Ever since Nashville became Music City, USA more than a century ago, people from across the country (and the globe, hey, Keith Urban) have made pilgrimages to the Tennessee city to find fame and fortune.
More recently, the city has grown in popularity as a tourist destination––annual visitation has increased 45 percent in the last decade––and now much of what people seek is not fame or a record contract, but just a place to stay.
To meet that demand, an increasing number of Nashville homeowners and investors are using sites such as Airbnb, VRBO, and Homeaway to make their properties available to tourists as short-term rentals (defined as stays of less than 30 days). The uptick also may be due to the fact that Nashville has a robust workforce of people who hit the road on tour, and have realized their empty homes could be available for rent. A years-long hotel room shortage hasn't helped either.
These factors (and more) have made Nashville Airbnb’s top market in Tennessee, and the number of short-term rentals in the city now outpaces that of Portland, a similarly-sized city. But the proliferation of short-term rentals has brought with it a growing outcry over their impact on neighborhood conditions and housing affordability, prompting Nashville, like many cities across the country, to grapple with how to regulate them. The hotly contested topic has statewide implications.
In January, Nashville's Metro Council banned "non-owner occupied" short-term rentals in some areas, prohibiting landlords from listing single-family homes on Airbnb and the like in residential zones. People who offer the home they reside in as a short-term rental were not affected, and neither were non-owner occupied units in commercial areas. The measure brought Nashville in line with more than two dozen cities throughout the state that have similar laws, but Nashville’s was particularly contentious because it didn't grandfather in existing non-owner occupied short-term rentals, and because of the outsized impact it could have on the industry.
The proliferation of short-term rentals has brought with it a growing outcry over their impact on neighborhood conditions and housing affordability, prompting Nashville, like many cities across the country, to grapple with how to regulate them.
As the Nashville ban was being debated, Airbnb tried to kill the measure, launching a campaign with TV ads that ran so frequently the area began to feel like a swing state in a presidential election year. Now the company has turned its attention to the legislature, spending heavily to lobby for a Republican-led effort to overturn short-term rental bans. According to reports filed with the Tennessee Ethics Committee, between February 2017 and February 2018, Airbnb reported spending between $75,000 and $150,000 on lobbyist compensation.
"Property owners should have a right to use their property as they see fit. A lot of local governments are trying to ban that," says Rep. Cameron Sexton (R-Crossville), the House sponsor of the Short Term Rental Unit Act. Sexton says he and Sen. John Stevens (R-Huntingdon), the sponsor of a similar the bill in the Senate, worked to craft a plan to allow cities to regulate usage without outright bans.
Both bills passed their respective chambers and last week a conference committee agreed on the final legislation. In short, the House sought to do away with bans completely, while the Senate wanted to uphold partial bans like Nashville’s as long as existing permitted rentals are grandfathered in. An amendment to the Senate bill prevents owners of a grandfather permit to pass that along when they sell the property, so investors couldn’t capitalize on the permits. Ultimately, the Senate version prevailed.
As the Nashville ban was being debated, Airbnb tried to kill the measure, launching a campaign with TV ads that ran so frequently the area began to feel like a swing state in a presidential election year.
Nashville resident Grace Renshaw disagrees with Sexton’s property rights argument, noting that zoning and other regulations place limits on land use in a number of ways that haven’t drawn censure from the GOP. (Lately, Nashville’s codes department, for example, has been asking residents to remove Black Lives Matter yard signs and other signage that is too large.)
Renshaw owns one unit in a duplex that her daughter and a roommate rent from her long-term in the popular (and gentrifying) East Nashville neighborhood. Less than a year after she purchased it, the owner of the other side of the duplex converted it to a short-term rental and moved out of state.
"We have to negotiate and jointly pay for roof repair, landscaping, exterior painting, because we share a building. But all she had to do to convert her side to a short-term rental was write me a letter," Renshaw says, referring to city regulations that require neighbors to be notified that an owner has applied for a short-term rental permit. Renshaw worries that if Nashville’s ban is overturned, it eventually will be hard for her to sell her side of the duplex, believing that people don't want to share a roof with a tourist crash-pad.
Nashville’s opponents of short-term rentals often say that having them in residential areas changes the nature of neighborhoods, making them more congested, increasing noise and traffic, and making it harder to know one's neighbors. Many argue that operating short-term rentals is akin to running a commercial hotel in a residential area. Supporters say that Airbnb-users specifically prefer a neighborhood experience over a traditional hotel and thus aren't trying to change the nature of neighborhoods.
Such concerns are fueled, in part, by Nashville’s recent status as one of the top bachelorette-party destinations in the country, now second only to Las Vegas. The groups tend to stay (and drink) in rentals booked on sites like Airbnb. Anecdotally, some say these party houses are part of the problem. In East Nashville, residents complain about graphic accessories, like an inflatable sex doll and penis balloons, visibly decorating party houses that emit a steady stream of squeals and "woo hoos!" on the weekends.
"We do not want the wild, wild west,” says Megan McCrea, president of the Nashville Area Short-Term Rental Association (NASTRA). “We don't think no regulation is the right move. We want balanced and fair regulation." The ban on non-owner occupied short-term rentals isn’t the answer in her view, in part because there's no clear evidence that there are more party-house type problems in properties owned by investors versus primary residences that are rented while the owner is away.
