State of Vacation Rental Regulations

(from City of Chattanooga)

CHATTANOOGA, Tenn. (WDEF)- Short term vacation rentals are an ever increasing form of lodging for visitors.

Over the past year, both the Chattanooga City and Hamilton County Governments have been wrestling with how to tackle short term vacation rentals.

With pressure from multiple sides, one analyst says the market could undergo some regulation changes.

Pam Knudsen, a tax analyst who is the executive of Avalara, said, “One of the biggest challenges is that there’s no easy outward marking of an identification that this is a short-term rental.”

This is one of many challenges faced by municipalities when trying to regulate vacation rentals.

Both Chattanooga and Hamilton County have passed ordinances in the past year with new rules.

However, Knudsen says, “Compliance is one of the biggest challenges a lot of cities face.”

One such issue is collecting all the required taxes a renter has to pay.

Property taxes, like for any homeowner still apply, but an additional tax called a lodging tax that is normally reserved for hotels and motels has to be paid.

In Hamilton County, that rate is four percent.

Knudsen said, “Any house, whether it is their residential, or whether it is a short term rental, is still going to be subjected to the lodging taxes that are applicable to anytime you rent out your house as a short term rental. Even if you are renting out only a portion of it you are still subjected to that tax.”

It is important to note that the city and the county when it comes to short term vacation rentals.

It is also important to note that different municipalities have their own separate ordinances. 

For example, application and annual renewal fees vary based on location.

In Chattanooga, the application fee is $250 for those who live at the property and $500 for those who do not, and those fees are annual.

In contrast, the same fee in Collegedale is $300 for initial approval, but only $100 for annual renewal.

Municipalities are developing strategies for enforcement, but this will continue to be a long process.

Technology can be a factor in the enforcement.

Knudsen said, “What we call data mining, where they are looking for all of the listings on a platform and comparing those listings to the actual short term permitted rentals in a community and finding those listings that aren’t permitted.”

All owners of rental properties are encouraged to remain up to date on their registration and current ordinances.

We did reach out to several members of the Hamilton County Commission for the latest on the county’s enforcement efforts but have yet to hear back.