Short-Term Rental Regulations Across the South & Central US: 11-Market Investor Map

The South and Central US contains both America's most permissive and some of its most contested STR markets. The economic logic is consistent: where tourism is the dominant or significant local industry (Sevier County's Smokies, Hot Springs' national park, Branson's entertainment, PCB's beach economy), regulators take a light touch — typically requiring registration and tax remittance but not gating operation through scarce permits. Where tourism overlays a strong local housing economy (Nashville, Atlanta, Austin, Chicago, parts of New Orleans), regulators tier permits, cap counts, or zone-restrict to protect long-term housing supply.

The regulatory pattern map

Where the South + Central differs from the Northeast

Three structural differences shape investor strategy. First, state income tax: Tennessee and Texas have none, Florida has none, Oklahoma's is 4.75%, Missouri's is 4.95%, Arkansas's is 4.4% — all far below New York (10.9%) or Massachusetts (9% on income above $1M). Federal cost-seg deductions flow through without significant state offset in most South/Central markets. Second, tourism-economy political dynamics: many South markets economically depend on STR inventory; their regulatory direction is friendlier than Northeast metros where housing-supply constituencies dominate. Third, land cost: dramatically lower property prices in markets like Broken Bow, Branson, Hot Springs allow strong cash-on-cash returns at modest investment scales — entry points that don't exist in NYC, Boston, or the Hamptons.

Cost segregation strategy for the South + Central

Three cost-seg-relevant patterns hold across these markets:

1. No-state-income-tax markets (TN, TX, FL) deliver the cleanest cost-seg ROI. The full federal benefit (5/15-year reclassification + 100% bonus depreciation under OBBBA + STR loophole or REPS) flows to the operator without state-tax adjustment. A $500K Sevier County cabin with $150K in cost-seg deductions at 37% bracket = $55,500 federal year-one savings, period.
2. Cabin and beach properties typically have the highest personal-property ratios. Hot tubs (15-yr), game rooms (5-yr), decks (15-yr), pools (15-yr), premium furniture (5-yr) all reclassify aggressively. Studies on Smokies cabins, 30A beach houses, and PCB high-rise condos commonly clear 30-40% reclassification ratios — at the high end of the national distribution.
3. Restrictive markets concentrate the cost-seg benefit on permitted properties. NYC's LL18 reduced inventory but left permitted Class B hotel STR operations more profitable per unit. Same pattern in Nashville Type 2 commercial-zoned properties: the regulatory scarcity is priced into the property, but the federal tax stack remains identical. Don't avoid restricted markets categorically; just verify permit status and price the regulatory premium correctly.

Watchlist: where regulation is most likely to tighten next

The 2024-2026 trend is clear: even permissive South/Central markets are gradually building registration + tax-collection frameworks. Hochatown's incorporation, Walton County's 2023 ordinance, and Sevier County's ongoing supply discussions all point in this direction. Investors should expect: (1) more registration-and-tax frameworks emerging in markets that previously had none; (2) county-level rules layering on city-level rules; (3) HOA-level restrictions tightening in popular condo and master-planned communities. The high-permissiveness markets of the late-2010s won't disappear, but the regulatory burden is rising at the margin.

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