Picture this: You’re strolling down a Tennessee street, where a zero lot line complex sits across from a single-family house. Both provide shelter, both serve as homes - yet one is taxed as a business while the other is taxed as a residence. This discrepancy isn’t just an accounting error; it’s a fundamental misinterpretation of the Tennessee Constitution’s Article II, Section 28, which clearly states that taxation should be based on the actual use of a property. The zero lot lines are taxed as commercial for no reason other than both units are owned by the same person and are rented to a family.
In Tennessee, multi-family dwellings are taxed roughly 60 percent higher than single-family homes. This stems from an outdated and flawed classification system that treats properties with two or more rental units as “industrial and commercial” simply because they generate rental income. This classification, upheld by judicial precedent in Castlewood, Inc. v. Anderson County ignores the primary function of these properties—they are homes.
Adding insult to injury, townhome developments structured as condominiums are being assessed as commercial properties when there is common ownership of two or more units; further burdening residents with excessive tax burdens. This misinterpretation has serious consequences: property taxes are ultimately passed down to tenants through rent increases, making housing less affordable across the state.
The situation is exacerbated by Tennessee’s deed of trust system, where legal title is held by a trustee while the homeowner retains equitable ownership. Some have used this structure to argue that mortgaged homes operate as commercial entities. This logic is flawed. If followed to its conclusion, it would suggest that any financed home( it has a mortgage) is a commercial venture, which clearly contradicts both common sense and the intent of the Tennessee Constitution.
The General Assembly must act. The only fair interpretation of Article II, Section 28 is that taxation should be based on the actual use of a property. A home—whether a single-family house, a rented townhouse, or a condominium—should be classified as residential if it serves as a place of dwelling. Anything less is an abuse of judicial precedent that prioritizes tax revenue over fairness.
The state legislature must move swiftly to correct this misclassification. Tennesseans deserve a tax system that ensures affordability, protects homeowners, and upholds the constitutional principle of fairness. A home is a home—no matter how many families live there.
Rob Mitchell
Assessor of Property
Rutherford County, Tennessee