Is Rental Arbitrage Legal in Louisville, KY?
Registration for owner-occupied primary residences; conditional use permit for anything else. Louisville Metro registers owner-occupied primary residences administratively. A non-owner-occupied unit in a residential zone needs a conditional use permit with a public hearing, 600-foot separation from other approved rentals, and approximately six months to process.
Can a renter do rental arbitrage here? Only in limited areas. Renters can only operate in certain zones, or with a special approval. Confirm the exact property qualifies before you sign.
Requirements
- Annual registration with the Office of Planning: $250 per property
- A Tax Reporting Number from the Revenue Commission
- Owner-occupied primary residences: residency documentation (Kentucky ID plus voter registration, vehicle registration, or tax record)
- Non-owner-occupied rentals in residential zones, or owner-occupied in Old Louisville or Limerick: a conditional use permit
- Conditional use permit costs: $200 pre-application, then $560 owner-occupied or $1,260 non-owner-occupied
- $1 million general liability insurance
- Metro registration, zoning compliance, and Revenue Commission registration
Restrictions
- A public hearing required for conditional use permits; process typically takes about six months
- Minimum 600-foot separation from other approved short-term rentals
- Industrial zones and planned development districts are prohibited
- Maximum 12 adult occupants per property
- Owner-occupied primary residences in most zones: administrative registration only
- Excluded cities (cannot operate): Anchorage, Douglass Hills, Graymoor-Devondale, Hurstbourne, Indian Hills, Jeffersontown, Lyndon, Prospect, Shively, St. Matthews, St. Regis Park
- Old Louisville and Limerick neighborhoods: conditional use permit required even for owner-occupied
- Fines: $125 first offense, then $250, $500, $1,000, each day counted separately; $125/day for advertising unregistered rentals
- Leases, HOA bylaws, deed restrictions still apply and override Metro registration
Taxes and Fees
- Kentucky sales tax on lodging: 6%
- Kentucky state transient room tax: 1%
- Louisville local transient room tax: 3%
- Total combined: 10% (for stays under 30 consecutive days; 30+ day stays are exempt from transient taxes)
- Platforms (Airbnb, Vrbo) collect and remit taxes automatically as of January 1, 2023
- Occupational license tax registered with the Revenue Commission
Official permit or registration page
Next Step
Legal is one half of the decision. The other half is whether the deal earns enough to be worth the risk.
Sources
Frequently Asked Questions
- Can a Renter Do Rental Arbitrage in Louisville?
- In principle, but it's the hard route. A unit you don't live in in a residential zone needs a conditional use permit, with a hearing, a 600-foot spacing rule and about six months. A lease or HOA ban also overrides it.
- What Does Registration Cost?
- $250 a year per property, plus a Tax Reporting Number from the Revenue Commission.
- What Does a Conditional Use Permit Cost?
- $200 pre-application, then $560 for owner-occupied or $1,260 for non-owner-occupied.
- What Are the Fines?
- $125 for a first offense, then $250, $500 and $1,000, with each day counted separately.