Nashville STR Rules: Type 1 vs Type 2 Permits Explained

Nashville's Short-Term Rental ordinance, enacted in 2015 and tightened repeatedly since, draws the same line as Asheville and Charleston: owner-occupied STRs are permitted citywide; non-owner-occupied investor STRs are confined to specific commercial and mixed-use zones. Type 2 permits in residential zones (R6-A, RS5, etc.) have been off the table since the 2018 ordinance amendment that grandfathered existing Type 2 holders but stopped issuing new ones in residential zones. The result: Music Row, Gulch, Wedgewood-Houston, and other commercial-mixed properties trade at meaningful permit-value premiums.

Licensing & Registration

Nashville's Metro Codes Department issues both permit types. Type 1: $313/year + $50 inspection, requires owner primary-residence proof and on-site host either owner or an agent. Type 2 (where eligible by zone): same fees, no owner-occupancy requirement, but must comply with parking and density rules. All permits require liability insurance ($1M minimum), local emergency contact 24/7, and posting the permit number on every listing. Davidson County now uses Granicus's Host Compliance platform for active enforcement against unregistered listings.

Lodging & Occupancy Taxes

Tennessee sales tax 7% + Davidson County local options 2.25% = 9.25% combined sales tax. Davidson County hotel-occupancy tax 6%. Effective Nashville STR lodging tax: ~15.25%. Airbnb and Vrbo collect TN state sales tax + Davidson hotel-occupancy tax automatically. Operators booking off-platform must register with the TN Department of Revenue and Davidson County's Treasurer.

Penalties & Enforcement

Operating without an active STR permit: $50/day for Type 1 violations, $500/day for Type 2 violations in residential zones, escalating with offense count. Codes inspectors run regular sweeps and respond aggressively to neighbor complaints. Permit revocation typically follows three confirmed violations within 12 months. Davidson County's STR enforcement budget grew 30% in fiscal 2025.

Recent Changes

Nashville's 2024 council vote to require all STR permit applications to include HOA/condo association approval signaled tighter rules ahead. The 2025 push to extend the Type 2 residential-zone freeze to commercial zones in residential-character areas (East Nashville, parts of Germantown) was tabled but is on the agenda. Investors should treat the regulatory direction as restrictive.

Tax Strategy for Compliant Investors

Even within Nashville's regulatory framework, properly-licensed STR investors keep the federal tax stack intact. Cost segregation accelerates depreciation across 5-year personal property and 15-year land improvements, and the STR loophole can convert losses into active-income offsets for materially-participating owners. See cost segregation for Airbnb properties for the full playbook.

Frequently asked questions