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

Do you own a place in Lexington-Fayette, Kentucky and you're weighing whether to put it on Airbnb or Vrbo? Well, the good news is that Lexington-Fayette has never banned short-term rentals outright, and every attempt by the state legislature to strip the city of that authority has died in Frankfort. You can run a legal short-term rental here in 2026, hosted or unhosted, provided your property clears the zoning, licensing, and tax hurdles the Urban County Council built into the ordinance in 2023 and then tightened again in December 2024.

That last part is the real catch. Since the city started enforcing its density rules, the number of active short-term rentals in Fayette County has dropped from 1,290 to 787, roughly a 39% decline, and the Division of Revenue has issued 61 citations totaling $78,125 in fines since January 2024. Unhosted rentals now face a 600-foot spacing rule and a 2% cap on how many can sit within 1,000 feet of each other in residential zones, so a neighborhood that already has its share of Airbnbs may simply be closed to a new one, license application or not.

So let's walk through what it actually takes to do this properly: which zones allow a short-term rental at all, what the $200 license costs and requires, the three tax layers stacked on top of every booking, how aggressively the city is chasing unlicensed operators in 2026, and who to call when you get stuck. Every figure below comes from Lexington-Fayette's own zoning and revenue ordinances or the Kentucky Department of Revenue, checked in July 2026. If you're comparing a Lexington property against other Kentucky markets, run the numbers through BNBCalc first.

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

That comparison only makes sense once you know the rules you're comparing against, so here's the actual framework. Two ordinances do most of the work: Section 3-13 of the Zoning Ordinance sets where a short-term rental is allowed and how many can cluster together, while Article V of Chapter 13 of the Code of Ordinances handles licensing and the day-to-day duties of running one. Both trace back to ordinances passed July 11, 2023, then amended in December 2024 and again in January 2025.

The city's own definition is specific. A short-term rental is a dwelling unit "rented, leased, or otherwise assigned, in whole or in part, for temporary occupancy by transient guests for a tenancy of less than thirty (30) consecutive days, where no meals are served." That last clause matters. Hotels, bed and breakfasts, and boarding houses don't count, so this is specifically the Airbnb-and-Vrbo category.

Everything else hinges on one distinction: hosted versus unhosted. A hosted rental is one where the owner, operator, or an agent of theirs treats the unit, or another dwelling on the same property, as a primary residence and actually stays there while guests are present.

Proving that isn't a simple checkbox, either. The city wants two categories of documentation, an unexpired driver's license or voter registration plus a tax document, bank statement, vehicle registration, or utility bill dated within the past year, and the primary resident has to live there at least 275 days a year. An unhosted rental is everything that falls short of that bar: an investment property, a whole-home listing with nobody on site, or a hosted unit where the host stops showing up.

That distinction decides which zones will even let you operate, and by how much. Here's how the use table breaks down for the districts most hosts actually deal with:

Zone type	Hosted STR (host lives there)	Unhosted STR	Units allowed per property
Single-family residential (R-1A through R-5, EAR-1 to EAR-3)	Accessory use up to 10 guests, conditional use above that	Conditional use	1 dwelling unit, or 1 accessory dwelling unit
Agricultural-Rural (A-R)	Conditional use	Conditional use, capped at 10 acres	1 unit, hosted or unhosted
Agricultural Buffer / Natural-Areas (A-B, A-N)	Conditional use	Prohibited	1 unit, hosted only
Multi-family and group residential (R-1T through R-5, EAR-1 to EAR-3, CN)	Accessory use up to 10 guests, conditional use above that	Conditional use	10% of units on the lot, or 1, whichever is greater
Neighborhood business and mixed-use (B-1, P-1, MU-1 through MU-3)	Accessory use	Principal use	25% of units, or 1, whichever is greater
General business and industrial (B-2 and denser)	Principal use	Principal use	No cap

An "accessory use" needs no special permit beyond the license itself. A "conditional use" needs sign-off from the Board of Adjustment, and that's where the density limits below actually bite.

Occupancy is capped at two people per bedroom plus two more, or 10 total, whichever is lower, down from 12 before the December 2024 amendment. Any permanent resident in the home during the stay counts toward that cap too. The ordinance also bans private events, weddings included, that exceed the occupancy limit, forbids any private event between 11 p.m. and 7 a.m., and prohibits commercial special events at any hour, full stop.

