Understanding ADU housing laws and regulations in Tennessee

Tennessee has no statewide ADU statute, and the General Assembly has let every bill that would have created one die in committee, most recently HB 2031 in March 2026. That leaves each city and county zoning code to decide whether you can build an accessory dwelling unit, how large it can be, whether you must live on the lot, and whether a guest can book it for a weekend. The same backyard cottage is permitted by right in Nashville's Urban Services District, needs special-use approval in most Knoxville residential zones, and cannot be rented by the night anywhere in unincorporated Hamilton County.

Tennessee ADU laws in short: no state mandate, all local

Tennessee ADU laws are whatever the local zoning ordinance says they are. T.C.A. § 13-7-101 lets county legislative bodies regulate building location, size, lot coverage, yard setbacks and density, and T.C.A. § 13-7-201 grants municipalities the same power. TACIR's 2024 housing-affordability report describes the arrangement plainly: "local governments have broad authority over their own land use," and the state's few preemptions (inclusionary zoning, rent control) do not touch ADUs.

The Mercatus Center and Pew counted eighteen states with ADU preemption laws by late 2025. Tennessee is not one of them. If you own rentals elsewhere, set aside what you learned building under California's ADU laws or any other state's; no Tennessee statute tells a city what it must allow.

For a rental owner, an ADU is a second income stream on land you already own, which is why the legislature keeps getting bills on the subject. Every one has failed:

• Bill | What it would have done | Outcome
• HB 2292 / SB 2124 (2024) | Required municipalities to allow at least one ADU per single-family lot | Sponsors withdrew HB 2292 on March 15, 2024
• HB 2423 / SB 2237 (2024) | Listed ADUs as one of twelve optional housing-reform strategies | Taken off notice March 27, 2024
• HB 2031 / SB 2131 (filed January 22, 2026) | Barred local minimum sizes under 850 sq ft, owner-occupancy mandates, extra parking, lot-size limits and ceiling heights below 14 ft; deemed permits approved after 60 days of inaction | Taken off notice in House subcommittee March 11, 2026

The only ADU-adjacent measure that became law is Public Chapter 208, signed April 15, 2025. It defines "accessory buildings," including ADUs, for subsurface-sewage variance purposes and changes nothing about zoning.

What counts as an ADU in Tennessee (and what does not)

An accessory dwelling unit is a second, self-contained home with its own kitchen, bathroom and sleeping space on a lot that already holds a single-family house. Tennessee codes recognize three shapes: a detached unit such as a backyard cottage or converted freestanding garage (Nashville calls these DADUs), an attached unit built onto the main house with its own entrance, and an interior unit carved out of a basement or attic. In every case the unit sits on a permanent foundation and goes through the residential building code.

That foundation is the test that separates an ADU from a tiny home parked in the driveway. Shelby County treats a permanent tiny home on a foundation as a single-family dwelling when it is the only home on the lot and as an ADU when it is the second, subject to the same zoning minimums as any other second unit (CityRuleLookup).

Two local codes narrow the definition further. Memphis and Shelby County will not count a unit located inside the principal structure as an ADU, so a basement apartment there is not a UDC ADU (ZTA 22-1 presentation). Chattanooga allows detached or attached ADUs only alongside single-family detached houses; townhouses, duplexes, apartments and condominiums cannot add one (Chattanooga Code § 38-45).

ADU vs. tiny home on wheels

A tiny home on wheels is a recreational vehicle in Nashville, Memphis, Knoxville and Chattanooga, and none of the four lets you occupy one as a permanent dwelling or count it as an ADU. Chattanooga's regional planning agency states it flatly: "Tiny houses on wheels are not permitted to be used as an ADU" (CHCRPA). Hamilton County's code rewrite reached the same conclusion (Local 3 News), and Shelby County's ZTA 24-2 classifies them as RVs. CTAS notes that self-propelled RVs fall outside Tennessee's manufactured-home definition, so a THOW cannot enter through the manufactured-housing rules either.

The second hurdle is the building code itself. IRC Appendix Q, the model code's optional tiny-house chapter, is not adopted statewide, and the four metros split on it:

• Jurisdiction | IRC edition | Appendix Q adopted?
• Tennessee (State Fire Marshal) | 2018 IRC, effective July 16, 2020 | No (Rule 0780-02-02)
• Nashville / Davidson County | 2024 IRC, BL2025-898, July 16, 2025 | No; adopted appendices are BA, BD, BE, BF and CD only (Legistar)
• Knoxville (city) | 2024 IRC, O-125-2024, effective January 1, 2025 | Yes, along with Appendix BB (Tiny Houses) (O-125-2024)
• Knox County | 2018 IRC, O-18-10-101, November 19, 2018 | Yes (O-18-10-101)
• Memphis / Shelby County | 2021 IRC, Joint Ord. No. 569, effective April 1, 2025 | No; the ordinance adopts no IRC appendices (Shelby County)
• Chattanooga / Hamilton County | 2018 IRC | Not established in the sources reviewed

The State Fire Marshal's Commissioner's Inspection Program, announced in August 2024, was developed to allow construction, inspection and permanent residential use of tiny homes under consistent design and fire-resistance standards. It gives a foundation tiny home an inspection path; it does not change any city's RV classification for units on wheels.

