Louisville, Kentucky Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Louisville, Kentucky?

Louisville's short-term rental landscape has evolved significantly in recent years, with platforms like Airbnb and VRBO transforming how visitors experience the city. As the market grows, so too have the regulations designed to balance the interests of hosts, residents, and neighborhoods. Let's dive into what you need to know about operating a short-term rental in Derby City.

Starting a Short-Term Rental Business in Louisville, Kentucky

If you're looking to enter the short-term rental market in Louisville, you'll need to navigate several key requirements before listing your property.

Registration and Licensing

All short-term rental hosts in Louisville must register with the city. This involves a three-step process: checking your property's eligibility based on zoning, obtaining a tax reporting number, and applying for a registration number. The registration application currently costs $250, up from the previous $100 fee.

Owner Occupancy Requirements

One of the most significant regulations implemented in recent years requires prospective hosts to live on their property for at least six months before applying for STR registration. This rule aims to prevent investors from buying up residential properties solely for short-term rental purposes, helping to preserve neighborhood character.

Zoning Considerations

Your property must comply with local zoning regulations. Louisville has various residential zoning districts, including single-family (R-R, R-E, R-1, R-2, R-3, and R-4) and multi-family zones (R-5, R-5A, R-5B, and R-6). Depending on your property's zoning designation, you may need a Conditional Use Permit, especially for non-owner-occupied rentals.

Density Restrictions

Louisville enforces a 600-foot rule, meaning non-owner-occupied short-term rentals must be located at least 600 feet away from each other in residential areas. This prevents over-saturation of neighborhoods with rental properties. Previously, hosts could apply for waivers to this requirement, but recent amendments have tightened these exceptions.

Occupancy Limits

The city restricts short-term rentals to a maximum of 12 adult occupants. This helps prevent party houses and excessive noise that might disturb neighbors.

Tax Obligations

Hosts need to register with the Louisville Metro Revenue Commission and collect transient room tax from guests. You'll need to file monthly tax returns, even if platforms like Airbnb collect and remit taxes on your behalf. Additionally, you must register with the Kentucky Department of Revenue for state lodging taxes.

Safety Standards

Your property must meet building and safety standards established by the Louisville Metro Code. This typically includes functional smoke detectors, carbon monoxide detectors, and fire extinguishers.

Enforcement and Penalties

Louisville takes compliance seriously, with escalating fines for violations: $125 for a first offense, $250 for a second offense, $500 for a third offense, and $1,000 for any additional offenses. Each day of non-compliance may be considered a separate offense.

The city has also prohibited new registrations for properties that have received citations for unlawful short-term rental activity within the past 12 months. The planning director can revoke permits for properties with two or more substantiated civil or criminal complaints in a year.

For hosts considering entering the Louisville short-term rental market, staying informed about current regulations is essential. The landscape continues to change as the city refines its approach to managing this growing industry while preserving neighborhood integrity and housing affordability.

Short-Term Rental Licensing Requirement in Louisville, Kentucky

Operating a short-term rental in Louisville requires proper licensing and registration with the city. This process ensures that all rental properties meet safety standards and comply with local regulations designed to maintain neighborhood integrity.

Registration Process

All hosts offering short-term stays (less than 30 nights) in Louisville must register with the city through a three-step process:

• Check your property's eligibility based on zoning classification
• Obtain a tax reporting number
• Apply for a short-term rental registration number

Application Submission Options

You can submit your application through several channels:

1. Online through the Louisville Planning and Design Department website
2. In person at 444 South 5th Street, Suite 300, Louisville, KY 40202
3. By mail to the same address

Required Documentation

When applying, you'll need to provide:

1. Completed application form

2. Proof of primary residency (for owner-occupied rentals)

3. At least two supporting documents such as:

1. Kentucky-issued driver's license
2. Voter registration
3. Utility bills
4. Motor vehicle registration
5. Federal or state tax returns

4. Zoning classification number (can be found on the city's website)

5. Property safety information

Fees and Costs

The current application fee is $250, which represents an increase from the previous $100 fee. This fee must be paid at the time of application submission.

Conditional Use Permits

Depending on your property's zoning classification, you may also need to obtain a Conditional Use Permit from the Louisville Metro Board of Zoning Adjustment. This is particularly important for:

1. Non-owner-occupied rentals
2. Properties in certain residential zones
3. Secondary residences like vacation homes

Processing Time

While the city doesn't specify an exact timeframe, the processing of applications typically takes several weeks, depending on the completeness of your application and current processing volumes.

Registration Renewal

Short-term rental registrations must be renewed annually to remain valid. Maintaining an active registration is crucial for continued operation.

