Knoxville ADUs may be rented long-term only when the owner occupies the other unit on the property. Short-term rentals (under 30 days) require a Short-Term Rental Unit (STRU) permit under Knoxville City Code Chapter 16, Article XV. The ordinance distinguishes Type 1 (Owner-Occupied) from Type 2 (Non-Owner-Occupied) permits, with Type 2 restricted in residential districts. Tennessee's STR Act (TCA 13-7-602) preempts cities from banning pre-2018 STRs.
Knoxville's Short-Term Rental Unit ordinance under City Code Chapter 16, Article XV - effective January 2018 - regulates rentals of less than 30 days at a time. The ordinance distinguishes Type 1 (Owner-Occupied) permits, available citywide, from Type 2 (Non-Owner-Occupied) permits, which are restricted in residential RN zones and primarily permitted in mixed-use and commercial districts. An ADU used as a short-term rental in a residential zone must be operated as a Type 1, with the owner occupying either the main house or the ADU. Long-term leases of 30 days or more are permitted under Recode Article 10 as long as the owner-occupancy rule is met. STRU applicants must submit proof of ownership, residency documentation, off-street parking confirmation, and pay annual permit fees. Tennessee Code Annotated 13-7-602 et seq. (the Short-Term Rental Unit Act, effective 2019) preempts cities from banning STRs that lawfully operated before the city's first STR ordinance, but allows registration, taxation, and reasonable regulation. Knoxville hotel/motel tax (3%) and Tennessee state sales tax (9.25% combined state and local) apply to STR revenue.
Operating an unpermitted STR in Knoxville carries citations under City Code Chapter 16, Article XV, with daily fines and required cessation. Platforms (Airbnb, VRBO) may delist properties for permit non-compliance. Renting both ADU units to non-owners separately from the principal dwelling violates Recode Article 10. Tennessee Department of Revenue separately enforces sales and occupancy tax obligations.
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