Eligible structure types

The structure types that can qualify as an ADU in Tennessee, subject to the local definitions above, are:

• Detached new construction, the backyard cottage or DADU, on its own foundation
• An attached addition that shares a wall with the main house and has a separate entrance (Chattanooga counts these; Memphis requires the unit to stand apart from the principal structure)
• A converted detached garage or, outside Memphis, a converted basement or attic
• A modular or prefab unit set on a permanent foundation. In Williams v. Fox, 219 S.W.3d 319 (Tenn. 2007), the Tennessee Supreme Court held that a covenant banning "mobile homes and trailers" did not reach a modular home, because the covenant did not list it
• A tiny home on a foundation that meets the applicable IRC edition and the local ADU size and setback rules

Memphis is mid-rewrite. The Memphis 3.0 UDC replacement (ZTA 2026-001) reached Public Draft 3 in June 2026 with a proposed effective date of January 1, 2027, and it is not yet enacted (901 UDC Update). Any definition you rely on in Shelby County should be checked against that draft.

City-by-city rules: Nashville, Memphis, Knoxville and Chattanooga compared

The four largest cities disagree on nearly every dimension that affects a rental plan. The table summarizes the controlling numbers; the sections below cover the ordinances, districts and offices behind them:

• City | Max ADU size | Height cap | Detached setbacks | Owner-occupancy | STR eligibility | Permit office
• Nashville / Davidson County | 850 sq ft on lots under 10,000 sq ft, 1,200 sq ft on larger lots per the enacted ordinance text (Metro Codes' guidance page lists 700 and 850) | Single-story eave 10 ft; two-story eave 17 ft; ridge below the house's ridge and under 27 ft | 3 ft side and rear for footprints up to 850 sq ft behind the house (10 ft rear if garage doors face an alley) | Required for one of the two units | New DADUs in residential zones cannot hold an STR permit | Metro Codes
• Memphis / Shelby County | Smaller of 700 sq ft or one-third of the house on lots from 7,000 sq ft to 1.5 acres; 50% of the house on 1.5+ acres; up to 10% administrative deviation | Not taller than the house (up to 1.5× with ground-floor parking) | 5 ft rear; district side setback, typically 5 ft | None identified in the current UDC | Expressly allowed, up to three sleeping rooms | Shelby County Division of Planning and Development (zoning); Office of Construction Code Enforcement (permits)
• Knoxville | 600 to 1,200 sq ft by lot tier; never more than 40% of the house or two bedrooms | No ADU-specific cap in the ordinance | 5 ft side; 10 ft rear | Required for one of the two units | Not expressly addressed; owner-occupied Type 1 framework applies | Plans Review & Inspections
• Chattanooga | 200 to 800 sq ft by exterior dimensions | 24 ft (two stories where the house has more than one) | 5 ft interior side, rear and alley; 10 ft corner side | None; both units must share an owner | Homestay only, within the STVR overlay; absentee barred in residential zones | Land Development Office

Nashville and Davidson County

BL2025-1007 made detached ADUs a base-code allowance across the Urban Services District. Metro Council passed it December 4, 2025 by a 29–8 vote with one abstention, the mayor signed it December 8, and it took effect December 12 (Nashville Scene). The ordinance deleted the old gatekeeping conditions: a lot no longer needs 15,000 square feet, alley frontage, or a historic or urban design overlay to qualify (WPLN).

Outside the USD, in the General Services District, a DADU still needs a DADU overlay on AR2a, AG, R/R-A or RS/RS-A property, or pre-existing DADU permission. The standards themselves live in Metro Code § 17.16.030.G, and the enacted text requires "similar style, design and material color as used for the principal structure," a footprint no larger than the house, one DADU per lot, and a single curb cut for the whole lot with a driveway no wider than 12 feet.

The size cap is the one number you cannot take from a single source. The ordinance text says 850 and 1,200 square feet by lot size; the Metro Codes DADU page, updated December 22, 2025, says 700 and 850. The ordinance is the controlling document, but the guidance page may reflect third-reading amendments, so confirm the cap with Metro Codes before you pay for drawings.

BL2026-1257, effective May 1, 2026, extended DADU eligibility to legally created lots with non-conforming area, as long as the lot holds at least 3,750 square feet and predates Title 17.

Memphis and Shelby County

Memphis ADU rules sit in UDC § 2.7.2D, and the two amendments that matter to investors are ZTA 22-1, which dropped the minimum lot from 10,000 to 7,000 square feet, and ZTA 24-2, which the Land Use Control Board approved April 11, 2024. ZTA 24-2 added the 10% administrative deviation shown in the table and cut the clerestory-window buffer from 10 feet to 5. Retrieved sources do not show ZTA 24-2's final ordinance number or confirmed effective date, so ask the Division of Planning and Development which version governs your application.

The UDC permits one ADU per lot, only as an accessory to a single-family detached house, and requires the unit to be architecturally consistent with the house. The ADU's living area can never exceed the living area of the principal structure, regardless of lot size (ZTA 22-1 presentation).

Every ADU application goes through administrative site plan review at the Shelby County Division of Planning and Development, 160 N. Main Street, Memphis, TN 38103, 901-222-2300. Building permits and inspections run through the Office of Construction Code Enforcement, 6465 Mullins Station Road, Memphis, TN 38134, 901-222-8300, with online filing through Accela Citizen Access. Both offices will be applying a rewritten code if Memphis 3.0 takes effect on its proposed January 1, 2027 date.

Knoxville

Knoxville's ADU standards are in Article 10, Section 10.3.B of the city zoning ordinance, last amended for ADUs by Ordinance O-25-2024 on March 5, 2024. The lot tiers behind the table's 600-to-1,200-square-foot range run 600 sq ft on lots of 5,000 to 6,999 sq ft, 800 sq ft on 7,000 to 9,999, 1,000 sq ft on 10,000 to 19,999, and 1,200 sq ft at 20,000 sq ft or more.

