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Property Owner Concerned about Zoning, Taxation of Overnight Rental Cabins

Property Owner Concerned about Zoning, Taxation of Overnight Rental Cabins

We are trying to find a way to get a message to someone in the legislature that can change how overnight rental cabins are being classified as “single family dwellings” even though some have 16 bedrooms. They only pay the 25% tax basis instead of the 40% for commercial use. We are talking to our neighbors and friends, as this should be a concern for everyone, especially now that local officials are going to try to regulate (the little guys–my words) the AirBnB’s and Uber start up people. Lets get the developers and the out of state investors to pay their fair share first for a change. That would be really different wouldn’t it?

Enforcement of Zoning Ordinances for Overnight Rental Cabins

Almost exactly 13 years ago, 75 or more of our friends and neighbors stood together to oppose the rezoning of a lot from R-1 to R-2 in the Vickwood Hills Subdivision. This lot is directly across the street from our home on Gold Dust Dr. in Pigeon Forge. The purpose and intent of that request was for the expansion of the Arrowhead Ridge Resort, an overnight rental cabin resort, into our residential neighborhood. The developers of said Resort were planning to build multiple overnight rental cabins on that small piece of property. Do to an overwhelming number of local residents who showed up to voice their opinions, that request was removed and the lot is still vacant.

A new issue has cropped up and once again, it seems, we need to get the word out to everyone. We recently applied to have one of our long-term rental properties refinanced this spring. We didn’t think there would be an issue because we had this home built new 2004 and keep it maintained, but among other things the appraiser said:

“The design/layout of the subject is not typically found in the area. There are a lot of overnight rental cabins in the area with similar above and below grade square footage and room count but these are not good comparables for the subject. These are typically located in resort rental areas and sell significantly higher than long term rental properties.”

The new appraisal was significantly lower than an appraisal in 2011 and even lower than the current tax appraisal. We are referring to our situation in case you want to sell your property in the near future; you can have an idea for what your home might appraise. A mortgage broker is telling us that most appraisals are running between $85 and $115 a square foot, new homes being the $115 range. Although, we understand the numbers and how they were calculated, the above quote about “a lot of overnight rental cabins in the area” caused us to be concerned, and the main reason for this letter.

Recently on May 9, 2016, we became aware of an overnight rental company that had posted a plaque on the retainer wall at 3535 Progress Hills Blvd., a home in our subdivision, which read:

Cabins of the Smoky Mountains
MOUNTAIN VILLA
www.cabinsofthesmokymountains.com
866-34-smoky

We have thought that some people are renting their homes out to other family or friends, but this was the first time that we actually saw a plaque displayed on a home in our R-1 subdivision. We immediately notified city officials about the non-conforming use by this cabin rental company (overnight rentals are not allowed in R-1 zones of Pigeon Forge). The plaque was removed from the retainer wall, but two days later it was nailed back up.

Anyone can see the tax information and zoning for all real estate at: www.assessment.cot.tn.gov/RE_Assessment

Click on Sevier County; type in a name or street address; use the GIS to locate a property; click to see up to date information of the property; and the aerial image shows the property even better. From this information we found the new owner to be a Dustin Manns, of Warsaw, Ind.

We have spoken with several elected and non-elected city officials since May 9, 2016. The bottom line is:

This clearly is a violation of the City Ordinance for Pigeon Forge, but we have been told a citation cannot be issued to a property owner out of state. They said it’s too difficult to determine if a property is being rented over night (not enough man power). We suggested having the cabin rental agencies put the actual physical address of the rental property on their website then, we the local residents, can help them check on it. Rental companies just use a cutesy name, such as “Mountain Villa” for identification.

We were told that a certified letter was mailed to Mr. Manns and that he was not aware that he was violating any ordinances. He had been told that he could overnight rent this home. (Our question: by whom?) He reportedly stated that he is concerned about recouping his investment. That caused us to wonder about our investment, or yours as homeowners in a restricted R-1 zone.

Common sense should tell anyone that if someone is using a property for overnight business income it should be done in the proper city zoned areas and pay the applicable taxes associated with it. The overnight rental cabin industry has been booming for years and so has the difficulty in keeping up with the demand for all the infrastructure needed for it such as: new roads; water; sewer; trash collection; electricity; hospital; police and fire protection. Perhaps, these overnight rentals cabin should pay a higher tax rate than being classified as a “single family dwelling?”

Checking the “book on line” for “Mountain Villa” of the rental company website and one reads where they charge extra fees for cleaning and security damage. That seems reasonable, I think they all do. Reading on to see an another fee of $36 to $96 depending upon how many bedrooms in your cabin (stated requirement from the Sevier County Health Department) for the hot tub to be drained, cleaned and refilled before each new arrival. That too makes sense.

With all the overnight rental cabins in our area with hot tubs, that’s a lot of water and A LOT of money in extras fees. The biggest surprise came when we found out that all the cabin rentals no matter how many bedrooms they have are taxed at the residential tax basis of 25% (same as yours and mine–and we do try to conserve our water use). We asked how to get that changed and were told that property use designation is defined at the state level through the Tennessee Code Annotated, which basically calls everything a “single family dwelling” unless it has two or more kitchens like a duplex then it is taxed at the 40% or, the commercial use rate of appraised value.

Fair and proper taxation is a really big and important issue for all us, as is the constant demand for improvements to our infrastructure. Perhaps, we should ask our local and state representatives how a change could be effected to reflect a more reasonable tax schedule for these overnight rental cabins. We have to start somewhere. Big developers and out of state investors are not going to regulate themselves. We cannot match them in the money game but, we are voters and votes do count. We cannot allow them to use our R-1 residential zones in a non-conforming way with no way to cite them simply because they have an out of state address.

Call your local city, county official or state representative to voice your concerns or to ask questions.

UPDATE: I just received telephone calls from city officials, that the Gatlinburg cabin rental company will start being issued a citation daily. Thank them for good start to this problem. Our elected city and county officials are trying to get on top of this but, it is big problem and they need our encouragement and support.

Thanks for taking the time to read this letter.

Mary Morgan
Pigeon Forge, TN 37863

One comment

  1. Fair share? The local Hotel/Motel tax and business tax collected due to rental cabins is astronomical. These companies are subsidizing the city and county services you use at a great value to you, the single family homeowner. This revenue engine also keeps your property taxes really low.

    This isn’t the rental management companies problem to fix. Following the rules about where you are allowed to rent a cabin, I agree. But having the cabin companies funding more so you can keep paying less is simply an inequitable request.

    Be careful about your assumptions on how profitable the cabin owners and cabin companies are without really knowing the underlying math.