Amended short-term rental bill gets recommendation of state senate committee

Amended short-term rental bill gets recommendation of state senate committee

The Tennessee Senate Commerce and Labor Committee recommended passage of an amended short-term rental bill Tuesday afternoon that would continue to allow municipalities like Brentwood to ban short-term rental units. It would also let municipalities who do not currently have bans implement bans in the future.

As amended, Senate Bill 1086, would not, however, permit municipalities to disallow short-term rentals already in operation if those units were set up before a ban or restriction was put in place.

That provision imperils the ordinance passed by the Nashville Metro Council in January to phase out non-owner-occupied short-term rental units over the next few years.

The amended version of the bill is less restrictive than previous versions, which would have established a statewide prohibition on municipalities outlawing short-term rentals in their jurisdictions.

Sen. John Stevens, R-Huntingdon, is the sponsor of SB 1086. He explained the amended bill’s stance on existing short-term rentals in the state.

“Whatever the law was at the time the property began to be used as a short-term rental unit is the law that applies to the property going forward,” he said.

He framed this aspect of the bill in terms of property rights, saying that property owners should not be penalized for changes to the law that came after they made an investment in short-term rentals. Such owners’ properties would be deemed “grandfather units” under SB 1086.

“They have relied on the government’s promise to say, ‘Yes, you can do this,’ and then…the government has said, ‘No we changed our mind, you can’t operate anymore,’” Stevens said. “‘You haven’t done anything wrong, but we are going to change our mind and take away this property right that we granted you…and too bad for you and your losses and what you’ve put into your property.’”

Under the terms of SB 1086, a short-term rental can be considered a grandfather unit even if the property owner never received a permit from a municipality to operate. If, for instance, a municipality has nothing in its laws explicitly prohibiting short-term rentals, a person in that municipality who set up a short-term rental unit would be considered to have acted lawfully since they did not contravene any laws.

“If a municipality has not acted in this area, a short-term rental host could claim their grandfather status,” Stevens said.

Sen. Jack Johnson, R-Franklin, chairman of the committee, as well as Sen. Ken Yager, R-Kingston, both posed questions prompting Stevens to clearly iterate the bill’s effect on possible future local bans of short-term rentals. Would the bill prohibit local governments from one day deciding to ban short-term rentals in their jurisdictions?

“No, it does not prohibit them from banning,” Stevens said. “Every municipality in the state could enact an ordinance saying that short-term rental units are not allowed in this municipality, but any lawfully operating short-term rental unit, the grandfather would apply. They could continue, but there would be essentially no new rental units allowed in that municipality.”

The amended bill also includes language preserving the rights of municipalities, like Brentwood, with long-standing short-term rental bans to retain those bans.

The amended bill was not popular with everyone.

Several guests attended the committee meeting to express reservations about the bill.

One of those guests was Metro Council Member Larry Hagar, who sponsored the council bill to phase out non-owner-occupied short-term rentals in Nashville.

He said that bill had been passed to address a number of problems that these types of short-term rentals were causing Nashville residents.

For instance, he said that the city noticed that many non-owner-occupied units were being bought by people who did not live in Davidson County or even in Tennessee. That made it difficult for the city to enforce various complaints related to noise, nuisance and trash issues, among other things.

Hagar said he was not against business. He owns several long-term rental properties himself. He pointed out, though, that people who stay in his properties have to pass criminal background checks, something not required of all short-term rental guests.

To him, the issue gets at the very heart of what it means to live in a residential area.

“The reason that you buy into a neighborhood and live in a neighborhood is to know who your neighbors are,” he said. “When you have these types of short-term rentals that are non-owner-occupied you don’t know who is moving in next door to you.”

Tennessee Municipal League Deputy Director Chad Jenkins also raised some concerns about the bill. In particular, he worried about one portion that would declare that “short-term rental units are not commercial activity when conforming to a residential zone or use,” as Stevens had put it.

Jenkins said this represented a change in how short-term rental units are treated by state law. He worried this section could invite legal challenges to any local prohibition against short-term rentals.

Sen. Johnson responded to Jenkins that the bill was not meant to keep municipalities from being able to ban short-term rentals.

“It is the sponsor’s intent…to allow local governments prospectively to do anything they want on future short-term rentals,” he said. He said he did not understand how this language in the bill could stop municipalities from being able to forbid short-term rentals.

Jenkins also took issue with the part of the amended bill that would give grandfather status to short-term rentals that were set up in the absence of any law prohibiting them.

Jenkins said that just because a local government does not have an explicit ban on short-term rentals, should not be taken to mean that they are condoned by that government. Rather, the government may have simply thought it obvious that short-term rentals were commercial operations, and thus not allowed in residential areas.

“The crux of this issue is operating in absence of a local government action, whether that is going to now be called lawful or not,” he said. “That causes us great anxiety…and is where we kind of draw the line.”

The last to speak against the bill was Sen. Steven Dickerson, R-Nashville.

“I’ve probably used more profanity about this bill,” he admitted at the outset.

Dickerson asked several pointed questions about SB 1086, but his main objection was that he felt the bill prioritized corporate interests over those of Nashville residents.

“At its heart a lot of it was aimed at Nashville, and that’s what got me fired up,” he said. “Because it was in order to keep this market open for business interests that I think are contrary to the neighborhood interests and the constituents that I represent.”

He nevertheless thanked the committee for allowing him to come and speak.

In the end, the committee recommended the bill in a 7 to 2 vote. Sen. Mark Green, R-Clarksville, Sen. Dolores Gresham, R-Somerville, Sen. Jack Johnson, R-Franklin, Sen. Bill Ketron, R-Murfreesboro, Sen. Frank Niceley, R-Strawberry Plains, Sen. Kerry Roberts, R-Springfield and Sen. Ken Yager, R-Kingston, all voted in favor of the bill.

Sen. Reginald Tate, D-Memphis, and Sen. Bo Watson, R-Hixson, voted against recommending passage of the bill. 

The bill will now go to the Senate Calendar Committee to be scheduled for a vote on the Senate floor.

The House of Representatives counterpart to this bill, House Bill 1020, was passed in 2017. If SB 1086 passes the Senate, then the House will either have to vote to pass it as well, or a compromise bill will have to be drawn up.

HB 1020 focused on Nashville and would prohibit the city from banning short-term rentals.

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