Tennessee property tax change push could raise rent on single-family homes, officials say

NASHVILLE, Tenn. (WKRN) — Some Tennessee families could see a rise in rent thanks to a push to charge landlords a higher property tax rate by treating single-family rental homes like commercial properties.

William Carman, former director of the TN Comptroller’s Division of Property Assessments, told News 2 his former employer wants single-family rental homes reclassified from residential properties to commercial, which means rental properties would be assessed at 40% of their value instead of 25%.

“Residential homes that are rented are going to be taxed like a shopping center,” Carman said.

Those who support the reclassification say property is classified by its use in TN. Since landlords don’t use their single-family rental homes as a residence, but to make money, they believe that justifies the change to a commercial classification.

However, Carman told News 2 single-family rental homes are still used as a residence, just not by the owner.

“It’s moving property that is used for dwelling purposes into a commercial classification, not because of use, but because of ownership, which is absolutely contrary to state law and the Tennessee constitution,” Carman said.

Landlords worry this will increase their property taxes, and they’ll be forced to pass that extra cost onto renters.

“Rental is a viable alternative for most people, so it’s just going to push the cost up on the people who can least afford to pay it,” Danny Hale, property manager at HALO Realty, said. “We’ve talked to several different property management companies in the area, and they’re all in agreement that this is outside the bounds of state law and that it’s not fair for those people and it’s going to put a hardship on the tenants.”

Carman is calling on lawmakers to step in. This year, legislators debated a bill that would have defined single-family rental homes as residential, preventing a reclassification to commercial.

However, the bill was deferred to summer study, which is often where proposals die.

“If the legislature wants to tax residential property like shopping centers, then let it be said, but nobody is willing to say that,” Carman said. “They know it’s so illogical. It doesn’t make any sense, but unless the legislature acts, that’s exactly what’s going to happen.”

News 2 reached out to the TN Comptroller’s Office for comment and received the following response:

“There has been no change in the Comptroller’s guidance regarding the assessment of single-family rental homes. The constitution, statutes, and case law require a fact-specific analysis for each individual property, so there is no one-size-fits-all answer concerning the classification of residential rental property. However, any changes regarding assessment classifications would occur through statutory or case law updates, not at the Comptroller’s direction.”