After an update to the city's rules for short-term vacation rentals failed in front of the Chattanooga City Council on Tuesday, officials are poised to take another crack at revising the city's regulations.
Chris Anderson, Mayor Tim Kelly's senior adviser for legislative initiatives, said by phone that the city will be sending a proposal to the Chattanooga-Hamilton County Regional Planning Commission in April that would be similar to a version presented to council members last November.
"There are some changes in our new legislation that come directly from council meetings and discussions on the issue," Anderson said. "We believe this framework can get support from most, if not all, council members."
Under the new proposal, Anderson said, absentee rentals -- properties where the owner doesn't live onsite -- would only be permitted in commercial zones that allow hotels.
Currently, vacation rentals in Chattanooga are limited to a designated zone that predominantly includes the districts represented by Councilman Chip Henderson, of Lookout Valley; Councilwoman Jenny Hill, of North Chattanooga; Councilwoman Demetrus Coonrod, of Eastdale; Councilwoman Raquetta Dotley, of East Lake; and Councilwoman Marvene Noel, of Orchard Knob.
Under the revised rules, that zone would no longer define the boundary for absentee rentals, but they would be limited to those specific commercial areas citywide.
"Short-term vacation rentals, especially absentees, are businesses that are operated for profit," Anderson said. "It makes sense that they should go where businesses that are operated for profit are located, and it's not logical to say you can allow a hotel on Gunbarrel Road or Highway 153 in Hixson but not a lower-impact short-term vacation rental."
Anderson said this would allow the city's short-term vacation rental market to have space to grow without causing issues for existing neighborhoods.
Homestay rentals -- units where the owner does live onsite -- would be allowed in any residential district within the overlay, Anderson said. They would also be permitted citywide in the same commercial areas as absentee rentals.
OTHER REFINEMENTS
The version that council members shot down Tuesday included increases in the permit and renewal fees for short-term vacation rentals. A portion of those fees would have flowed into the city's new affordable housing trust fund.
Anderson said he expects the new proposal will continue to carve out funding that would be reserved for affordable housing. Currently, the city plans to charge an added $12-$15 per night fee similar to those for cleaning or by online marketplaces like Airbnb or Vrbo.
The original ordinance also included the creation of an appointed board that would hear appeals, approve permits and oversee the city's proposed density cap. There won't be a need for that under the proposed revisions, Anderson said, because the bill doesn't allow absentee rentals in neighborhoods.
(READ MORE: Property owners form group to oppose Chattanooga's proposed vacation rental rules)
REACHING CONSENSUS
The original ordinance failed on final reading Tuesday after no council members made a motion on the item. Henderson said by phone that officials had grown concerned about the size of a buffer proposed for absentee rentals in single-family detached zoning districts.
At the suggestion of Noel, council members passed an amendment Feb. 28 in a 5-4 vote that would prohibit new absentee rentals in those areas if they're within 1,000 feet of the nearest absentee permit holder. The buffer had originally been 500 feet.
Council Chairman Darrin Ledford, of East Brainerd, said by phone that he voted against the ordinance Feb. 28 because of the expanded 1,000-foot buffer.
"It wasn't vetted, and I needed more information before I supported such a radical amendment," Ledford said.
Anderson said the administration did voice its concerns with legal issues associated with the final proposal the council reviewed Tuesday, including the new 1,000-foot buffer zone.
"I'm hesitant to say more about that because I assume the industry will file a lawsuit no matter what is passed," he said.
Short-term vacation rental owners have formed a group called Greater Chattanooga Coalition for Private Property Rights to oppose more restrictive rules. They have raised approximately $25,000 for legal fees.
Ledford is more amenable to the proposal going to the planning commission in April, which he said seems to take into account comments made by council members. Although it's not perfect, he said, the new approach is a more reasonable compromise.
Absentee short-term vacation rentals should be regulated as businesses, he said, and should not be allowed inside residential areas. Ledford's district is outside the city's designated zone, meaning homestay rentals would not be permitted in the neighborhoods he represents under the new proposal.
Reached by phone, Noel said she's had consistent issues with the ordinance that failed Tuesday.
"We were going to continue to be saturated with short-term vacation rentals, and my constituents had said, 'No, we don't want any more,'" she said. "They've done nothing about the ones that are here illegally. They have not enforced ... the guidelines they have in place."
The expanded 1,000-foot buffer was designed to act as a safeguard for her district in the event the ordinance passed, she said. The version going to the planning commission "sounds 100% better," Noel said.
"There's things in it I'm OK with," Henderson said of the changes. "There are things I'm not OK with."
Henderson singled out the proposed nightly fee as a potential issue, which he said would make rentals more expensive and could cut into profits. He would also prefer to see homestay rentals permitted in residential areas citywide rather than just the designated area.
LOOKING AHEAD
The city temporarily stopped issuing new permits for absentee short-term vacation rentals in April, a moratorium the municipality ultimately extended until July of this year. Anderson expects the new ordinance will proceed to the City Council in May.
"We don't want to see any further extensions to the moratorium," Anderson said. "We think getting it to council in May will still allow us to have new rules in place before the moratorium expires in July."
Even though officials haven't yet agreed on a new set of regulations, the city is continuing to move forward with stronger enforcement measures. Anderson said the council has already passed a standalone ordinance that allows Chattanooga to hire an administrative hearing officer, which will enable the city to charge a maximum $500 per day for violations rather than $50 per day. In June of last year, about 496 of the city's 936 vacation rentals weren't properly permitted.
Absentee rentals are more prevalent in Chattanooga than homestays. As of June 2022, there were 320 permitted absentees versus 120 homestays in the city.
Councilwoman Jenny Hill, of North Chattanooga, co-sponsored the bill that failed earlier this week. She confirmed Friday that she operates a homestay rental in the city, which she said was built out to help pay for college expenses.
"The state and the city have always considered homestay as a separate issue from absentee," she said by text. "They have very different impacts on communities. Those impacts have been discussed at great length at stakeholder conversations over the last several months. I've been transparent about that from day one."
Contact David Floyd at dfloyd@timesfreepress.com or 423-757-6249.