Lexington, KY Airbnb & Short-Term Rental Regulations 2026

Regulation Overview

A university and horse-country market (University of Kentucky, bourbon tourism, equine events) with steady year-round demand; the city tightened its rules in 2023 to require a zoning-compliance check before any STR can register.

Lexington requires a zoning-compliance check, a paid annual license, and $1M liability insurance, plus a residency requirement for its 'Hosted' STR category — real conditions — but no confirmed citywide cap or blanket owner-occupancy rule covering all STR types was found.

Kentucky State Law

State preemption: No state preemption currently in effect. Kentucky Senate Bill 112 (2026 Regular Session), which would bar local conditional-use-permit requirements, density caps, residency requirements, and location/time restrictions on short-term rentals, was introduced 1/21/2026 and remained pending in a Senate committee as of the last recorded legislative action (8/19/2026) — it has NOT been enacted, vetoed, or otherwise resolved as of this research date.

Statewide rules: No statewide STR registration or licensing program exists. Airbnb/VRBO collect and remit Kentucky's 1% statewide transient room tax (KRS 142.400) on behalf of hosts, and since January 1, 2023 these platforms are also required to collect and remit local transient room taxes.

Taxes: Kentucky's 6% state sales tax applies to short-term lodging, plus a 1% statewide transient room tax (KRS 142.400), plus local transient room taxes that vary by city/county.

2025–2026 legislation: SB 112, a broad statewide STR-preemption bill that would void local conditional-use-permit and density-cap ordinances like Louisville's and Lexington's, is pending in the Senate as of September 2026 and has not become law. Its status should be reconfirmed before assuming current local ordinances will remain unchanged.

Lexington Rules

Governing jurisdiction: Lexington-Fayette Urban County Government (Division of Planning for zoning; Division of Revenue for licensing).

• Lexington's STR registration requirement was approved by the Urban County Council in July 2023, layering a zoning-compliance check on top of existing business licensing.
• Operators need three separate approvals: a Zoning Compliance Permit, a Business License, and a Special Fees License renewed annually.
• The Special Fees License costs $200/year for the first unit and $100/year for each additional unit.
• STR operators must carry general liability insurance of at least $1,000,000 per occurrence, maintained at all times while licensed.
• The 'Hosted Short-Term Rental' category specifically requires a permanent resident to live at the unit, verified by two forms of documentation.
• Operating without a license can result in fines of up to $500 per day.
• Kentucky's pending SB 112 could preempt Lexington's entire licensing structure if it becomes law — a live risk investors should track.

Not confirmed

We could not verify the following against a primary source. Confirm each with the jurisdiction before you rely on it:

• Whether non-owner-occupied ('unhosted') STRs are permitted citywide, and under what zoning districts.
• Any zones where STRs are banned outright.
• Minimum stay and occupancy limits.
• Whether the Zoning Compliance Permit or Special Fees License transfers to a new owner on sale.
• Exact local transient room tax rate.

Buyer Due Diligence Checklist

Before you write an offer on a short-term rental here:

• Get a written determination from the governing jurisdiction for the specific parcel. Verbal guidance from anyone else is not diligence.
• Establish which jurisdiction governs — city, town, village and unincorporated county can differ sharply within a few miles.
• Ask whether an existing permit transfers on sale. In many markets it does not, and a listing marketed as a running short-term rental may convey nothing of the sort.
• Read the HOA or condo covenants during your inspection period. Private covenants bind even where the jurisdiction permits the use.
• Model revenue against the legal occupancy cap, not the bedroom count.

Frequently Asked Questions