In Rutherford County, Tennessee, a Property Classification Fight Is Threatening Small Landlords and Their Tenants

Written by:

Alejandra Rodriguez

Date:

02 Sep 2026

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A single rental property reclassified from residential to commercial in Tennessee does not just change a label on a tax roll; it triggers a 60% increase in the property tax assessment. In Rutherford County, the state’s fastest-growing county with nearly 400,000 residents and $81 billion in assessed real estate, that reclassification is now being imposed on small landlords by state-level officials over the objections of the local assessor’s office.

Rob Mitchell, Property Assessor for Rutherford County, describes the situation directly: the state comptroller’s office directed his office to change classifications on rental properties; he resisted; the state forced the changes; and the affected property owners are now appealing. Mitchell has taken the unusual step of siding with taxpayers against his own office’s decisions, because those decisions, he says, were not freely made.

How Classification Works

Tennessee statute draws a clear line on the surface. Residential property is assessed at 25% of market value. Commercial property is assessed at 40%. The dividing line: a property used for dwelling purposes with no more than one rental unit qualifies as residential. A duplex where the owner occupies one side and rents the other remains residential, one rental unit. If the owner moves out and rents both sides, it becomes commercial.

The current dispute centers on whether ownership patterns, rather than physical use, should determine classification. The state comptroller’s office is pushing what Mitchell calls “artificial aggregation,” tracking classification based on who owns the property rather than how it is being used. Mitchell argues this contradicts the Tennessee Constitution’s Article 2, Section 28, which defines classification based on use.

“Laws are written, at least in Tennessee, to be liberally construed in favor of the taxpayer, which I think is fair,” Mitchell says. “When you’re dealing with taxes and taking money from people, that’s the wrong attitude to have,” referring to classification decisions that bypass voter approval.

The Revenue Pressure Behind Reclassification

Mitchell traces the contention to around 2018, coinciding with rapid population growth that strained local budgets for schools, roads, and emergency services. In Tennessee, all property taxes are local, placing the full burden of growth-related spending on county governments.

Reclassification offers a politically convenient revenue mechanism because it raises money without requiring elected officials to vote for a rate increase. “This is a way they can say the assessor did it, he changed the classification and here’s all this money and no, you don’t get to vote on it,” Mitchell says. “If you want to challenge it, you got to go to court.”

His office has attempted to reach settlements with affected taxpayers, but the state has intervened and refused to allow those agreements to be processed, a level of involvement Mitchell characterizes as heavy-handed. Other assessors across the state have remained quiet, Mitchell says, because they do not want a target placed on them.

Small Investors Are Already Liquidating

The practical effect is falling on what Mitchell describes as mostly mom-and-pop owners, people who invested $60,000 or $70,000 in a rental property as a retirement vehicle rather than a business. Their goal, according to Mitchell, is to earn a return better than the 2% to 4% they might get from a bank account, then eventually liquidate the property to fund their care in old age.

Many have already sold rather than pass increased costs to tenants. “They couldn’t bear to go to these struggling families and say, we’re going to have to go up on your rent,” Mitchell says. “So they simply sold the property, and now they’re going to let somebody else be the bearer of bad news.”

The affordability math reinforces his concern. According to a study Mitchell conducted, median family income in Rutherford County has risen 71% since 2005, from roughly $50,000 to about $85,000. Over the same period, median home prices have climbed 213%, from $140,000 to over $400,000. Mitchell frames homeownership as the primary path to generational wealth and sees the classification push as undermining the affordable rental stock that serves families who cannot yet buy.

“If you fix housing affordability, you fix everything else,” he says.

Misunderstandings About Reappraisal

Separate from the classification dispute, Mitchell identifies a persistent misconception: residents equate rising assessed values with rising taxes. Tennessee’s “truth in taxation” law requires jurisdictions to adopt a certified tax rate after reappraisal that keeps total revenue roughly constant. Rutherford County’s most recent reappraisal reflected a 28% median increase over four years, modest compared to Davidson County’s 60%.

Under a revenue-neutral rate, a property that increased 30% against a 28% median would see approximately a 2% tax increase. A property that rose only 25% would actually see a decrease. “Most people worry about the wrong thing,” Mitchell says. “They worry about their value going up instead of worrying about their taxes.”

His office built a public tool called Smart Rutherford that lets owners compare year-over-year tax liability using both old and new rates, calculating estimates based on the previous year’s rate and value against the current year’s figures.

The Scale of the Workload

Rutherford County processes between 5,000 and 10,000 permits annually, with roughly 2,500 representing new construction. Mitchell’s 30-person office is charged with reviewing 45,000 to 50,000 properties every four years on top of ongoing new construction valuations, a workload that includes measuring and valuing everything from pools to driveways.

The classification dispute, Mitchell says, compounds this pressure by generating appeals his office must process while simultaneously defending decisions it did not freely make. His position is that the fight needs resolution at the state legislative level, through the General Assembly, not through administrative reclassification imposed without voter approval.

About the Expert: Rob Mitchell is the Property Assessor for Rutherford County, Tennessee.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.