Zoning approval is the step most owners underestimate. The Article 9 use matrix lists ADUs as a Special Use in RN-1 through RN-7, so most residential lots need a special-use approval rather than a routine permit; only the EN district allows them by right.

Plans Review & Inspections handles the building permit at 400 Main St., Suite 475, Knoxville, TN 37902 (865-215-4311, BldgInspections@KnoxvilleTN.gov, weekdays 8:00 a.m. to 4:30 p.m.) (city page). Applications go through Accela Citizen Access and plans upload through the KnoxPlans portal. The city's 2024 building-code update added Appendix BC, Accessory Dwelling Units, so your drawings are reviewed against an ADU-specific chapter.

Unincorporated Knox County uses different vocabulary and different numbers. The county ordinance calls the use a "garage apartment." In the RA (Low Density Residential) zone it is permitted on review with a 12,000-square-foot minimum lot, an 18-foot maximum height to the ceiling joists, and an 8-foot side setback for multi-story structures (Knoxville-Knox County Planning). In the A (Agricultural) zone a second dwelling is allowed on lots of two acres or more (Planning). The sources reviewed identify no countywide owner-occupancy rule or floor-area cap for the county.

Chattanooga

Chattanooga rewrote its entire zoning code as Ordinance No. 14137, adopted July 23, 2024 and effective December 18, 2024; ADU standards are in Article IX, Section 38-43(b). ADUs are allowed by right in RN-1-3, RN-1-5, RN-1-6, RN-1-7.5, RN-2, RN-3, TRN-1, TRN-2, TRN-3, C-N and C-NT (§ 38-45).

The ADU cannot be sold off separately; it must stay under the same ownership as the house and cannot be subdivided. Attached ADUs follow the principal structure's setbacks, while detached units must sit in the rear or interior side yard and never in the front yard.

Two offices split the work. The Land Development Office (423-643-5891) issues permits and inspects construction, and the Chattanooga-Hamilton County Regional Planning Agency (423-643-5902) interprets the zoning standards (CHCRPA).

Size, height, setback and lot requirements you can expect

On a standard urban lot in any of the four cities, plan for a cap between 700 and 850 square feet. The main dimensional rules break down this way:

• The 1,200-square-foot ceilings in Nashville and Knoxville apply only to lots of 10,000 and 20,000 square feet respectively, while Chattanooga stops at 800 no matter how large the parcel.
• Chattanooga sets a 200-square-foot floor and requires a second means of egress for any unit between 701 and 800 square feet. It measures size by exterior dimensions, including conditioned lofts and stairwells.
• Memphis limits you to one-third of the house's gross floor area on most lots and 50% on 1.5 acres or more. Knoxville caps the ADU at 40% of the primary dwelling and two bedrooms.
• Nashville forbids any other accessory structure over 200 square feet once a DADU is on the lot. Memphis further limits all accessory structures combined to 75% of the principal structure's square footage outside the CA district (CityRuleLookup).

Minimum lot sizes range from 3,750 square feet in Nashville (non-conforming lots under BL2026-1257) to 5,000 in Knoxville, 7,000 in Memphis, and 12,000 in Knox County's RA zone. A Memphis lot under 7,000 square feet gets no ADU at all. A septic-served rural lot must also clear TDEC's minimums of 20,000 square feet with public water or 25,000 with a private well (Rule 0400-48-01-.03).

Height rules are measured differently in each city, which is why the table's numbers are hard to compare. Nashville measures eave height from average finished grade and requires the DADU to stay below the house's eave line and ridge. Chattanooga measures 24 feet to the roof peak for a one-story house. Memphis ties height to the house itself and adds a setback penalty: any portion of the ADU above 20 feet must sit at least 20 feet from side and rear lines that do not abut an alley (Shelby County UDC).

Setbacks tighten as the unit grows. Nashville's 3-foot side and rear allowance applies only to footprints of 850 square feet or less behind the house; anything larger reverts to full district setbacks (Metro Codes). Knoxville bars a detached ADU from any front yard or corner side yard. Memphis adds a privacy rule: no windows other than clerestory windows on ADU walls within 5 feet of an abutting single-family parcel.

Parking is the least consistent requirement. Knoxville demands one off-street space for the ADU. Memphis requires an extra space only if the ADU pushes the lot below the zoning minimum, and any new space must be in a side or rear yard or on the ADU's ground floor. Chattanooga sets no ADU parking minimum but requires you to keep or replace the house's existing required parking. Nashville regulates access rather than spaces: alley lots must use the alley, and no new curb cuts are allowed from a public street.

Owner-occupancy and whether you can rent the ADU out

Owner-occupancy is the rule most likely to kill an investor's ADU plan in Tennessee, and it turns entirely on which city the lot is in. Nashville's ordinance text reads: "One of the two dwellings shall be owner-occupied." Before Metro Codes issues a permit, you must record a restrictive covenant with the Register's office stating that the DADU is accessory and may be used only under the § 17.16.030.G conditions. That covenant runs with the land, so a future buyer inherits the same restriction.

Knoxville's ordinance says "One of the dwelling units must be occupied by the owner of the property," and City Council kept that language when it amended the ADU rules through O-25-2024 (WBIR). In both cities, an investor who lives elsewhere can rent the house or the ADU, but not both.