Penalties for Non-Compliance

Operating without proper registration can result in significant penalties:

1. First offense: $125 fine
2. Second offense: $250 fine
3. Third offense: $500 fine
4. Additional offenses: $1,000 fine per violation

Each day of non-compliance may be considered a separate offense, potentially resulting in substantial cumulative fines. Additionally, properties that have received citations for unlawful short-term rental activity within the past 12 months are prohibited from obtaining new registrations.

The city's planning director has the authority to revoke permits for properties with two or more substantiated civil or criminal complaints within a one-year period, further emphasizing the importance of operating within the established regulations.

Hosts must display their registration number on all listings and advertisements, and the city can request that platforms like Airbnb and Vrbo remove non-compliant listings.

Required Documents for Louisville, Kentucky Short-Term Rentals

Navigating the documentation requirements for short-term rentals in Louisville is a crucial step in ensuring your property remains compliant with local regulations. Here's a comprehensive list of the documents you'll need to gather before applying for your short-term rental registration.

Proof of Primary Residency

For owner-occupied rentals, you must provide at least two documents that verify your primary residency at the property. Acceptable documents include:

1. Kentucky-issued driver's license or identification card
2. Voter registration record
3. Utility bills in your name (dated within the last 60 days)
4. Motor vehicle registration
5. Federal or state tax returns (with personal information redacted)

These documents help the city verify that you actually live at the property for at least six months of the year, which is a key requirement for many residential zones.

Zoning Classification Documentation

You'll need to provide your property's zoning classification number, which can be found through the Louisville Metro Planning and Design Department. This information helps determine whether your property is eligible for short-term rental use and what additional permits might be required.

Conditional Use Permit (if applicable)

If your property is a non-owner-occupied residential property, you'll need to obtain a Conditional Use Permit before you can register as a short-term rental. This involves a separate application process through the Louisville Metro Board of Zoning Adjustment.

Louisville Metro Revenue Commission Registration

Before completing your short-term rental registration, you must register with the Louisville Metro Revenue Commission. This provides you with an identification number for filing monthly Transient Room Tax (TRIM) forms. If you already report self-employment tax in Louisville, you may already have this number.

Proof of Insurance

You'll need to provide documentation showing that your property is adequately insured for short-term rental use. Standard homeowner's insurance often doesn't cover commercial activities, so you may need to obtain specialized short-term rental insurance or a rider to your existing policy.

Property Safety Information

Documentation confirming your property meets safety standards, including:

1. Functional smoke detectors in all sleeping areas
2. Carbon monoxide detectors (if the property has gas appliances or an attached garage)
3. Fire extinguishers in accessible locations
4. Emergency exit plans

Property Management Plan

If you don't live locally or will be using a property management company, you'll need to provide contact information for the person responsible for addressing any issues that arise during guest stays.

Short-Term Rental Registration Application Form

The completed application form can be obtained from the Louisville Planning and Design Department's website or in person at their office. This form requires detailed information about your property, including square footage, number of bedrooms, maximum occupancy, and parking availability.

Payment Documentation

Proof of payment for the $250 registration fee, typically in the form of a check made payable to the Louisville Metro Government or a receipt if paid online.

Gathering these documents before beginning the application process will streamline your registration and help ensure that your short-term rental operation starts on the right foot with full compliance with Louisville's regulations.

Louisville, Kentucky Short-Term Rental Taxes

Operating a short-term rental in Louisville comes with specific tax obligations that hosts must understand and comply with to avoid penalties. Here's a comprehensive breakdown of the tax requirements for short-term rental operators in the city.

Transient Room Tax

Louisville Metro Government imposes a Transient Room Tax of 8.5% on short-term rentals. This tax applies to the rent charged for any suite, room, lodging, or accommodation rented for less than 30 consecutive days. The 8.5% is split between:

1. 6% going to the state of Kentucky
2. 2.5% going to Louisville Metro

This tax must be collected from guests and remitted to the appropriate tax authorities. Even if platforms like Airbnb collect and remit these taxes on your behalf, you're still responsible for ensuring compliance and may need to file returns.

Kentucky State Sales Tax

In addition to the transient room tax, Kentucky imposes a 6% state sales tax on gross receipts from short-term accommodations. This tax applies to the total amount charged to guests, including:

1. The nightly rate
2. Cleaning fees
3. Pet fees
4. Extra person charges
5. Any other required fees for using the accommodation

Kentucky Statewide Transient Room Tax

Kentucky also levies a 1% statewide transient room tax on all short-term rental accommodations. This tax applies to stays of less than 30 consecutive days and is assessed on the total rental amount.