For conditional-use rentals, two density rules matter most. No short-term rental with a conditional use permit can sit within 600 feet of another one, and unhosted rentals can't exceed 2% of all dwelling units within 1,000 feet in a residential zone, tighter than the 500-foot, 3% version the ordinance carried before December 2024.

The Board of Adjustment can grant relief case by case, but only where the applicant shows the property sits next to a nonresidential zone, sits across a major road or environmental buffer from other rentals, or straddles the edge of the buffer area. Even then, the Board only hears up to 10 new conditional-use STR applications a month. A saturated neighborhood can mean a real wait, regardless of how clean the application is.

Agricultural zones (A-R, A-B, A-N) carry their own layer on top of all this: a one-mile buffer between rentals instead of 600 feet, mandatory Health Department sign-off that the septic system can handle the proposed occupancy, and Board findings on fire safety and on-site parking before approval.

Anything operating before July 11, 2023 gets grandfathered, though the terms differ depending on whether the property would now need a conditional use permit or sits in a zone that no longer allows STRs at all. Either way, those legacy rentals still had to get licensed by January 11, 2024, and a change in ownership ends the grandfathering and forces a fresh conditional use application.

Starting a Short-Term Rental Business in Lexington-Fayette

Grandfathering aside, anyone starting fresh in 2026 is working inside the density caps above, and that changes the math more than a lot of newcomers expect. Because Lexington-Fayette Urban County Government runs city and county as one consolidated government, this same ordinance covers all of Fayette County, and our Fayette County guide walks through the same rules from the county-government angle if you want the cross-reference.

The practical starting point is your zone and your neighborhood's existing STR count, not your budget. In most single-family zones, a hosted rental where you actually live is an accessory use and needs no conditional use permit at all, just the license.

An unhosted whole-home listing in the same zone needs a conditional use permit. If 2% of the dwellings within 1,000 feet are already unhosted short-term rentals, the Board can't approve you no matter how strong your application is. Do check the Board of Adjustment's case records or call the Division of Planning before you make an offer on a property, because that density math is the single biggest way plans fall apart here.

The city's own numbers show what enforcement has actually done to supply. Active short-term rentals in Fayette County dropped from 1,290 before enforcement began to 787 as of mid-2026, according to the Division of Revenue, a decline of roughly 39%. That's not a market cooling on its own. It's licensing and density rules doing exactly what the council designed them to do.

None of that looks likely to change soon, either. Multiple bills in the Kentucky legislature tried to strip cities of this authority in 2025 and 2026, including one aimed squarely at Lexington's ordinance, and all of them died before reaching the governor's desk. Our Kentucky statewide guide covers those bills in detail, but the short version is that local control here looks durable rather than temporary.

If the density math doesn't work for the property you're looking at, it's worth widening the search rather than forcing it. Louisville runs a different ordinance with its own thresholds, and our Louisville guide is the place to compare before you commit to one city over the other.

Short-Term Rental Licensing Requirement in Lexington-Fayette, Kentucky

Widening the search only helps once you know what licensing looks like wherever you land, so here's Lexington-Fayette's version. Every short-term rental in the city needs a special fee license from the Division of Revenue, and the fee itself runs $200 a year for the first unit and $100 a year for each additional one under the same licensee. One license can cover every rental you own, which helps if you're building a small portfolio rather than running just the one.

Before the Division of Revenue will even look at your application, the Division of Planning has to sign off that the property complies with the Zoning Ordinance, so make sure zoning verification happens first rather than paperwork you circle back to later. Once that's in hand, applications and renewals run through the city's str.lexingtonky.gov portal, where you create an account and upload everything the Division of Revenue asks for.

A granted license runs until December 31 following the most recent application or renewal, though it can end earlier than that. Selling the property, switching a rental from hosted to unhosted, or losing your conditional use permit all void the license immediately, and you'd have to reapply from scratch. Each license also comes with a local registration number, which has to appear on the listing itself.