Chattanooga and Memphis take the opposite approach. Chattanooga requires only that the same owner hold both units; CHCRPA's guidance says renting is allowed unless covenants or an HOA restrict it. The Memphis UDC sources reviewed contain no owner-occupancy requirement. If your model depends on leasing both units to tenants, those two cities are where the zoning permits it.

Long-term leasing of a permitted ADU faces no separate state restriction. The one state protection worth knowing runs the other way: under T.C.A. § 66-27-703, if an HOA amends its declaration to prohibit rentals, an owner already renting long-term keeps a vested right to continue until the property transfers.

Can your Tennessee ADU be an Airbnb? Short-term rental rules

A short-term rental (STR) permit is a separate approval from the ADU permit, and in three of the four cities the answer for a new ADU is no or heavily conditioned. Memphis is the exception.

Nashville's STR regime runs under BL2024-478, effective November 12, 2024, codified at Metro Code § 6.28.030, with online applications since March 11, 2026 (Metro Codes legislative history). Two permit types exist: STRP Owner-Occupied and STRP Not-Owner-Occupied. BL2025-1007 added a clause aimed squarely at ADUs: on any lot zoned single-family, Residential Neighborhood or Residential Limited where a new DADU is built or converted from an accessory structure, owner-occupied STRPs are not permitted in the DADU. Non-owner-occupied STRPs are already banned in RS, R, AR2A and RM zones (permit types). A new DADU in a Nashville residential zone therefore cannot operate as an STR at all. The owner-occupied permit also requires a natural person as owner (no LLCs), four primary-residence documents, and one permit per lot.

Knoxville's ordinances (O-245-2017 and O-284-2017, effective January 2018) create Type 1 permits for owner-occupied units in residential districts and Type 2 for non-owner-occupied units in non-residential districts, with a citywide cap of two Type 2 permits per person or entity (Knoxville STR FAQ). Nothing in the ADU ordinance expressly authorizes or prohibits the ADU as the STR unit.

Because ADUs sit in residential districts, the Type 1 rules apply, which means you reside onsite in the principal residence and supply two residency documents. Confirm the arrangement with zoning staff before listing. Occupancy is capped at two guests per bedroom plus two, maximum 12.

Chattanooga issues STVR Certificates in two categories. Homestay applies to a primary residence you occupy at least 183 days a year and is available inside the STVR Homestay Overlay or commercial zones. Absentee certificates are available only in commercial zones that allow hotel or motel use (Chattanooga STR page).

The rule on ADUs states: "A short-term vacation rental may include a primary dwelling unit or a secondary (accessory) dwelling unit but not both structures on one lot." An owner-occupied homestay ADU may qualify inside the overlay; a non-owner-occupied ADU STVR in a residential zone is not permitted.

The overlay expanded in Council District 1 on June 11, 2024 and District 5 on October 21, 2025, and the city's STVR GIS map shows parcel-level eligibility. Ordinance 14238 (May 2025) added a 25% cap on STVRs in multifamily buildings and limited STVRs to structures with no more than five bedrooms (Council minutes).

Unincorporated Hamilton County closed the door entirely. Resolution 1224-33, adopted December 18, 2024, states that ADUs, attached or detached, cannot be used as STVRs.

Memphis wrote ADU short-term rentals into its ordinance. Ordinance 5856, codified as Chapter 5-44 and effective July 1, 2023, provides: "A property owner may rent a detached accessory dwelling unit that complies with Ordinance No. 4232 governing the minimum conditions of property as short term rental property provided the detached accessory dwelling unit contains not more than three (3) sleeping rooms." STRs are an accessory use in every district that allows residential use, with a permit (Develop 901). The owner does not need to live there; a responsible party must be within 50 miles. Memphis also requires at least $1,000,000 in hazard and liability coverage on the unit and caps STRs at 5% of units in multifamily buildings.

Fees and taxes differ enough to affect the pro forma:

• City | Permit type | Application fee | Renewal | Occupancy tax
• Nashville | STRP (either type) | $313 | $313 annually | Not stated in sources reviewed
• Knoxville | Type 1 / Type 2 | $70 / $120 | $50 | 3% per city FAQ; 4% per hotel/motel return (confirm with the Business License and Tax Office)
• Chattanooga | Homestay / Absentee | $250 / $500 | $250 / $500 | Not stated in sources reviewed
• Memphis | STR permit | $300 (non-refundable) | $150, requested at least 30 days before expiration | 4.0% of taxable revenue (2026 form)

One state law protects existing operators. The Tennessee Short-Term Rental Unit Act (Public Chapter 972, effective May 17, 2018) grandfathers a property lawfully used as an STR before a later local restriction, until it is sold or transferred, sits unused as an STR for 30 continuous months, or racks up three violations. It does not help a new ADU, because the legacy status attaches to prior lawful use.

Permits, utilities and fees: the step-by-step path

The permit path runs through the same sequence in every city, with different offices at each stop.