Tax Collection by Platforms

Both Airbnb and VRBO currently collect and remit the 1% statewide transient room tax and the 6% Kentucky state sales tax for participating hosts. Since January 1, 2023, these platforms are also required to report and pay local transient room taxes based on total charges for rentals, including service fees.

If you operate exclusively through these platforms, you may not need to maintain a separate state Transient Room Tax account, but you should verify this with local tax authorities as requirements can vary.

Tax Reporting Requirements

Even if platforms collect taxes on your behalf, hosts must register with:

• The Louisville Metro Revenue Commission for local taxes
• The Kentucky Department of Revenue for state taxes

Monthly tax returns may need to be filed even if the platforms are remitting taxes for you, so it's essential to understand your specific filing obligations.

Possible Write-offs and Deductions

Short-term rental operators in Louisville can potentially reduce their tax burden through various deductions, including:

• Mortgage interest and property taxes
• Insurance premiums for your rental property
• Utilities (electricity, water, gas, internet)
• Cleaning and maintenance costs
• Furnishings and supplies
• Depreciation of the property and assets
• Marketing and advertising expenses
• Professional fees (accounting, legal, property management)
• Travel expenses related to managing the property
• Home office expenses (if applicable)
• Property management software subscriptions
• Guest amenities

To maximize these deductions, maintain detailed records of all expenses related to your short-term rental business. Consider working with a tax professional familiar with Louisville's tax laws to ensure you're claiming all eligible deductions while remaining compliant with local, state, and federal tax regulations.

Remember that tax laws can change, so staying informed about current regulations is crucial for operating a successful and compliant short-term rental business in Louisville.

Kentucky Wide Short-Term Rental Rules

The landscape of short-term rental regulations in Kentucky has undergone significant changes recently, with new legislation that directly impacts hosts in Louisville and across the state.

Statewide Tax Requirements

All short-term rental operators in Kentucky must comply with state tax obligations, including:

• 1% statewide transient room tax on all short-term accommodations
• 6% Kentucky state sales tax on gross receipts from short-term rentals

These taxes apply to the total amount charged to guests, including nightly rates, cleaning fees, and other charges. While platforms like Airbnb and VRBO typically collect and remit these taxes, hosts remain ultimately responsible for compliance.

Proposed Legislation: Senate Bill 110 (2025)

A bill under consideration, Senate Bill 110, would further restrict local governments' ability to regulate short-term rentals. The bill proposes to:

• Prohibit requirements for conditional use permits for short-term rentals
• Ban density-based restrictions, including minimum distance requirements between rentals
• Prevent caps on the percentage of housing units that can be used as short-term rentals

While this bill is still in the legislative process, it represents the ongoing trend toward state preemption of local short-term rental regulations.

The regulatory environment for short-term rentals in Kentucky continues to evolve, with tension between state-level efforts to standardize rules and local governments' desire to address community-specific concerns. Louisville hosts should stay informed about these developments, as the passage of pending legislation could significantly alter the current regulatory landscape.

Does Louisville, Kentucky Strictly Enforce STR Rules?

Louisville has established itself as a city that takes short-term rental regulations seriously, with enforcement mechanisms that have real teeth. The city has implemented a structured system of escalating penalties for non-compliance, starting at $125 for first offenses and climbing to $1,000 for repeat violations, with each day potentially counting as a separate offense.

Louisville's enforcement strategy is notably more stringent than many comparable cities. The planning director has the authority to revoke permits for properties that receive two or more substantiated civil or criminal complaints within a single year. Additionally, properties that have received citations for unlawful short-term rental activity are prohibited from obtaining new registrations for at least 12 months.

Compared to other cities, Louisville falls on the more restrictive end of the spectrum. The recent tightening of regulations-including the six-month owner-occupancy requirement before applying for STR registration, the increased registration fee from $100 to $250, and the strict 600-foot rule between non-owner-occupied rentals-signals that Louisville prioritizes neighborhood preservation over short-term rental expansion.

The city's approach stands in contrast to more permissive markets like Nashville or Savannah, where regulations tend to be less restrictive or enforcement more lenient. Louisville's regulations specifically target investor activity, with Councilman Ben Reno-Weber explicitly stating that the rules aim to "protect neighbors from investors who are coming in and buying up properties."

The consensus among online communities is clear, Louisville is not particularly Airbnb-friendly compared to other markets, and the city's enforcement mechanisms have effectively limited the proliferation of investor-owned short-term rentals in residential neighborhoods. While some hosts continue to operate successfully within the rules, particularly those who live in their properties, the days of easily converting residential properties into full-time Airbnbs in Louisville appear to be over.

