by Ryan Poe | The Commercial Appeal
The Memphis City Council on Tuesday confirmed a decision to cut the “red tape” out of an ordinance creating taxes and room fees on the city’s fast-growing short-term property rental market.
Council members on Tuesday adopted the minutes of their previous meeting, solidifying the Oct. 18 approval of an ordinance allowing the city to begin charging short-term hosts a 3.5 percent tax and $2 room fee on March 1 — the same taxes and fees generally charged to hotels and motels.
The tax will generate an estimated $158,340 a year to pay off debt service on the Memphis Cook Convention Center and FedExForum, and $78,000 a year for “destination marketing” by the Memphis Convention & Visitors Bureau.
The city will negotiate agreements with third-party hosting platforms like Airbnb and VRBO, which will remit the taxes to the city, according to the ordinance.
Charles “Chooch” Pickard, an architect and short-term rental host who represented local short-term hosts in negotiating the ordinance, said approval of the ordinance without “onerous” regulations was a “win” for hosts.
“It makes it so much easier not to have all the red tape,” he said.
Led by council chairman Kemp Conrad, the council cut a permitting process and other regulations from the ordinance previously, leaving the taxes and fees in place but not requiring hosts to pay them directly.
Conrad took aim especially at a restriction on serving food, saying it wasn’t “Southern” to forbid short-term rental hosts from leaving cookies out for their guests.
Council members said Memphis’ ordinance should be clear enough to avoid a similar legal challenge as the one Nashville’s ordinance faces. Davidson County Circuit Judge Kelvin Jones recently ruled Nashville’s short-term rental ordinance was unconstitutionally vague, although metro lawmakers said they’ll rework the ordinance to clear up the language. Here’s what Jones said in his written order about the ordinance:
“The definitions of (short term rental properties like Airbnb), bed and breakfast, boarding house and hotel overlap, such that a single property could fall into one, several or all of the aforementioned property classifications. The court concludes that the definition of (short term rental properties) is unconstitutionally vague because a person of average intelligence would not be able to understand the differences and/or distinctions between (short term rental properties) and hotels, bed and breakfasts and boarding houses.”
Memphis’ ordinance defines short-term rental property as a building or room that is also or in a home, and explicitly exempts hotels, motels, boarding houses, bed-and-breakfasts.
Justin Owen, CEO of the Beacon Center of Tennessee, a libertarian group that supported the legal challenge to the Nashville ordinance, said in a statement that Memphis’ ordinance was “a great example of sensible and fair regulations.”
“Memphis took a straightforward, balanced approach to regulating short-term rental properties without infringing on the property rights of Memphis homeowners,” he said after the council’s vote. “We applaud the Memphis City Council for following the Constitution, and we hope cities like Nashville and Chattanooga will learn a lesson from the approach that Memphis took.”
But the lack of regulations in the ordinance is troubling to hotel and motel owners, who worry the short-term rental trend will have massive, long-term consequences for the local hospitality industry that will make the Uber- and Lyft-driven ride-share boom “pale in comparison,” said Memphis Convention and Visitors Bureau President Kevin Kane.
“You’re going to see apartments, hotels, everybody jump into this space,” he said.
Kane worried publicly to council members that the ordinance didn’t do enough to ensure the safety of short-term rental guests, and cautioned against swift adoption of the ordinance without regulations.
But Conrad said the council could revisit the ordinance if there are issues — a comment echoed by council member Berlin Boyd, who co-sponsored the ordinance with Edmund Ford Jr. and previously expressed concern with removing regulations.
“We can evolve as the platform evolves in Memphis,” Conrad said.
“I think it’s definitely something we can revisit,” Boyd added.