1. Confirm the lot qualifies under zoning. Check the district, lot area and any overlay: Metro Codes' DADU page for Nashville, the Division of Planning and Development's administrative site plan review in Shelby County, the Article 9 use matrix (and a special-use application in RN districts) in Knoxville, and CHCRPA's zoning check in Chattanooga.
2. Pull the recorded covenants and the FEMA flood map for the parcel. A deed restriction or a Special Flood Hazard Area designation can stop the project before any permit is filed (both are covered in later sections).
3. Record the restrictive covenant if you are in Nashville. Metro will not issue the DADU permit until the covenant is on file with the Register's office.
4. Design to the local IRC edition: 2024 IRC in Nashville and Knoxville (with Knoxville's Appendix BC), 2021 IRC in Memphis and Shelby County, 2018 IRC in Chattanooga and Hamilton County.
5. File the building permit. Nashville charges $5.00 per $1,000 of valuation plus a plan examination fee equal to half the permit fee, so a $200,000 DADU runs about $1,000 plus $500 (2025 fee schedule). Chattanooga charges $25 for the first $1,000 of valuation and $5.75 per additional $1,000 (residential permit page). Shelby County and Knoxville both take applications through Accela Citizen Access, with Knoxville plans uploaded to the KnoxPlans (ProjectDox) portal.
6. Pay water and sewer fees and settle the meter question. Nashville requires at least 30% of water and sewer capacity fees paid before initial building-permit sign-off (MWS development guide).
7. Pull the septic permit first if the lot is not on sewer. TDEC says to get it before any dirt work or pad construction; processing can take up to 45 days (TDEC FAQ).
8. Schedule inspections through to the certificate of occupancy. The permit record also goes to the county assessor, which triggers the tax change covered below.

Utility fees are where the four cities diverge most in dollars, and the meter rules decide whether you can bill a tenant separately:

• Utility (effective date) | Water tap | Sewer / capacity | Separate meter for the ADU
• Nashville Metro Water Services (March 10, 2026) | 5/8" $500; 3/4" $525; 1" $560 | Water capacity $1,375 and sewer capacity $2,300 per 350-GPD unit ($3,675 combined); sewer tap 6" $360; CEBRA fee $3,026 per unit in the Central East Bank only (fee schedule) | Permissive: Metro guidance says a DADU "may be served by separate utility meter(s)"; MWS confirms the GPD unit count (Planning minutes)
• KUB, Knoxville (May/July 2025) | 5/8" or 3/4" new tap $1,000 ($700 for meter install on an existing tap); 1" $1,400 (water procedures) | Wastewater tap minimum $1,700 (fees); no separately named impact fee, and a homeowner adding one ADU is generally exempt from Capacity Reservation Program charges (development guide) | KUB's rules exclude a second dwelling unit from a single "premises" and require written approval for separate services; get a project-specific determination before construction
• MLGW, Memphis (May 26, 2026) | 3/4" $777; 1" $912; Shelby County residential capacity charge $500 (schedule of charges) | City sewer development fee by meter size: 5/8" $2,255; 3/4" $3,383; 1" $5,638 (Ord. 5793) | MLGW's additional-meter request form (revised July 6, 2026) lists "guest house" as an eligible structure (form)
• Hamilton County WWTA and Tennessee American Water, Chattanooga area | TAW new service fee $25; the company furnishes and maintains meters (TPUC No. 20) | WWTA tapping privilege fee $800 per residential unit, or by meter size (under 1" $800; 1" $950), whichever is higher (fee worksheet) | Not addressed in the sources reviewed

Rates are rising under all four providers. KUB approved 6% annual water increases for July 2025, 2026 and 2027 with 2% wastewater increases in the same years; Nashville MWS raised rates 3% on January 1, 2026; MLGW's final 4% installment took effect January 2026; and WWTA's October 1, 2026 rates are $20.45 per 1,000 gallons for standard service.

A rural parcel replaces the utility table with a septic design. TDEC's rules (Chapter 0400-48-01) set design flow at 150 gallons per day per bedroom, a minimum 750-gallon tank for two or fewer bedrooms (900 for three, 1,000 for four), and at least 370 square feet of trench-bottom area per bedroom for a conventional drainfield in soils percolating between 10 and 75 minutes per inch, plus a reserve area for a duplicate field. Statewide policy DWR-P-03 (July 29, 2024) states that "Each individual dwelling unit must be served by its own, separate septic system; one system is not authorized to serve multiple dwellings."

A few counties bend that rule. Williamson County allows shared systems for structures under common ownership on one lot with sufficient capacity, though each accessory dwelling typically still needs its own tank (Williamson County). Rutherford County allows sharing with proof of capacity. In most other counties, budget for a second system.

The construction permit costs $400 for a conventional system up to 1,000 gpd ($500 for an alternative system) and expires after three years (Rule 0400-48-01-.21). Blount, Davidson, Hamilton, Jefferson, Knox, Madison, Sevier, Shelby and Williamson counties run their own septic programs; the rest go through TDEC directly.

What an ADU costs to build in Tennessee, and how people pay for it

Nashville architecture firm Fabl Architecture estimates that a site-built detached ADU runs $200,000 to $250,000 for 400 to 600 square feet, about $250 to $475 per square foot, before design fees, landscaping, driveways and appliances (2026). No Tennessee newspaper has published its own cost survey, so every figure below comes from architects, builders and cost platforms with different scopes; read them as orientation rather than budget.

Costs vary by construction type and market:

• Market | Detached new-build | Garage or basement conversion | Attached addition | Prefab / modular
• Nashville | $200,000–$300,000 including design and permitting (ADUZoning.org); $150,000–$300,000 for 600 sq ft with utility connections of $10,000–$25,000 listed separately (Buildora IQ) | Garage $70,000–$120,000 (ADUZoning.org) or $80,000–$180,000 (Buildora IQ) | $100,000–$225,000 (Buildora IQ) | $100,000–$200,000 (Buildora IQ) to $200,000–$400,000 (ADUZoning.org), depending on whether the figure covers a kit or a fully installed, connected unit
• Knoxville | $220–$340 per sq ft all-in; an 800 sq ft unit at $176,000–$272,000 (Buildora IQ feasibility) | Garage $80,000–$180,000 (Buildora IQ) | $100,000–$225,000 | $100,000–$200,000
• Chattanooga | $100,000–$200,000 (Chattanooga Renovation, 2025) or $180,000–$320,000+ at $300–$450+ per sq ft (Peaceful Haven Homes, June 2026) | Garage $35,000–$75,000 (Chattanooga Renovation) or $90,000–$175,000 (Peaceful Haven); basement $40,000–$85,000 | Not broken out | Wind River Built Ronan, 390 sq ft, from $174,000
• Memphis | Not broken out | 600 sq ft ADU/garage conversion $49,737–$132,631, typical $82,894, with a −12% Memphis metro multiplier (RemodelerIQ, 2026) | Not broken out | Not broken out

