Chattanooga City Council pausing permits for short-term vacation rentals not occupied by owner

Residents, investors battle over where, how much to allow short-term rentals

Staff file photo / Cleaning items are left out for guests at a Highland Park vacation rental.

Chattanooga real estate agent Sarah Brogdon bought a $220,000 condominium just built on Fagan Street off of Main Street two weeks ago with the intent of using the one-bedroom unit as an Airbnb or other short-term vacation rental home for those visiting Chattanooga.

Brogdon got her business license and applied for the required permit from the city for her first such short-term rentals. Before she could begin her newest business venture, however, the Chattanooga City Council voted Tuesday to immediately ban such non-owner-occupied short-term rentals - at least until January - while the city studies the issue.

After voting 7-2 to reject an amendment to provide another month for issuing permits to those like Brogdon who had already invested in such housing, the council unanimously approved a moratorium for the rest of the year on issuing any more permits for Airbnb or other short-term vacation rental units in houses where the owner doesn't live in the house.

"I just think it is unfair to retroactively limit how you can use your property," Brogdon said after Tuesday's council meeting.

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But council chair Chip Henderson of Lookout Valley said Wednesday he thinks a temporary ban is needed in granting more permits for absentee owners of short-term vacation rentals after council members kept hearing concerns about more homes in local neighborhoods in Highland Park, North Chattanooga and the Southside being turned into lodging facilities for visitors rather than being used to house residents and community members.

"There are concerns that these neighborhoods are changing because of the transient population that is occurring from these non-owner-occupied short-term vacation rentals," Henderson said in a phone interview Wednesday. "I just felt like we had reached a point of some urgency to address these concerns and to make sure we have the right approach."

Henderson and other council members want to study changes in the city's licensing and zoning rules for short-term vacation rentals this year to help promote better neighborhoods with affordable housing for local residents.

"I believe, and I think economics will prove out, that thriving mixed-use neighborhoods are economically resilient while neighborhoods that rely solely on tourist lodging are economically fragile," council member Jenny Hill of North Chattanooga said at Tuesday's council meeting. " We want to make sure that the people who live in Chattanooga can stay in Chattanooga."

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After the council approved the moratorium Tuesday night without much discussion, a half dozen Chattanoogans who operate short-term rental houses outside their own residences spoke against the new moratorium during the public comment session at the end of the council meeting.

"We always had community input in the past, but not this time," said Lisa Brown, a managing broker for Crye-Leike real estate who owns a couple of short-term vacation rentals, during Tuesday's meeting.

Brown said the current permitting process ensures short-term vacation rentals operate within city noise and other regulations, but she said too many short-term rentals are operating outside the city permitting process and are not paying the taxes due. Brown estimates more than 400 short-term vacation rentals in Chattanooga are not properly permitted. Brown said vacation websites identify 936 short-term vacation rental sites that are available in Chattanooga, but only 405 permits have been granted so far by the city.

"The problem seems to be in enforcing the rules you have," Brown said. "Last year, $3.5 million came into our city from Airbnb alone, not counting all of the money these visitors spend in our community. But it could be much more."

Brad Wardlaw, another real estate agent who operates short-term vacation rental homes, said the number of Airbnb and other short-term rentals is not great enough to affect the overall housing market in Chattanooga, but such lodging is important in promoting Chattanooga's $1.1 billion-a-year tourism industry.

"If we want to keep being called the Scenic City, we need to have houses where many people want to stay rather than hotels when they travel," Wardlaw said during Tuesday's meeting. "If we don't have these [short-term vacation rentals], we're going to lose out on conventions and tourists coming to our city."

Joe Riley, an Army veteran who served in Afghanistan, said he started a short-term vacation rental business while in the military to help provide short-term housing in military towns.

"When I got out of the Army, I came back to Chattanooga wanting to build my business here, and now I'm being told I can't do that," Riley told the council Tuesday night. "I'm not from California, I'm not from New York, and I'm not driving up property values."

Riley asked the city to continue to grant permits for local residents buying properties for short-term vacation rentals.

"The properties we have bought, we have tried to improve, and to my knowledge, we haven't had any complaints or issues with our houses," he said. "If there are complaints, there are plenty of ordinances out there already to address resident concerns. I don't think responsible operators should be penalized, and I don't think this is fair to make this change retroactive for those that already have business plans for their properties."

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But some neighborhood leaders applauded the city moratorium.

Emerson Burch, president of the Highland Park Neighborhood Association, said when houses become short-term rental units, the local neighborhood loses residents, voting power and a sense of community.

"As a traveler, I think that Airbnbs are a great thing, but as a resident, I think this type of housing can be a very challenging thing," Burch said in an interview Wednesday. "We have a block in Highland Park where there are three or four Airbnbs, and as a resident, you suddenly don't have neighbors anymore and you don't know who to expect at these houses."

Burch said the city needs to set better limits to prevent some areas from becoming entirely vacation home districts.

Ken Hays, a former real estate developer, River City Co. president and top aide to former Mayor Jon Kinsey, who ran unsuccessfully last year for the council, said the city needs to revise its short-term vacation rental policy to prevent some condominium complexes from becoming like hotels.

On Mitchell Avenue in the Fort Negley neighborhood, where Hays lives, four units in a nine-unit condo immediately became short-term vacation rentals, and several units in another 19-unit condo development are also being used for short-term rentals.

"We're not against Airbnbs by any means, but we think there ought to be some density restrictions to help protect neighborhoods from being inundated with too many of these short-term vacation rentals," Hays said in an interview Wednesday.

The city has regulated the operation of short-term vacation rentals, in one form or another, since 2009.

Under the existing city regulations for short-term vacation rentals, neighbors around any proposed Airbnb or similar development in a residential area are given notice and have 30 days to object to the permit and receive a review of the permit by the entire city council. So far, in all seven cases in which four or more such letters have been filed against a proposed short-term vacation rental, the council has voted to reject the permit.

Contact Dave Flessner at [email protected] or at 423-757-6340. Follow him on Twitter @dflessner1.