Other trade associations agree. The position of Travel Technology Association and its members (companies such as Airbnb) is that there are already laws in place, like noise ordinances, to deal with problems that crop up from a party house.
Another argument against non-owner occupied short-term rentals posits that as investors turn homes into Airbnb accommodations, the city’s affordable housing stock declines. As the city has grown, renters have gotten "slammed" when it comes to housing costs, says Austin Sauerbrei of HomesForAll Nashville. Since 2011, he says, wages have increased in Nashville 14 percent, but rents have increased 60 percent.
"For anyone making working-class wages, it is very difficult,” Sauerbrei explains. “These low-wage workers are the folks who are building the city that other people want to visit. They are cleaning the hotels and doing construction and have been here for generations and now they can't afford to be here."
Sauerbrei adds that because Nashville's public transportation options are limited, workers who have been pushed to outlying counties now spend significant time and gas money getting to their jobs in the urban core.
“These low-wage workers are the folks who are building the city that other people want to visit. They are cleaning the hotels and doing construction and have been here for generations and now they can't afford to be here."
Matt Kiessling, of the Travel Technology Association, doesn’t think there’s a connection between the affordable housing issue and short-term rentals. "I think sometimes short-term rentals are getting scapegoated. We are seeing people move back into cities and affordable housing is an important conversation that we need to have, but we have not seen evidence that it is related to short-term rentals."
However, a study published in January by the School of Urban Planning at McGill University showed just that. Focusing on New York City, researchers found that between 2014 and 2017, Airbnb removed between 7,000 and 13,500 housing units from the city’s long-term rental market, leading to a $380 rent increase for the median New York tenant. The study also noted that the impact was racialized. In New York’s predominantly Black neighborhoods, Airbnb hosts are majority white, and yet Black residents are six times more likely to be affected by housing loss and neighborhood disruption.
In Nashville, where the average monthly rent increased by more than 50 percent between 2011 and 2016, the Metro Council established The Barnes Housing Trust Fund to make grants to nonprofit affordable housing developers. According to the fund’s website, it has invested $27 million (a portion of which comes from the taxes that short-term rentals pay) and leveraged more in federal and private funding to produce 1,300 housing units. But a 2017 report from the mayor’s office acknowledged that the city would need to create a total of 31,000 affordable housing units by 2025 in order to eliminate the shortage.
Sauerbrei’s group, HomesForAll Nashville, is part of a coalition calling for the city to dedicate $775 million to affordable housing, establish a citywide land trust and a municipal land bank, and issue a quarterly scorecard counting the number of affordable housing units lost, gained, and saved.
Meanwhile, the partial ban on non-owner occupied short-term rentals could return some affordable housing to the long-term rental market, but likely not enough to make a big impact. Between September 2017 and March 2018, a contractor for Nashville’s codes department identified 4,995 short-term rentals in the city. It’s unclear how many of those are subject to the new ban.
While affordable housing is an issue related to short-term rentals nationwide, Nashville has its own peculiarities, including a hotel room shortage that has dramatically increasing hotel prices. While a number of high-end hotels have opened in recent years, and another 14,390 rooms are in the pipeline, prices are still inflated and rooms can be hard to come by.
In addition, the city of Nashville made mistakes by not enforcing its early short-term rental regulations and then changing those regulations, which created confusion. That made the city vulnerable to political interference from the state. "There was a lot of nipping and tucking," Kiessling says of Nashville's early problems. "There has to be an ordinance and there has to be enforcement. Those are two things that are key to making it work."
In 2017, the Nashville’s Codes Department contracted with Host Compliance, a San Francisco-based company that works with more than 110 cities on enforcing their short-term rental regulations, for a cost of $195,000 annually for five years. Host Compliance reviews complaints that locals submit through a 24-hour hotline. The majority are reporting unlicensed rentals and permit violations, as well as noise, parking, and trash.
Host Compliance founder and CEO Ulrik Binzer says the firm gets more anonymous tips about illegal operators in Nashville than it does in any other city, even larger cities. This may be in part because of Nashville's hotel shortage, as well as the location of many of the short-term rentals (in Vegas, partiers near the strip aren't bothering anyone in a residential neighborhood). Also, he says, "The debate has been going on so long and people are fed up. They want to help the city figure out and report issues."
But many people think the onus shouldn’t fall on the city and its residents alone. One of the concerns about websites such as Airbnb is that they don't require a property to be permitted before listing on the site. (There is small print suggesting property owners check local regulations.) Some believe if Airbnb would take a more proactive stance by only listing legal rentals, some of the tension would dissipate. Supporters of the short-term rental industry say sites like Airbnb are simply advertising outlets, and enforcement isn't their jurisdiction.
Host Compliance gets more anonymous tips about illegal operators in Nashville than it does in any other city, even larger cities.
Binzer doesn’t buy it. He points out that there are business models where such checks and balances do exist. "The airlines do not have a choice about what information they share with TSA," he says. "For some reason, this industry can get away with saying there is no way to verify compliance. But there is. That's just a business decision. They could write the terms and conditions differently."
While all of these factors make the Nashville short-term rental controversy unique, Binzer says the situation also underscores what he's seen elsewhere: "Cities are different. You can't come up with…solutions that work for every city."