The Director of Revenue can refuse or pull a license for a fairly wide set of reasons: a false statement on the application, an incomplete application, unpaid fees, fines, or liens tied to the property, a lapsed conditional use permit, or noncompliance with any applicable building, fire, health, or zoning code.

Get two violations inside one license term and the license can be revoked outright. A revoked licensee can't reapply for that same dwelling unit for a full year. Keep that in mind if you're weighing whether to cut a corner early on, because the math rarely favors it once you factor in a year of lost income on top of the fine itself.

Required Documents for Lexington-Fayette Short-Term Rentals

That revocation risk makes the paperwork worth getting right the first time, so here's what actually goes into an application. The special fee license application requires:

• The address of the proposed short-term rental, plus the applicant's name, address, phone number, and email.
• Contact information for the operator, if different from the applicant, and for an emergency contact who lives or is otherwise located within 25 miles of the property.
• Written zoning approval from the Division of Planning confirming the use complies with the Zoning Ordinance.
• A site plan and floor plan showing exactly how many vehicles can legally park on the property without spilling onto the street or sidewalk.
• A certificate of general liability insurance for at least $1,000,000 per occurrence, kept active for the whole license period.
• A signed affidavit confirming the health and safety requirements are met: working smoke detectors, at least one carbon monoxide detector, a charged fire extinguisher on every habitable floor, and a proper emergency egress opening in every sleeping room.
• A second affidavit confirming ongoing compliance with building codes, fire codes, and every other applicable law.
• Health Department documentation that the septic system can handle the proposed occupancy, but only for properties in the A-R, A-B, or A-N zones.

Once you're licensed, the paperwork still doesn't stop there. Section 13-79 of the Code requires you to post, inside the unit, the licensee's contact information, the emergency contact, local emergency and non-emergency phone numbers, trash and recycling pickup details, an evacuation plan, the maximum occupancy, a copy of the conditional use permit if you have one, and the city's own complaint-filing website.

No outdoor signage identifying the property as a rental is allowed. A hosted rental can't be advertised as an "entire home" listing while a host is actually staying there, either. Licensees also owe the Division of Revenue an annual report listing every rental they own, its registration number, and the number and length of contracts it had that year.

Lexington-Fayette Short-Term Rental Taxes

Assuming you clear the paperwork and are able to get licensed, there's still tax to stack on top, and it comes in three layers here rather than the usual two. All three apply to the rent a guest pays, on top of any cleaning or guest fees.

Tax	Rate	Collected by
Local transient room tax	8.5%	Lexington-Fayette Urban County Government
State transient room tax	1%	Kentucky Department of Revenue
State sales tax	6%	Kentucky Department of Revenue
Combined	15.5%	Three separate agencies

The local piece is actually three separate levies stacked into one line under Section 2-172 of the Code of Ordinances: a 4% general transient room tax, a 2% tax that services bonds for the Lexington Center Corporation, and a 2.5% tax earmarked for renovating the Lexington Convention Center. The ordinance says plainly that this tax applies to all short-term rentals.

Section 13-78 puts the collection duty on whichever hosting platform handles the booking, falling back to you only when a guest pays you directly. Airbnb's own tax page confirms it, as of July 2026: it lists an 8.5% Lexington-Fayette County transient room tax that it collects automatically on every reservation of 29 nights or fewer.

The 1% state transient room tax and the 6% state sales tax work the same way in practice. Kentucky's Department of Revenue says platforms collect and remit both automatically for participating hosts, so a host booking exclusively through Airbnb or Vrbo generally doesn't need a separate state Transient Room Tax account. Take money directly from a guest outside the platform, though, even once, and you're on the hook to register and remit on that portion yourself.

One more tax sits outside that stack entirely: the city's occupational license fee, 2.25% of net profit rather than gross rent. Licensees owe this on the profit their short-term rental actually generates, filed annually through the Division of Revenue on Form 228, and it applies whether or not a platform is already collecting the transaction taxes above. Don't confuse the two: one taxes what the guest pays, the other taxes what you keep.

Kentucky Wide Short-Term Rental Rules

Zoom out from Lexington's own tax stack and the state layer above it explains why a lot of that math looks the same in every Kentucky city. Kentucky has no statewide short-term rental license or registry. The only state-level paperwork most hosts deal with is standard Department of Revenue tax registration, and even that gets waived for anyone renting exclusively through a marketplace platform.