The gap between the two Nashville detached ranges is mostly scope: Fabl excludes architecture and engineering fees and ADUZoning.org includes them. No Tennessee source reviewed publishes a dollar figure for design fees.

Costtobuildhouse.com (2026) ranks the state's markets for a 600-square-foot detached unit from Franklin and Brentwood at $110,000–$298,000 down through Nashville ($100,000–$275,000), Murfreesboro ($88,000–$248,000), Chattanooga ($78,000–$225,000), Knoxville ($75,000–$218,000) and Memphis ($65,000–$188,000). On prefab, a builder quoted by AARP puts factory-built units at "30 to 40 percent less expensive than a stick-built," while Angi (July 8, 2026) says prefab "can save up to 20% compared to custom builds." Shipping, crane, foundation and utility connections come on top of the factory price.

Financing is where Tennessee owners find the fewest local options. THDA has no ADU program (THDA). Metro Nashville's Barnes Fund serves nonprofit developers, and its expired ARPA round for homeowners 62 and older excluded detached DADUs (grant policy). Knoxville's Middle Housing Redevelopment Program, run by Housing and Neighborhood Development, offers zero-interest construction loans up to $200,000, but for duplexes through fourplexes, not single ADUs. Chattanooga's Down Payment Assistance Program (up to $15,000) counts a home with an ADU as an eligible purchase but does not fund construction. Memphis has no ADU-specific program.

The federal renovation products carry most ADU projects:

• FHA 203(k): Mortgagee Letter 2023-17, effective October 16, 2023, made adding an attached ADU (Standard 203(k)) and renovating an attached or detached ADU expressly eligible. The Limited 203(k) covers rehabilitation up to $75,000 with a nine-month completion window (ML 2024-13); the Standard allows 12 months. Lenders may count 75% of market or lease rent from an existing ADU and 50% for a new attached ADU, capped at 30% of total qualifying income.
• Fannie Mae HomeStyle Renovation: Finances up to 97% LTV on a one-unit principal residence with work done within 15 months (Fannie Mae). SEL-2025-08 (October 8, 2025) allows ADU rental income on purchases and limited cash-out refinances, capped at 30% of qualifying income; SEL-2025-10, effective March 31, 2026, extends eligibility to up to three ADUs on a one-unit property and one ADU on two- and three-unit properties.
• Freddie Mac CHOICERenovation: Adds or renovates an ADU under Guide Chapter 4607, counting lease-documented rental income up to 75% of the lease amount, capped at 30% of qualifying income, with at least three comparable rentals in the appraisal (Freddie Mac fact sheet).

Equity products fill the gap for owners who would rather not refinance the first mortgage. Fannie Mae's Eligibility Matrix (August 5, 2026) caps cash-out refinances on one-unit primary residences at 80% LTV. Bankrate reported that HELOC rates averaged 7.28% nationally on September 23, 2026, in a range of 3.99% to 11.60%; the CFPB warns that these variable-rate lines can see payments jump at the end of the draw period and that default risks the home. Tennessee-specific options include RenoFi, a platform whose partner lenders write ADU loans up to $750,000 or 90% of after-renovation value; Tennessee Valley Federal Credit Union's construction-to-permanent loan at up to 95% financing; ORNL Federal Credit Union's HELOC up to $400,000 at 95% LTV with a 10-year draw and 20-year repayment; and Truist's HELOC plus LightStream unsecured home-improvement loans of $5,000 to $100,000.

Tiny houses, counties without building codes and other edge cases

A tiny house is legal in Tennessee when it sits on a permanent foundation, meets the local IRC edition and clears the local ADU or single-family zoning rules; the RV classification for units on wheels covered above does not go away in rural counties. What does change outside the metros is who inspects the build, and in 37 counties the answer is nobody.

Tennessee's residential code system under T.C.A. § 68-120-101 puts every county in one of three statuses: SRBP, where the State Fire Marshal's Office permits and inspects; EXEMPT, where the local government enforces its own qualifying code; and OPT OUT, where the county legislative body has voted by two-thirds to enforce no residential code at all (SFMO). The statewide code is the 2018 IRC and 2018 IECC. An opt-out resolution expires 180 days after the next county election unless renewed, and a simple majority can reverse it (CTAS).

As of the SFMO's August 21, 2026 jurisdictions table, the opt-out counties are Benton, Bledsoe, Carroll, Claiborne, Cocke, Decatur, Fentress, Franklin, Grainger, Grundy, Hardin, Henderson, Henry, Houston, Humphreys, Jackson, Johnson, Lake, Lawrence, Lewis, McMinn, McNairy, Monroe, Moore, Morgan, Obion, Overton, Perry, Pickett, Polk, Scott, Sequatchie, Stewart, Unicoi, Van Buren, Wayne and Weakley. The opt-out covers only unincorporated land; a city inside one of those counties can enforce its own code. The 49 exempt counties enforcing local codes include all four metro counties (Davidson, Shelby, Knox, Hamilton) plus the growth ring around Nashville (Williamson, Rutherford, Wilson, Sumner, Maury).

