Lexington, Kentucky Short Term Rental Regulations Guide for Airbnb hosts

Overview: Are Short-Term Rentals Allowed in Lexington, KY?

Yes, short-term rentals (STRs) are explicitly allowed in Lexington, Kentucky under specific regulatory frameworks established by the Lexington-Fayette Urban County Council. STRs are defined as "the commercial use of a dwelling unit rented in whole or part for temporary occupancy by transient guests for a tenancy of less than 30 consecutive days, where no meals are served." The city has implemented a comprehensive regulatory system that distinguishes between "Hosted STRs" (where the owner lives on the property) and "Un-Hosted STRs" (where the owner does not occupy the property), with different requirements for each category.

Recent regulatory updates took effect December 12, 2024, implementing density restrictions and reducing occupancy limits to address community concerns about STR clustering in residential neighborhoods.

What do Airbnb hosts actually earn in Lexington?

Lexington hosts earn a median $31,611/year with $177 ADR and 61% occupancy.

Top performers pull in $46,237+ per year.

See the full Lexington market breakdown →

How to Start a Short-Term Rental Business in Lexington

Starting an STR business in Lexington requires navigating a multi-step regulatory process:

Step 1: Initial Zoning Verification

Complete the short-term rental zoning verification form through the Division of Planning
Submit only one form per property
Receive email confirmation from Planning staff

Step 2: Obtain Required Permits and Licenses

Zoning Compliance Permit through the Division of Planning
Business License through the Division of Revenue (if not already held)
Special Fees License through the Division of Revenue (annual renewal required)

Step 3: Application Submission

Create account at str.lexingtonky.gov
Upload all required documentation
Pay applicable fees
Await Division of Revenue review and contact for additional details

Step 4: Operational Compliance

Display Local Registration Number in all advertisements
Maintain compliance with safety requirements
Submit annual reports to Division of Revenue

Required Documents, Permits, Licenses, and Guidelines

Mandatory Permits and Licenses

1. Zoning Compliance Permit

Issued by Division of Planning
Required for each property being licensed
Contact: Stephanie Cunningham at scunning@lexingtonky.gov or (859) 258-3885

2. Business License

Issued by Division of Revenue
Initial application required if not already held
Submit to revenue@lexingtonky.gov

3. Special Fees License

Issued by Division of Revenue
Annual renewal required
Fees: $200 for first unit, $100 per additional unit
Application portal: str.lexingtonky.gov

Required Documentation

For All STRs:

Current Occupational Business License
Sworn Affidavit signed by Applicant attesting compliance with safety requirements
Sworn Affidavit signed by Owner (if applicant is not the owner)
Zoning Compliance Permit
Site plan and floor plan depicting property and parking capacity
Certificate of insurance or proof of general liability insurance ($1,000,000 minimum)
For septic tank properties: Evidence of adequate septic system capacity
Documentation of Local Registration Number for advertisement inclusion

Additional for Hosted STRs:

Two forms of documentation showing permanent residence:
- Motor vehicle registration
- Unexpired Driver's License
- Voter registration
- Tax documents indicating dwelling as residence
- Utility bill

Safety and Operational Requirements

Smoke and carbon monoxide detectors in all sleeping areas and adjacent hallways
Compliance with building codes, fire codes, and all applicable regulations
Maximum occupancy limits (currently 10 guests as of December 2024)
Prohibition on events exceeding general occupation limits

Specific Regulations for Short-Term Rentals

Legal Definitions

Short-Term Rental (STR): Commercial use of dwelling unit for temporary occupancy under 30 consecutive days, no meals served
Hosted STR: Primary residence where owner occupies property during guest stays
Un-Hosted STR: Property not occupied by primary resident during guest stays

Density and Zoning Restrictions (Effective December 12, 2024)

For Un-Hosted STRs in Residential Neighborhoods:

Conditional Use Permit required through Board of Adjustment
Permit denial if existing STR within 600 feet
Permit denial if 2% or more of homes within 1,000 feet are STRs
Limited to 10 applications per Board of Adjustment meeting
Maximum 10 guests per STR (reduced from 12)

Exceptions to Density Restrictions:

Property adjacent to nonresidential zones allowing STRs
Significant environmental feature or minor arterial/higher classification road separating properties

Operational Limitations

STRs cannot host events exceeding occupancy limits
Conditional Use Permits are non-transferable to new owners
Properties must maintain compliance with residential zoning requirements

Tax Obligations

Local transient room tax: 8.5% (collected by platforms like Airbnb/Vrbo)
State transient room tax: 1% (collected by platforms when applicable)
Sales tax: 6% (may be passed to customers)
Annual licensing fees: $200 first unit, $100 each additional unit

Non-Compliance Penalties

Fines up to $500 per day for operating without license
Citations for safety violations, occupancy violations, and zoning violations
Appeal process through Board of Adjustment

Contact Information for Local Authority

Division of Revenue (Primary STR Authority)

Address: 218 E. Main St., Lexington, KY 40507
Phone: (859) 280-8300
Fax: (859) 258-3309
Email: revenue@lexingtonky.gov
Hours: Monday – Friday: 8 a.m. – 5 p.m.
STR Portal: str.lexingtonky.gov

Division of Planning

Contact: Stephanie Cunningham
Email: scunning@lexingtonky.gov
Phone: (859) 258-3885

Board of Adjustment

Handles Conditional Use Permit applications for unhosted STRs
Appeals process for citations and violations
Limited to 10 STR applications per meeting

General Government Contact

Address: 200 E. Main St., Lexington, KY 40507
Phone: (859) 425-2255

Source Pages and Important Links

This comprehensive regulatory framework requires careful adherence to all requirements, with particular attention to recent density restrictions and reduced occupancy limits. Investors should regularly monitor updates through Engage Lexington and maintain compliance with all safety and operational standards to avoid penalties and ensure continued operation of their STR business in Lexington.

Next step

Found a property in Lexington?

Paste any address and get estimated revenue, cash-on-cash return, and comparable STR performance in under 5 minutes. 3 free analyses per day.

Ask the AI Advisor about Lexington →