More importantly, Kentucky has no law preempting a city's authority to zone, cap, or license short-term rentals the way Lexington does. Lawmakers tried repeatedly to change that.

Senate Bill 61 in 2025 would have blocked cities from requiring conditional use permits or imposing density restrictions on STRs at all, and it was drafted specifically, in one local reporter's words, to "override and cancel Lexington's recently passed STR regulations." It passed the House, but the Senate let it die without a floor vote. Senate Bill 110 tried something similar later in 2025 and never got out of committee.

Senate Bill 112 and an amendment tacked onto Senate Bill 9 both tried again in the 2026 session, and both died too, the latter in a conference committee "cannot agree" report on the session's last day. Our Kentucky statewide guide tracks each of those bills in more detail, since a refiled version in the 2027 session is a real possibility worth watching.

There's also a live legal question about who owes the local transient room tax statewide. In December 2023, the Kentucky League of Cities and the Kentucky Travel Industry Association sued Airbnb on behalf of several member cities over unremitted local room tax.

The Kentucky Supreme Court ruled on June 25, 2026 that the League and Association lacked standing to bring that suit on the cities' behalf. It's a procedural ruling, one that leaves the underlying question of platform liability technically open elsewhere in the state. It doesn't touch Lexington directly, mind you: the city's own ordinance already requires platform collection, and Airbnb's own tax page confirms that's already happening here.

Does Lexington-Fayette Strictly Enforce STR Rules?

That court fight is a state-level sideshow, though. On the ground in Lexington, enforcement has gotten more aggressive every year since the ordinance took effect, not less. The clearest evidence is the listing count itself: 1,290 active short-term rentals before enforcement began, 787 as of mid-2026, a roughly 39% decline that the Division of Revenue attributes directly to licensing and density enforcement.

The citation numbers back that up. Since January 2024, the city has issued 61 citations totaling $78,125 in fines, 52 of them for operating without a license and 9 for nuisance violations like noise, trash, and overcrowding.

Collection has been slower than the citations, though: only about $19,000, roughly 24%, has actually come in, with $59,125 still outstanding and four properties alone owing $52,400 of that. One property owes $22,000 on its own, and the city has already placed a lien against it. As Revenue Director Wes Holbrook put it, "with the larger citations, we are putting liens on the properties and working with the law department for how we get paid back." Unlicensed operation can also draw daily fines of up to $500 for as long as the violation continues, so a slow-walked correction gets expensive fast.

Complaints feed a lot of this. The city runs a dedicated violations hotline at 859-710-9048 and an online complaint portal, and between July 2025 and mid-2026 it fielded 68 calls, 17 of which turned up a genuine violation, six of them unauthorized rentals operating with no license at all. Watch out for that last category especially: an unlicensed listing is exactly what a nosy neighbor with a phone can report in under a minute.

The Board of Adjustment throttles new supply too, deliberately. It caps itself at 10 new conditional-use short-term rental applications a month, which means even a fully compliant applicant in a popular area can be waiting behind a queue before they ever get a hearing. Between the citations, the density math, and that monthly cap, Lexington-Fayette isn't a city where an unlicensed listing quietly slips through. It gets found, and increasingly, it gets billed for real money.

How to Start a Short-Term Rental Business in Lexington-Fayette

Given all of that, the order you tackle these steps in matters almost as much as doing them at all. Skip ahead and you risk paying the $200 fee for an application the density cap was always going to reject.

