An investor finds a condo in SoBro with an asking price that pencils out against a stated nightly rate history. The zoning checks out too: downtown is one of the last places in Davidson County where Metro will still issue a new non-owner-occupied short-term rental permit. Everything about the listing points toward yes. Then the recorded declaration for the building arrives, and it says rentals are restricted, full stop.
That sequence plays out often enough in downtown Nashville that it deserves its own explanation, because the two approvals a buyer needs here don't move together, and the permit itself doesn't survive a sale at all. Getting the order wrong is what turns a promising deal into a condo you can't legally operate the way you bought it to operate.
The Zoning Advantage Most of the City Lost
Metro Nashville splits short-term rental permits into owner-occupied and not-owner-occupied categories, and the second category is where investment math lives. Since 2022, new not-owner-occupied permits have been banned outright in the city's standard residential zoning districts, AR2A, R, RS, and RM, which covers most of the housing stock in neighborhoods like 12 South, Germantown's rowhouses, Sylvan Park, and The Nations. If a property in one of those zones already had a permit before the freeze, it can keep renewing, but that permit is not transferable and dies the moment the property changes hands.
Downtown sits outside that freeze. Metro Code 6.28.030 lists DTC North, DTC South, DTC West, and DTC Central among the districts where a not-owner-occupied permit is still issuable as a use permitted with conditions. That's the Downtown Code, Chapter 17.37 of the Metro Zoning Code, and it covers the Core, SoBro, the Gulch, and several other named subdistricts inside the interstate loop. For an investor comparing submarkets, that's a real structural advantage: it's one of the only parts of the city where the zoning conversation about a new STR purchase can start from yes instead of no.
The advantage isn't uniform even within downtown. The Downtown Code's fifth use area, East, which sits across the river on the East Bank, currently prohibits short-term rental property outright, according to Metro Planning's February 2026 staff report. A downtown address doesn't automatically mean downtown zoning works in an investor's favor. It depends on which use area the parcel falls in, and that's a five-minute check on Metro's STRP Eligibility Viewer before any conversation about the building itself.
The Second Approval Nobody Puts on the Listing Sheet
Zoning eligibility is Metro's answer to one question: is this address the kind of place the city will consider issuing a permit for. It says nothing about whether the building will let an owner use that permit. Tennessee's Short-Term Rental Unit Act preserves a condominium association's right to prohibit or restrict short-term rental use in its own governing documents, regardless of what Metro allows, and Metro's own permit application requires an affidavit that the rental won't violate any HOA, condo, co-op, lease, or covenant. The city built the override into its own paperwork.
In practice, several of downtown's most recognizable high-rise condo buildings—including Viridian, ICON, Encore, the 505 Building, Twelve Twelve, and the Adelicia—make the building-level review worth doing. A buyer who does the zoning research and stops there is doing half the job.
This is also where a common point of confusion comes from. Buyers sometimes point to active Airbnb listings inside towers and ask how that's possible. Those listings do not establish that an individual unit owner in the same building can do the same thing.
The flip side exists too. Older conversions like Riverfront Condos near Bicentennial Park have operated with individually owned units for years, and newer product built in Gulch South, including Muse and Illume, has been positioned from the start for owners interested in short-term rentals. The building, not the neighborhood name, is the unit of analysis.
The Permit Doesn't Come With the Keys
Even in a building that clears both hurdles, there's a third fact that changes how a buyer should read an active listing. Metro's ordinance ties the permit to the person who holds it, not the address. A change in ownership ends it, and the new owner has to apply from scratch under whatever rules are in effect at closing, not the rules the seller operated under.
That means a seller's trailing twelve months of Airbnb income, however real, isn't a comp a buyer inherits. It's evidence that the model worked for someone else under a permit that no longer exists once the sale closes. The buyer's actual position is a fresh application in a building that may or may not have room under any unit cap the association enforces, filed with Metro under the current version of Code 6.28.030. Reading the recorded declaration and confirming the building's own occupancy math before writing an offer is the only way to know whether that fresh application has anywhere to land.
What the Supply Numbers Change, and What They Don't
Downtown's population is growing fast enough that the raw unit counts can make the STR opportunity look larger than it is. The Nashville Downtown Partnership counted 23,335 residents in 16,802 units at midyear 2026, with another 1,490 units under construction and 9,394 planned. But the Partnership's 2025 Annual Residential Report also found that downtown's housing stock runs 75 percent rental and only 25 percent condominium, with 1,400 residential units delivered during 2025 overall.
The individually owned condo, is a minority share of a core that's adding mostly apartments. New unit counts downtown are real, but they don't translate one-for-one into new STR-eligible, individually owned inventory. That scarcity is part of why the towers that do allow individual owners to operate, like Riverfront, Muse, and Illume, hold a different position in an investor's search than the raw zoning map would suggest.
Financing conditions shifted too. Fannie Mae's Lender Letter LL-2026-03, effective March 18, 2026, retired the rule that made an established condo project ineligible for conventional investor financing once more than half its units were non-owner-occupied. That change applies to established projects reviewed under Fannie Mae's Full Review process and makes financing easier in buildings with heavy rental or investor concentration. It didn't remove every limit. Fannie Mae's Project Standards Requirements FAQ says a separate rule still caps any single entity's ownership at 20 percent of units in a project of 21 or more, which matters more to a fund assembling several units in one tower than to a buyer purchasing a single condo.
Before You Write the Offer
- Check the specific address in Metro's STRP Eligibility Viewer rather than assuming the neighborhood's reputation applies. Confirm which Downtown Code use area the parcel sits in, since East Bank's East use area currently prohibits STR.
- Request the building's recorded declaration and any board communications referencing rental caps or minimum lease terms before the inspection period closes.
- If the listing cites current STR income, ask directly whether that income is tied to a permit that ends at closing, and whether the building has room under any internal cap for a new applicant.
- If the building runs investor-heavy, ask the lender whether the project has completed Fannie Mae's Full Review under the March 2026 rule change before assuming standard conventional financing terms apply.
Frequently Asked Questions
If a downtown condo has an active Airbnb history, can I take over that permit when I buy it? No. Metro's STR permit is tied to the person who holds it, not the unit, and it does not transfer on sale. A new owner has to apply under the rules in effect at the time of purchase.
Does downtown's favorable zoning override a condo association's own rental rules? No. Tennessee's Short-Term Rental Unit Act specifically preserves a condo association's right to prohibit or restrict short-term rentals beyond what Metro allows, and Metro's own application requires confirmation that the rental doesn't violate the building's covenants.
Is every part of downtown equally open to short-term rental under the zoning code? No. The Downtown Code's East use area, across the river on the East Bank, currently prohibits short-term rental property according to Metro Planning's February 2026 staff report, even though other downtown subdistricts allow it with conditions.
Verifying both layers before an offer is exactly the kind of groundwork that separates a workable STR purchase from a condo that looks right on paper. If you're weighing a downtown Nashville investment and want someone who has actually run the permit and building math before, The Tammi Weed Team offers a White-Glove Consultation built around this kind of due diligence.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
