Places like Nashville, Tennessee, should love short-term rental platforms like Airbnb or HomeAway. For one, the city has a booming tourism industry but remains short of enough hotels to meet surging demand. This is why Nashville’s downtown has the highest average nightly hotel rate in the United States — ahead of cities like San Francisco and New York City.
More importantly, economic growth has led to some people struggling to afford the increasing costs of living. Unfortunately, rather than craft laws that embrace innovation and make it easier for both residents and tourists, Nashville’s government has unbelievably placed arbitrary limits on short-term rentals. Now, it is time for the state of Tennessee to step in and curtail Nashville’s war on innovation.
In 2015, Nashville bowed to pressure from special interests in the hotel industry and organized labor by passing an ordinance that restricted people’s ability to rent out their homes. The ordinance mandated a 3 percent cap on the number of non-owner occupied homes in a neighborhood that could receive a short-term rental permit. It also required at least $1 million in liability insurance coverage for renters and forbade homeowners from using signs to advertise their homes.
Under these new requirements, many long-time Airbnb hosts were unable to secure a permit. One of these families, the Andersons, could not get a permit, because their neighborhood already reached the 3 percent cap. The family, longtime Nashville residents and Airbnb users, had the chance to relocate temporarily for a work opportunity, something that is common given the size of the music industry in Nashville. However, they would be unable to afford to do so, if they could not rent out their home while they were away. To fight back against Nashville’s limits on renting non-owner occupied homes, the Andersons teamed up with the free-market Beacon Center of Tennessee and sued the city to regain their property rights.
In October 2016, Circuit Court Judge Kelvin Jones ruled in favor of the Andersons, striking down parts of the ordinance. While this was a positive result for all homeowners, Jones’s ruling left room for restrictive laws to come from Nashville in the future.
The ordinance was struck down for its unconstitutional level of vagueness, as it was unclear whether the Andersons’ home qualified “as a hotel, bed-and-breakfast, or boardinghouse, which are not considered short-term rentals.” However, the arbitrary 3 percent cap was ruled to be constitutional, meaning it could go into effect if the ordinance is clarified and rewritten.
Critics allege that Nashville is being taken over by outside investors who buy houses only to rent them out through online platforms. However, an overwhelming majority of Airbnb hosts rent out the house that they live in. Limits on this type of property affect far more groups of people than simply wealthy outside investors. The Andersons’s story is a telling example of how this ill-conceived attempt to crack down on what the city considers “illegal hotels” harms Nashville residents and costs the city money.
Another complaint against Airbnb in Nashville is that it creates “party houses” and “illegally parked cars” in residential areas. Even so, existing local nuisance laws, including the unused nuisance enforcement mechanisms built into Section R of Nashville’s short-term rental ordinance, offer a more realistic way to police quality of life problems. While there are undoubtedly some disrespectful Airbnb guests, there are also countless rude full-time neighbors. The same enforcement mechanisms that hold residents accountable for actions such as holding late-night parties or playing loud music can easily be applied to short-term rental guests. Lawmakers do not need to solve a problem that already has a solution.
Furthermore, Airbnb’s presence in Nashville is helping to address a serious issue. Nashville currently dishes out millions of taxpayer dollars to incentivize hotel building, due to its hotel shortage. In this climate, Nashville policymakers would be wise to embrace the opportunity Airbnb and other short-term rental platforms offer to their community. Instead, they limit this technology’s potential in order to satisfy the demands of loud special interests. And things may get worse, as the city has consistently considered placing a complete moratorium on issuing short-term rental permits.
Even if Nashville policymakers do not improve their short-term rental policy, the state of Tennessee can solve the problem. This year, Senator John Stevens and Rep. Cameron Sexton introduced a bill to create a state-wide regulatory system that resembles the sensible regulations passed late last year by the Memphis City Council. This preemption bill would prohibit local government from regulating homes that are open for short-term rentals differently than other homes. This makes sense, because if a local regulation is necessary to protect the public or minimize nuisances, then those regulations should apply to all housing — regardless if a home is rented out or not.
Arizona passed a similar, commonsense law that stops local governments from standing in the way of innovation when it comes to short-term rentals, and Florida is considering parallel legislation. A bill like this is likely necessary in Tennessee, since the state’s problems extend far beyond Nashville — Chattanooga, for example, inexplicably bans all short-term rentals in residential areas, as does Brentwood.
Before Nashville reinstates the 3 percent cap or an even worse regulation, state lawmakers should take this decision from a city council’s hands that have shown no respect for property rights. There is no reason for policymakers to be afraid to rein in cities that limit the economic opportunity that comes from technological progress.
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