"No building code" is narrower than it sounds. Three permits apply in every county regardless of opt-out status:

• Electrical permits and inspections, which counties cannot opt out of under Tenn. Comp. R. & Regs. 0780-02-01-.04 (SFMO electrical FAQ)
• Septic construction and modification permits from TDEC or the contract county, which run independently of the building code
• NFIP floodplain development permits, administered locally (TEMA)

Building without a certificate of occupancy carries costs you will feel at sale or refinance. The SFMO lists conventional mortgage difficulty, a possible insurance rating penalty (no ISO Building Code Effectiveness Grading discount) and a smaller resale pool (SFMO FAQ). Owners in opt-out counties can request a voluntary SFMO inspection, and the office issues a CO if the dwelling meets statewide standards (SFMO opt-out page).

Floodplains are the edge case that reaches inside the metros. Any ADU in a Special Flood Hazard Area needs a development permit under 44 CFR § 60.3, and FEMA P-2140 (August 2021) excludes from the lenient "accessory structure" category any building "for which any part is used for human habitation," naming "detached garages and carriage houses with a portion used as an apartment or a guest house." An ADU is regulated as a residential structure, and FEMA Technical Bulletin 2 bars wet floodproofing as a substitute for elevation. In a regulatory floodway, nothing goes in without engineering certification of no rise in flood levels.

Tennessee's model ordinance sets the lowest floor at least 1 foot above base flood elevation in AE zones and 3 feet above the highest adjacent grade where no BFE exists, and several jurisdictions go higher:

• Jurisdiction | Required lowest floor, AE zone
• Nashville / Davidson County | 4 ft above BFE (Stormwater Manual Ch. 5)
• Memphis / Shelby County | 2 ft above BFE
• Knoxville (city) | 1 ft above BFE (Chapter 12)
• Knox County | 1 ft above the flood protection elevation (the higher of existing 500-year or future 100-year)
• Chattanooga (city) | 2 ft above BFE for wood construction; 1 ft for concrete slab-on-grade
• Hamilton County | 1 ft above BFE (county FAQ)

Nashville also carries a post-2010 rule that matters for garage conversions. BL2010-794 prohibits all new structures in the floodway and forbids enlarging an existing structure beyond its current height or footprint. Any encroachment needs a no-rise certification and a variance from the Stormwater Management Committee, and fill that removes floodplain storage must be offset with compensating storage.

Septic-served rural lots add TDEC's setback grid to the site plan: the tank must sit 50 feet from a water supply, 5 feet from dwellings and 10 feet from property lines, and the disposal field 50 feet from the water supply, 10 feet from dwellings and property lines, and 25 feet from streams (Rule 0400-48-01-.11). On a 20,000-square-foot lot, the house, the existing field, its reserve area and a second field for the ADU can consume the whole parcel.

Property taxes, HOAs and deed restrictions after you build

Finishing an ADU raises your assessment the year it is ready for use, and the mechanism is an added improvement rather than a fresh look at the whole property. Tennessee assesses residential property at 25% of appraised value under T.C.A. § 67-5-801(a)(3), with no homestead exemption that changes the ratio for owner-occupants. Counties reappraise on 4-, 5- or 6-year cycles under § 67-5-1601; Davidson last reappraised in 2025 with 2028 next, Knox in 2026 with 2028 next, Shelby on January 1, 2025 with 2029 next, and Hamilton in 2025 with 2029 next.

Attorney General Opinion op25-007 (2025) confirms that § 67-5-1601 does not authorize reappraising the parcel as a whole between cycles. Instead, once the ADU is complete and ready for occupancy under § 67-5-603(b)(1), the assessor adds its value as a new improvement, priced on the same basis the county used at its last revaluation. Permits are how the assessor learns about it: Davidson County tracks every Metro Codes permit (Assessor of Property), and in opt-out counties the State Fire Marshal sends monthly electrical inspection records and TDEC sends septic permits. An ADU finished between January 1 and September 1 is prorated for the remainder of that year (prorate rules).

The arithmetic is direct. A DADU the assessor values at $150,000 adds $37,500 of assessed value (25%). At Davidson County's Urban Services District rate of $2.814 per $100 of assessed value (tax rates), that is about $1,055 a year in additional property tax. The same $37,500 at Chattanooga's city rate of $1.93 per $100 (tax information) comes to roughly $724. Owners of Greenbelt parcels get no relief on this piece; the Comptroller's Greenbelt handbook (May 2025) values the homesite and its improvements at market value, so an ADU on the homesite is assessed the same way it would be anywhere else.

An HOA can block an ADU that the city has approved. No Tennessee statute preempts a recorded covenant that prohibits second dwellings, accessory structures or rentals, and a building permit does not override one. The state has no general HOA statute for single-family subdivisions; the Horizontal Property Act and the Condominium Act of 2008 govern condominiums, and T.C.A. § 66-27-601 et seq. covers the "dedicatory instruments" of subdivisions. The statutory limits on HOA power concern flags (§ 66-27-602) and campaign signs (§ 2-7-143), plus the long-term rental vesting right noted earlier. T.C.A. § 13-7-605 expressly lets HOAs restrict short-term rentals through their governing documents.

