of it, backed by Shulman, did nothing to bring the two sides together. The phase-out bill was delayed by the council in October to see if a resolution could be worked out.

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Measures in Shulman's now-deferred bill included strengthening caps on the number of non-owner-occupied rentals allowed in suburban parts of the county and a new "anti-clustering" provision to prevent the concentration of future short-term rentals. All existing short-term rentals would have been grandfathered in.

Critics of short-term rentals said the real "compromise" was their phase-out proposal, which still allows many short-term rentals to operate.

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Nashville has struggled with regulating short-term rentals and been unable to properly enforce initial regulations that were adopted in 2014. That's when the city also started taxing short-term rental properties like they do hotels.