The Tennessee General Assembly adjourned its 2026 legislative session sine die on April 23, marking the end of its two-year term. This year, Enterprise Community Partners actively monitored legislation in the Volunteer State with the help of our Associate Director of State and Local Policy, Erika Thomas, based in Nashville. 

Over the last few years, Tennessee has experienced a growing housing affordability crisis spurred in large part by the post-pandemic boom in population. Both Governor Bill Lee and the state legislature took notice, introducing proposals aimed at increasing supply, expanding tenant protections, promoting transparency in real estate acquisition, and allocating state funding toward housing development.

Key Budget Outcomes for Housing

Starter Home Revolving Loan Fund
In his 2026-2027 FY budget, Governor Lee proposed a one-time $30 million appropriation to establish a self-sustaining fund to support first-time homebuyers by providing 0% interest loans to builders for the construction of owner-occupied homes under 1,500 square feet. While the program was ultimately not funded, lawmakers did redirect these dollars to a new workforce housing pilot program.

Rural Development Transformation Fund
The Tennessee Rural Development Fund, a CDFI serving the State of Tennessee, received a $15 million nonrecurring appropriation to support capital projects in rural and economically distressed counties. The fund helps support business development and infrastructure planning across the state, in addition to financing multifamily housing projects.

Housing Assistance Pilot Grant
Lawmakers provided $1 million to the Department of Aging and Disability to fund a Housing Assistance Pilot Grant through the agency’s Housing Innovation Program. The Housing Innovation Program works to expand and enhance housing opportunities for people with disabilities and older adults across Tennessee.

Significant Bills That Passed

Community Workforce Housing Innovation Pilot Program (SB 2410/HB 2509)
Touted as a middle-income housing initiative, this bill establishes a $20 million loan fund to support the construction and rehabilitation of “workforce housing.” The bill requires that projects set aside at least 80% of units for workforce housing (defined as up to 150% AMI) and at least 50% of units for "essential services personnel." Language in the bill requires the General Assembly to assess the effectiveness of the program in meeting housing needs on or before January 1, 2029.

The program will be administered by the Tennessee Housing Development Agency (THDA), and the agency shall provide at least one loan in each of Tennessee’s three Grand Divisions. Projects must be targeted in high-growth, high-cost jurisdictions that incentivize public-private partnerships to develop or preserve affordable rental and home ownership community workforce housing.

LIHTC Property Tax Assessments (SB 539/HB 753)
Tennessee is one of a handful of states that has allowed the inclusion of low-income housing tax credits when assessing property valuations for tax purposes. For jurisdictions that choose to adopt this framework, the bill establishes a methodology for assessing property taxes on newly developed, multi-unit rental housing projects subject to government restriction on use.
Beginning July 1, 2026, property tax assessors must consider a property’s actual income and rent restrictions when calculating its valuation, and they must exclude the amount of housing tax credits received. It also requires assessors to use state-defined capitalization rates to account for the real risks associated with affordable housing (e.g. diminished ownership control, income generating potential, liquidity, property conditions, etc.). These rates will be updated and published annually in consultation with THDA.

Streamlining Development Permits (SB 2237/HB 2552)
Aimed at speeding up the construction of housing, this bill puts strict deadlines and limits on local jurisdictions when reviewing real estate development projects. Governments will now be required to approve a written application within 30 business days of receipt or send a written list of deficiencies to the applicant. If the government misses these deadlines, the project is automatically deemed approved. For applications that are denied, local governments must refund 50% of the fees a developer paid during the review process.

Bills That Were Unsuccessful

Recordation Tax Reallocation (SB 1080/HB 649)
This carryover bill from the 2025 session would have reallocated 50% of the recordation taxes on the transfer of realty back to the respective locality where the property was purchased. The bill authorized funds to be used for infrastructure projects, including roads, bridges, schools, and other public facilities. While housing was not explicitly mentioned, this funding could have provided local governments with an additional revenue source for infrastructure needed to support housing development projects.

Homes Not Hedge Funds Act (SB 242/HB 298)
Since 2021, Tennessee has seen a significant rise in corporate ownership of single-family homes which has strained already limited supply for first-time buyers. The Homes Not Hedge Funds Act was an effort to restrict large institutional buyers from purchasing more than 100 single-family homes for rental purposes in counties with populations over 150,000. Although the bill had bipartisan support and passed the Senate unanimously, it was defeated in the House.

REIT Registry and Reporting
Several measures aimed at bringing more transparency to institutional investor ownership of residential rental properties were introduced during the legislative session. SB 1601/HB 1501 would have allowed a municipal government to create and require the use of a landlord registry for a Real Estate Investment Trust (REIT) that owns or operates more than 10 properties within the municipality. HB 501 legislation passed the House but did not advance in the Senate. Another proposal, SB 2126/ HB 1777, would have required the state Comptroller to submit a report to the Tennessee General Assembly of de-identified information related to REIT purchases of single-family homes in the state for 2025.

Accessory Dwelling Units (SB 1231/HB 2031)
This legislation would have prohibited a local government from adopting certain restrictive requirements for ADUs, such as limiting ADU construction to less than 850 square feet, prohibiting owners from renting ADUs, and requiring owner occupancy of the primary residential dwelling on the property.

State Housing Tax Credit (SJR0027)
Building on legislation passed in 2024 allowing THDA to allocate a state housing tax credit, this bill would have authorized Tennessee rural and workforce housing credits in the amount of $10 million per year for 10 years for 2026, 2027 and 2028. The bill required that at least fifty percent of the Tennessee rural and workforce housing tax credits must be allocated to qualified projects in an eligible rural area.

Several tenant protection bills introduced during the 2026 legislative session also did not advance. The Affordable Housing and Tenant Protection Act (SB 961/HB 955) would have enabled local governments to establish maximum rents and application fees for private residential properties via a two-thirds vote of the governing body. With the growing prevalence of algorithmic devices and data-sharing platforms like RealPage, the Stop Rent Rigging Act (SB 1990/HB 2234) sought to restrict landlords from using these technologies to automate rental prices, lease renewal terms, and occupancy levels.