How to Start a Short-Term Rental Business in Louisville, Kentucky

Starting a short-term rental business in Louisville requires careful planning and adherence to local regulations. Follow these steps to establish your STR business in Derby City:

Research Louisville's STR Market

Begin by thoroughly researching Louisville's short-term rental landscape. Identify high-demand neighborhoods like the Highlands, Phoenix Hill, and Butchertown. Study seasonal trends, especially around major events like the Kentucky Derby, and analyze competitor pricing strategies. Understanding the local market will help you determine if your investment can generate sufficient returns to justify the costs and regulatory hurdles.

Check Property Eligibility

Verify your property's zoning classification through the Louisville Planning and Design Department. Different zones have different requirements, and some areas may be more restrictive than others. Remember that Louisville requires the property to be your primary residence for at least six months before you can register it as a short-term rental, which significantly impacts investment strategies.

Obtain a Tax Reporting Number

Register with the Louisville Metro Revenue Commission to receive a tax identification number for filing monthly Transient Room Tax (TRIM) forms. You'll also need to register with the Kentucky Department of Revenue for state lodging taxes. Even if platforms like Airbnb collect taxes on your behalf, you remain responsible for proper tax compliance.

Apply for STR Registration

Submit your short-term rental registration application to the Louisville Planning and Design Department, along with the $250 fee. You can apply online, in person, or by mail. Include proof of primary residency (at least two supporting documents such as a driver's license, voter registration, or utility bills) and your property's zoning classification number.

Apply for a Conditional Use Permit (If Necessary)

If your property is non-owner occupied or a vacation/second home, you'll need to apply for a Conditional Use Permit through the Louisville Metro Board of Zoning Adjustment. This involves additional fees and a more complex approval process, including neighborhood notifications and possibly a public hearing.

Ensure Compliance with Safety Standards

Prepare your property to meet all safety requirements, including functional smoke detectors in all sleeping areas, carbon monoxide detectors (if you have gas appliances or an attached garage), fire extinguishers, and emergency exit plans. Document these safety features for your registration application.

Secure Proper Insurance Coverage

Standard homeowner's insurance typically doesn't cover commercial activities like short-term rentals. Obtain specialized short-term rental insurance or add a rider to your existing policy. This protects you against property damage, liability claims, and potential loss of income.

Create a Property Management Plan

Develop a comprehensive plan for managing your rental, including cleaning protocols, guest communication strategies, and maintenance schedules. If you won't be managing the property yourself, identify a reliable local property manager who can respond quickly to guest issues and emergencies.

Set Up Your Online Listings

Create compelling listings on platforms like Airbnb and VRBO, highlighting your property's unique features and proximity to Louisville attractions. Professional photography is essential for standing out in a competitive market. Remember to display your registration number on all listings as required by Louisville regulations.

Establish a Business Entity

Consider forming an LLC to protect your personal assets and potentially benefit from tax advantages. Consult with a local attorney or financial advisor to determine the best business structure for your specific situation and to ensure compliance with all legal requirements.

By following these steps and staying informed about regulatory changes, you'll be well-positioned to launch and operate a successful short-term rental business in Louisville while maintaining compliance with local laws and regulations.

Who to Contact in Louisville, Kentucky about Short-Term Rental Regulations and Zoning?

Navigating the regulatory landscape for short-term rentals in Louisville can be complex, but several official resources and community groups are available to help hosts understand and comply with local requirements.

Louisville Planning Department

The primary point of contact for short-term rental registration and zoning questions is the Louisville Planning and Design Department. They oversee the application process and can provide guidance on zoning classifications and conditional use permits.

• Address: 444 South 5th Street, Suite 300, Louisville, KY 40202
• Phone: (502) 574-6230

This department can answer questions about the short-term rental regulation updates implemented in 2023 and help you determine if your property is eligible for registration based on its zoning classification.

Louisville Metro Revenue Commission

For tax-related inquiries regarding your short-term rental business, contact the Louisville Metro Revenue Commission:

• Address: 617 W Jefferson St, Louisville, KY 40202
• Phone: (502) 574-4860
• Hours: Monday through Friday, 8:00 AM - 5:00 PM (By Appointment)

The Revenue Commission handles the tax reporting numbers required for short-term rental registration and can provide guidance on filing monthly Transient Room Tax forms.

By utilizing these official channels and community resources, hosts can stay informed about current regulations, upcoming changes, and best practices for operating a compliant and successful short-term rental business in Louisville.