Tennessee courts enforce clear ADU-blocking language and refuse to enforce vague language:

• In Barnett v. Behringer (Tenn. Ct. App. 2001), a covenant prohibiting "any new building, improvement, or structure" was upheld, though the court applied strict construction against the party enforcing it.
• In Burkett v. Stevens, the Court of Appeals used a one-dwelling-per-lot covenant to bar a 400-square-foot second structure.
• On the rental side, the Supreme Court in Pandharipande v. FSD Corp. (October 17, 2023) held that a "residential and no other purposes" clause alone did not bar STRs, while an express 30-day minimum-lease amendment did.
• The Court of Appeals in Lone Mountain Shores (June 9, 2025) found ambiguous covenant language unenforceable against STRs. Architectural review boards are held to a reasonableness and good-faith standard.

Even the legislature's most aggressive ADU bill would have left HOAs alone. The HB 2031 text stated that it "does not supersede, preempt, or apply to … a deed restriction, or homeowners association rule or bylaw that limits or prohibits the construction of an ADU." Before you spend on design, read the recorded CC&Rs for a one-dwelling-per-lot clause, an accessory-structure prohibition, a requirement for HOA approval of improvements, and any rental prohibition or minimum lease term.

Insuring your Tennessee ADU

The moment a tenant moves into the ADU, the homeowners policy on the main house may no longer provide the right coverage for that structure. A rented unit on the same lot creates the risks landlord insurance exists to cover: liability exposure and rent lost after a covered fire. It can also create exposure to tenant-caused damage.

Steadily writes ADU insurance as an eligible property type in all 50 states. Its eligible property types also include single-family and multifamily rentals, short-term rentals (Airbnb/VRBO), mobile and tiny homes, and vacant or renovation properties.

• Vacant and restoration properties can receive coverage during qualifying renovation work.
• A DP3 policy uses an open-peril form for the structure.
• Liability options run from $100K to $1M+, which covers Memphis's $1,000,000 STR requirement.
• Loss of rental income pays up to 12 months of fair rental value if a covered loss makes the unit uninhabitable, subject to a sub-limit tied to dwelling coverage.

Pricing scales with rebuild cost. A unit insured for $100K of dwelling coverage typically runs $500 to $1K a year and $300K runs $900 to $1.8K, against a national average of about $1,478. Raising the deductible from $1K to $5K trims premiums roughly 12–15%.

Flood is excluded. Every landlord policy reviewed for this article, Steadily's included, treats flood as a separate NFIP or private policy, and an ADU that had to be elevated 4 feet above base flood elevation in Nashville is a candidate for one. FEMA's Community Rating System discounts NFIP premiums by 10% in Nashville (Class 8), 20% in Knoxville (Class 6) and 10% in Knox County (Class 8); Chattanooga does not participate and Hamilton County has no class assigned (FEMA CIS). Sewer backup is also excluded on a standard policy, which is worth weighing on a septic-served ADU.

The Tennessee-specific coverage details, including how policies handle ADUs on the same parcel as an owner-occupied house, are on landlord insurance in Tennessee. Get a quote in minutes at quote.steadily.com; the form pulls construction data from public records, and no phone call is required.

FAQ

These answers summarize the most common questions about Tennessee ADU laws, construction costs, permits, utilities and private restrictions.

Are tiny houses legal in Tennessee?

A tiny house on a permanent foundation is legal where it meets the local IRC edition and the local zoning rules for a single-family home or an ADU. A tiny house on wheels is an RV in Nashville, Memphis, Knoxville and Chattanooga and cannot be a permanent dwelling or an ADU in any of them. Knoxville and Knox County have adopted IRC Appendix Q, the tiny-house chapter; Nashville and Memphis have not.

How much does an ADU cost to build in Tennessee?

Builder and platform estimates put a detached site-built unit between roughly $150,000 and $320,000 in Nashville, Knoxville and Chattanooga, with garage conversions starting near $35,000 in Chattanooga and averaging about $83,000 in Memphis. Add $10,000 to $25,000 for utility connections, a building permit priced on valuation ($5 per $1,000 in Nashville), and a separate septic system if the lot is not on sewer.

What is the difference between an ADU and a tiny home?

An ADU is defined by its relationship to the lot: a second, permanent dwelling on a foundation, accessory to a single-family house, subject to size, setback and occupancy rules. A tiny home is defined by its size, and it becomes an ADU only when it is built on a foundation to code and fits the local ADU rules. Under Tennessee ADU laws, a wheeled tiny home never qualifies.

Which Tennessee counties don't require building permits?

The State Fire Marshal's August 2026 list identifies thirty-seven counties that have opted out of the state residential code in their unincorporated areas, from Benton and Bledsoe through Wayne and Weakley. Electrical and septic permits still apply in every one of them, as do floodplain permits. Cities inside those counties may enforce their own codes.

Do I need a separate meter, and what are the hookup fees?

Nashville and Memphis allow a separate meter for a DADU or guest house, KUB in Knoxville requires written approval for a second service on one lot, and none of the four mandates it. Fees range from Nashville's $3,675 in combined water and sewer capacity charges per 350-GPD unit plus taps, to KUB's $1,000 water tap and $1,700 sewer tap, to Memphis sewer development fees of $2,255 to $5,638 by meter size, to WWTA's $800 per unit in Hamilton County.

Can an HOA block my ADU if the city allows it?

Yes. No Tennessee statute preempts a recorded covenant against second dwellings or accessory structures, courts have enforced one-dwelling-per-lot clauses against structures as small as 400 square feet, and the 2026 preemption bill that failed would have exempted HOA rules anyway. The covenant controls unless its language is too ambiguous to cover what you are building.