Overview: Are Short-Term Rentals Allowed in Mountain City, TN?

YES – Short-term rentals ARE explicitly allowed in Mountain City, TN. The town has established a dedicated regulatory framework through Ordinance No. 2006, which was signed on July 2, 2024. Mountain City has chosen to permit STR operations within its jurisdiction, though the regulatory system is still being refined and formalized. As of 2025, the town is in the process of revising its complete municipal code in partnership with the Tennessee Municipal Technical Advisory Service (MTAS), with the STR regulations being a key component of this comprehensive update.

How to Start a Short-Term Rental Business in Mountain City

Starting an STR business in Mountain City requires following both state-level Tennessee requirements and local municipal regulations. The process involves several key steps:

1. Business License Acquisition

• Obtain both Johnson County and Mountain City business licenses
• These are prerequisite licenses required before applying for STR permits
• According to Tennessee state law, you must hold valid city and county business licenses to operate an STR

2. Property Compliance Verification

• Confirm your property is zoned appropriately for STR use
• Verify compliance with safety requirements (fire sprinklers, smoke alarms, carbon monoxide detectors)
• Ensure the property meets occupancy standards (typically 2 guests per bedroom, maximum 12 guests total per Tennessee state law)

3. STR Permit Application

• Apply for the annual Mountain City STR permit
• Pay the required $100 annual permit and inspection fee
• Submit required documentation (see detailed list below)

4. Insurance Requirements

• Maintain minimum $500,000 liability insurance coverage
• This requirement can be satisfied through marketplace-provided coverage (Airbnb, VRBO, etc.)

5. Tax Registration and Collection

• Register for and begin collecting hotel occupancy taxes
• Set up sales tax collection and remittance systems
• Ensure compliance with Tennessee's 6-month tax remittance history requirement for legacy status

Required Documents, Permits, Licenses, and Guidelines

Local Mountain City Requirements:

• Mountain City STR Permit (Ordinance No. 2006)
• $100 annual permit and inspection fee payment
• City business license
• Johnson County business license

State of Tennessee Requirements:

• Personal identification
• Federal EIN (Employer Identification Number)
• Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
• Proof of property ownership or lease agreement
• Proof of primary residency (if claiming owner-occupied status)
• Liability insurance documentation showing minimum $500,000 coverage
• Site plan showing property layout
• Floor plans showing room configurations
• Completed application affidavits

Safety and Compliance Documentation:

• Fire sprinkler system documentation (where required)
• Smoke detector installation verification
• Carbon monoxide detector installation verification
• Fire extinguisher placement documentation
• Life Safety Compliance Verification Form

Operational Documentation:

• Local contact person information
• Management company details (if applicable)
• Platform listing information (Airbnb, VRBO, etc.)

Specific Regulations for Short-Term Rentals

City of Mountain City Regulations (Ordinance No. 2006)

Current Status: Mountain City is operating under a transitional regulatory framework. While Ordinance No. 2006 establishes the legal basis for STR operations, the town acknowledges that formal collection and enforcement processes are still being developed.

Key Local Provisions:

• Annual permit requirement with $100 fee
• Annual inspection requirement (fee includes inspection)
• Registration with City Recorder's office
• Maintenance of active rental list by city
• Compliance with ongoing municipal code revision process

Enforcement Challenges: As noted in recent town meetings, Mountain City faces enforcement challenges including:

• Lack of formal collection processes for permit fees
• Limited staffing for compliance monitoring
• Difficulty tracking and auditing individual property compliance
• Revenue loss due to incomplete enforcement systems

Johnson County Regulations

As of the provided content, specific Johnson County STR regulations were not detailed. STR operators should contact Johnson County government offices to determine any county-level requirements beyond the mandatory county business license.

State of Tennessee Regulations

Tennessee Short-Term Rental Unit Act (SB1086)

Property Classification:

• STR units include single-family dwellings and units in multi-family buildings
• Properties rented for less than 30 continuous days qualify as STRs
• Hotels, tourist courts, tourist camps, and motels are excluded from STR definitions

Mandatory Safety Requirements:

• Liability insurance: Minimum $500,000 coverage (unless marketplace provides equivalent coverage)
• Fire sprinkler systems required
• Smoke alarms in all sleeping areas
• Carbon monoxide detectors on habitable floors
• Fire extinguisher requirements

Operational Standards:

• Maximum occupancy: 2 guests per bedroom plus maximum of 12 total guests per property
• Prohibition against renting for periods less than 24 hours
• Requirement to collect and remit room occupancy and sales taxes
• Zoning compliance requirements
• Noise and waste management compliance
• Parking requirements
• Signage restrictions

Legacy Status Protection: Properties that were operating as STRs before local regulations took effect may maintain legacy status, allowing continued operation under regulations in place at the time of initial operation, subject to specific conditions regarding tax remittance history.

Contact Information for Local STR Authority

Mountain City Municipal Offices

• Primary Contact: City Recorder's Office
• Phone: (423) 727-8005
• Address: 210 S. Church St., Mountain City, TN 37683
• Office Hours: Monday-Friday, 8:00 AM - 5:00 PM
• Website: www.mountaincitytn.org

Key Personnel:

• City Recorder: Audra Gerty (oversees STR permitting and maintains active rental list)
• Mayor: Jerry Jordan (involved in ordinance revision oversight)
• Planning Commission (reviews ordinance updates)

Contact Strategy: Given the ongoing regulatory framework development, direct contact with the City Recorder's office is recommended for current requirements, permit applications, and clarification of enforcement procedures.

Source Links

Primary Regulatory Documents:

• Mountain City Ordinances: www.mountaincitytn.org/government/ordinances.php
• Short Term Rental Unit Air BnB Regulations (Ordinance No. 2006): www.mountaincitytn.org/Documents/Government/Ordinance No 2006 Short Term Rental Final Signed 7-2-2024.pdf
• Mountain City Municipal Code (Draft September 2025): www.mountaincitytn.org/Documents/Government/09-30-25_Mountain City_final code for adoption.pdf

State Regulatory Framework:

• Tennessee Short-Term Rental Unit Act Summary (MTAS): www.mtas.tennessee.edu/reference/summary-short-term-rental-unit-act
• Tennessee SB1086 Full Text: www.capitol.tn.gov/Bills/110/Bill/SB1086.pdf

Local News and Updates:

• Mountain City STR Reform Discussion: www.thetomahawk.com/news/mountain-city-eyes-reform-on-short-term-rentals-and-campgrounds/article_cbcfefee-b400-4265-a2b4-0cb2b8cb8220.html

Statewide Context:

• Tennessee STR Laws Overview: www.gosummer.com/post/tennessee-short-term-rental-laws

Important Considerations for STR Investors

Regulatory Environment: Mountain City is in a transitional phase regarding STR regulation. While operations are legally permitted, enforcement mechanisms and fee collection systems are still being formalized. This creates both opportunities and risks for investors.

Compliance Strategy: Given the evolving regulatory landscape, STR operators should:

• Maintain meticulous compliance records
• Stay in regular contact with City Recorder's office
• Anticipate increased enforcement as municipal code revisions are completed
• Budget for potential fee increases and additional requirements

Market Position: Mountain City represents a smaller, emerging STR market compared to major Tennessee tourist destinations like Gatlinburg, Pigeon Forge, or Nashville, potentially offering opportunities for early market entry with relatively less competition.

Due Diligence Requirements: Before purchasing or converting property for STR use in Mountain City, investors should verify current zoning compliance, obtain preliminary approval from local authorities, and factor potential regulatory changes into their financial projections.