1. Check the zone and the density math first. Confirm your property's zoning allows the type of STR you want, and ask the Division of Planning whether the 2% cap within 1,000 feet is already full for unhosted rentals nearby.
2. Get zoning verification from the Division of Planning. This has to happen before the Division of Revenue will process anything, so don't skip it hoping to circle back.
3. Apply for a conditional use permit if your zone or occupancy requires one. Budget time for this: the Board of Adjustment only hears 10 new STR applications a month.
4. Buy general liability insurance of at least $1,000,000 per occurrence. You'll need the certificate for your application, and it has to stay active the whole time you're licensed.
5. Install the required safety equipment and prepare the posted-notice packet. Smoke detectors, a carbon monoxide detector, a fire extinguisher on every floor, proper egress windows, and the informational posting the ordinance requires inside the unit.
6. Get a business or occupational license from the Division of Revenue if you don't already have one on file.
7. Apply for the special fee license through str.lexingtonky.gov, upload every document above, and pay the $200, plus $100 for each additional unit.
8. Sort out your tax accounts. Confirm your platform is collecting the 8.5% local and 1% state transient room tax plus the 6% state sales tax, and register directly with the Kentucky Department of Revenue if you'll ever take a payment outside the platform.
9. Diarize your renewal date and your annual report. The license expires December 31 following your most recent renewal, and you owe the Division of Revenue an annual accounting of every contract your rental had that year.

Before you commit real money to any of this, it's worth running the numbers against what a Lexington property could actually earn. The Kentucky market data on BNBCalc breaks out revenue and occupancy by market, which is a faster gut check than guessing off a listing price alone.

Who to Contact in Lexington-Fayette about Short-Term Rental Regulations and Zoning?

Whichever step trips you up, two city offices handle almost everything above between them.

The Division of Planning handles zoning verification, conditional use permits, and Board of Adjustment support, so it's the first call for anything about whether a property qualifies at all.

• Address: 101 E. Vine St., 7th floor, Lexington, KY 40507
• Phone: (859) 258-3160
• Email: [email protected]
• Hours: Monday through Friday, 8 a.m. to 5 p.m.

The Division of Revenue issues the special fee license, collects the local transient room tax and occupational license fee, and handles renewals and violations.

• Address: 218 E. Main St., Lexington, KY 40507
• Phone: (859) 280-8300
• Email: [email protected]
• Hours: Monday through Friday, 8 a.m. to 5 p.m.
• After-hours violations hotline: (859) 710-9048

To apply or renew online, use the str.lexingtonky.gov portal directly. To report a suspected violation, the online complaint form reaches the same enforcement team as the hotline.

For anything above the city layer, the Kentucky Department of Revenue handles registration and questions on the 1% state transient room tax and the 6% state sales tax.

Frequently Asked Questions

Can you legally run an Airbnb in Lexington-Fayette in 2026?

Yes, both hosted and unhosted rentals are legal, but each needs a $200 special fee license from the Division of Revenue and has to clear the zoning ordinance's use table for its district. Unhosted rentals face extra hurdles: a conditional use permit, a 600-foot spacing rule from other short-term rentals, and a cap of 2% of nearby dwellings within 1,000 feet. A hosted rental in a single-family zone, where you actually live on site, is the simplest path and needs only the license.

How much does a Lexington-Fayette short-term rental license cost?

The special fee license costs $200 a year for the first unit and $100 a year for each additional unit under the same owner, paid to the Division of Revenue. One license covers every rental a licensee owns. It expires December 31 following the most recent renewal, or earlier if you sell the property, switch from hosted to unhosted, or lose a required conditional use permit.

What happens if you run a short-term rental in Lexington without a license?

Operating without the special fee license can draw daily fines of up to $500 for as long as the violation continues. Since January 2024, the city has issued 61 citations totaling $78,125 in fines, most of them for unlicensed operation, and it has placed liens on properties carrying large unpaid balances. A revoked license also bars you from reapplying for that same unit for a full year.

How much tax do you pay on a Lexington-Fayette short-term rental?

Three taxes stack on the rent a guest pays: an 8.5% local transient room tax, a 1% state transient room tax, and a 6% state sales tax, for 15.5% combined. Airbnb and Vrbo generally collect and remit all three automatically. On top of that, licensees separately owe a 2.25% occupational license fee on net profit, not on gross rent, filed annually with the Division of Revenue.

Can you rent an entire house on Airbnb in Lexington-Fayette?

Yes, but only as an unhosted rental with a conditional use permit, and only where the 2% density cap and 600-foot spacing rule leave room. In many popular neighborhoods that cap is already met, which blocks new unhosted approvals no matter how strong the application is. Checking the existing short-term rental count near a specific address before buying is the single most useful step a prospective host can take.

Last verified: July 2026. Every ordinance, tax rate, state law, and contact detail in this guide links to or comes from its official source.