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Nathan and Eda Walldorf hope to jump through all the right hoops to get a North Chattanooga home on Baker Street rezoned to R-3 so they can use it as a short-term vacation rental — but they aren't there, yet. Planners gave a thumbs up to the rezoning, but City Council will have the final say in March.
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Nathan and Eda Walldorf hope to jump through all the right hoops to get a North Chattanooga home on Baker Street rezoned to R-3 so they can use it as a short-term vacation rental — but they aren't there, yet. Planners gave a thumbs up to the rezoning, but City Council will have the final say in March.
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Airbnb earnings in Hamilton County, Tenn.

>• Chattanooga: 24,600 guest arrivals in 2016 that earned hosts $2.5 million

• Lookout Mountain: 2,700 guest arrivals in 2016 that earned hosts $250,000

• Signal Mountain: 1,100 guest arrivals in 2016 that earned hosts $121,000

Source: Airbnb

Airbnb, the internet company that lets people rent out a room — or their entire house — said it provided 24,600 short-term rentals in Chattanooga last year, netting the roughly 300 hosts in the city $2.5 million.

The overwhelming majority of Chattanooga's hosts share their primary residences, Airbnb said, while 32 percent simply rent out an extra room in their homes. The average Chattanooga Airbnb host's annual earnings are $5,300, the company says, despite renting "sparingly" — less than one day a week on average.

But many — if not most — of Chattanooga's Airbnb rentals were likely illegal, according to Ethan Collier, chairman of the Chattanooga-Hamilton County Regional Planning Agency.

"I would be willing to bet a large number of them are not zoned correctly," Collier said.

That's because only two city zoning categories allow short-term vacation rentals: R-3, a high-density, multifamily category with lots of freedom some have called the "Wild West" of zoning, and R-4, which allows office and multifamily residential use.

People who seek R-3 zoning from the planning commission and Chattanooga City Council to use their property for short-term vacation rentals often get shot down, usually by the council, Collier said. That's because neighbors often oppose the rezoning, he said, even if they're OK with Airbnb.

"What we see is there's opposition to the rezoning," Collier said. "Because R-3 carries all kinds of [uses] that people don't want."

As a result, many Chattanoogans who offer short-term vacation rentals on Airbnb or similar websites, such as homeaway.com or vrbo.com, don't bother to seek rezoning. Instead, they just list their properties online. Collier said that's illegal but the city doesn't challenge Airbnb rentals unless someone complains.

"They don't actually do enforcement; it's complaint-driven," Collier said. "If you are illegally running an Airbnb, you're fine — as long as there are no complaints."

To rezone or not to rezone

Nathan and Eda Walldorf hope to jump through all the right hoops to get a home on Baker Street in North Chattanooga rezoned from R-2 to R-3 so they can use it as a short-term vacation rental. But they aren't there yet.

"We're just trying to do it the right way," said Nathan Walldorf, a broker for Herman Walldorf & Co. Realtors Inc., which he said was "another reason I'd like to do this thing right."

Eda Walldorf got approval from the Chattanooga-Hamilton County Regional Planning Commission at its Feb. 13 meeting to rezone the duplex to R-3. She told planning commissioners the property would be used only for overnight rentals, and if the couple ever want to sell the home, they will ask to have it rezoned back to R-2.

Still, a neighbor showed up to oppose the rezoning, saying he is concerned it could lead to apartments being built there.

"I think people when they hear 'R-3' in their neighborhood, they get scared," Nathan Walldorf said.

The City Council will decide in March whether to grant the rezoning.

Nathan Walldorf said some recommended the couple just do overnight rentals without rezoning.

"None of the neighbors were concerned at all about the Airbnb, they were concerned about the R-3," Nathan Walldorf said. "We thought about it, but it's a big investment to buy all the furniture and do all the things you have to do. And it could just be shut down in a minute."

Airbnb a way to make extra money

Another North Chattanooga couple, Tom and Gabrielle Sweets, have been Airbnb hosts for several years, even though their Oxford Road home is zoned R-1.

Tom Sweets said recently that it was news to him that the couple's home wasn't zoned for short-term rentals.

"I didn't know there was a zoning thing," said Sweets, who's an emergency room doctor. "We will set about trying to legalize ourselves, I guess."

The couple did register their operation with the city as a business called Home Sweets Home, he said.

The Sweets, who have three small children, are followers of financial guru Dave Ramsey, who advocates getting out of debt. They just went to Nashville to be on Ramsey's show.

"We just paid off all of my student loans, and we paid off our mortgage," Tom Sweets said.

As an emergency room doctor, Sweets said he makes a good income. Still, it's hard for most people to "move the needle" and find additional sources of income.

"Airbnb is a way that people who are middle class can make extra money," Tom Sweets said.

Airbnb allowed some places here

Short-term vacation rentals don't require rezoning in all of Hamilton County, or even all of Chattanooga.

Residents in the unincorporated parts of the county can just go through a special county permitting process for short-term vacation rentals.

"We have approved several permits now for Airbnb in the county," Collier said.

One advantage of a permit process, Collier said, is the permit can be revoked if the person violates the rules for a short-term vacation rental. In contrast, once the county or city rezones to R-3, he said, "we can't take the rezoning back."

The City Council in October turned down new rules for short-term vacation rentals.

However, short-term vacation rentals are allowed under the city's new form-based code, said Councilman Chris Anderson, who represents parts of St. Elmo, downtown and Alton Park. Form-based code, which is meant to focus more on aesthetics and less on property use, covers basically all of downtown and North Chattanooga.

Anderson and Councilman Chip Henderson, who represents parts of Hixson, Moccasin Bend and Lookout Valley, are working together on a proposed ordinance to allow permits for short-term vacation rentals. They can't introduce it until April, Anderson said, because six months have to pass since the previous short-term rental ordinance failed. That also will give Anderson and Henderson time to see what happens with several statewide short-term vacation rental regulations under consideration by the Tennessee General Assembly — which could render the whole local debate over Airbnb moot.

Chattanooga No. 3 for Airbnb

Chattanooga is now the No. 3 Airbnb home-sharing market in Tennessee, the company said, behind Nashville and Memphis. In 2016, Lookout Mountain, an exclusive residential enclave that's home to some of the area's wealthiest residents, emerged as the No. 9 Airbnb market in the state, while Signal Mountain came in at No. 18.

Dwight Montague, the town consultant for Lookout Mountain, Tenn., suspects Airbnb's numbers include other parts of Lookout Mountain, which stretches for miles and includes such touristy places as Mentone, Ala.

"I saw that report with some unbelievable number of Airbnbs on Lookout Mountain; that's not right," Montague said.

There's only a handful of short-term vacation rentals listed inside Lookout Mountain town limits, he said, and the town commission voted unanimously at its last meeting to ban such rentals. The town commission may modify that at its meeting in March, and go along with the county planning department's suggestion that short-term vacation rentals be allowed inside the town's small commercial district.

Airbnb has run afoul of rental regulations elsewhere, including San Francisco, which is home base for the company that was founded in 2008. San Francisco began to crack down on Airbnb rentals, spurred by neighbors' complaints. But then in 2014, Mayor Ed Lee signed the "Airbnb law" that allowed short-term vacation rentals.

Airbnb spokesman Benjamin Breit said every city has a different approach to regulating short-term vacation rentals. He said Airbnb has a "policy team" that helps cities craft regulations, and that it has reached out to Chattanooga.

"We make very clear to all of the hosts when they're joining the platform they need to know all the local rules and regulations," Breit said.

Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/MeetsForBusiness or on Twitter @meetforbusiness or 423-757-6651.

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