On Sept. 16, 2026, Fredericksburg's Zoning Board of Adjustment met to consider a three-bedroom, three-bath house on West Creek Street. The request was a special exception that would have let the house operate as an unoccupied short-term rental. The board denied it. As Citizen Portal reported, the board found the property did not meet the ordinance's compatibility and neighborhood-saturation criteria.
What the house lacked was a permit, and since Jan. 1, 2024, the ordinance has allowed no new unoccupied permits in most of Fredericksburg's residential zoning outside a narrow special exception. Inside city limits, then, the right to host guests is fixed and limited, and it changes hands mainly through sales. Anyone comparing a Fredericksburg house to a lot in the county is comparing two different sets of rules.
The rulebook that took effect Jan. 1, 2024
When the city adopted its 2024 STR ordinance, Anna Hudson, Director of Development Services, summarized its zoning changes in a November 7, 2023 memo. The ordinance took effect Jan. 1, 2024. Here are the main points as the city's memo describes them:
| Zoning or permit type | What the 2024 ordinance does, per the city memo |
|---|---|
| R1 | No new unoccupied STR permits and no new facilities |
| R2 | Treated like R1, with no new unoccupied permits and no new facilities |
| R3 | No type of STR allowed |
| STR-condominium | No new permits |
| Special exceptions | Decided by the Zoning Board of Adjustment, no longer by City Council and Planning & Zoning |
| Existing "grandfathered" permits | May continue operating and may transfer |
| Transfers on sale | Allowed within 90 days of the property's sale |
A narrow exception exists. The memo describes a "stranded property" in R1 or R2. It must share two property lines with parcels that hold STR-unoccupied permits or have C2, CBD or Public Facility zoning, schools excluded. In addition, at least half of the other properties within a 200-foot radius must hold that kind of permit or zoning. Only then can the owner apply for a special exception. Special exceptions are also available for added occupancy or parking, and for an STR on the first floor in the historic shopping district.
That test sets a high bar, and the September decision on West Creek Street shows that an application is no guarantee. For an unoccupied STR on most residential streets inside the city, an existing grandfathered permit is the main source of supply.
Why the permit, rather than the house, carries the value
If a permit cannot be created, it matters most at the point where it can move, which is a sale. The city's memo says grandfathered permits can transfer, and that a transfer must happen within 90 days of the property's sale. A transfer also comes with conditions. At renewal, a nonconforming permit must meet all of the new requirements except parking and occupancy. Those requirements cover life safety, a 24-hour contact, signage, food service, host rules, conduct on the premises, length of stay, hotel occupancy tax, application information and advertising. Inspections happen every year at renewal, after modifications or violations, and on transfer.
The city's step-by-step STR guide adds a timing point. Permits last one year and must be renewed every year with fees paid annually, and a property can't be rented or even listed until the permit is issued.
A Sept. 15, 2026 council decision shows how the city treats a grandfathered use when the building itself changes. According to Citizen Portal's account, the council approved DEV-2026-110. That action allows a rebuilt structure to keep hosting a legal nonconforming short-term rental at its prior occupancy, on the condition that occupancy does not increase. The structure could be replaced, but the permitted occupancy stayed where it was.
Taken together, these rules mean two houses on the same Fredericksburg street can look identical to an appraiser and still carry very different uses. One may hold a permit that can transfer. The other may hold none and have almost no path to getting one.
A slow market gives buyers time to ask
Market conditions make that question easier to raise. The Texas A&M Texas Real Estate Research Center publishes monthly figures for the Central Hill Country Board of REALTORS. Its Gillespie County report for September 2026, dated Oct. 7, 2026, showed a market with plenty of supply.
- Sales: 33 closed residential sales in September 2026, up 17.9% year over year
- Inventory: 459 active listings and 10.9 months of inventory in September 2026
- Pace: 153 days on market on average in September 2026
- Negotiation: homes closed at 90.0% of original list price in September 2026
The September median of $498,000 was down 19.0% from a year earlier. With only 33 sales, though, a few closings can move the monthly median a long way. The year-to-date figure is steadier. Through September 2026, Gillespie County recorded 362 sales at a median of $507,395, up 8.4%. The research center also notes that closed-sale counts for the latest three months are preliminary.
Existing homes made up most of the activity. In September 2026 there were 25 existing-home sales at a median of $590,500, with 400 active listings and 11.7 months of inventory. These are countywide numbers. The research center says its public figures cover MLS listings for the named area, and that finer geographies are available only to REALTORS through MarketViewer. No public series separates permitted homes inside city limits from the rest of the county.
With nearly 11 months of supply and sales closing below original list, a buyer usually has time to confirm a permit's status before going under contract. Those conditions also mean a listing's description of rental potential deserves to be checked against the city's records.
The new-construction number is a quirk of the data
The same September report shows a new-construction median of $296,999 across 8 sales. That's well below the existing-home median. The research center explains that its housing data leaves out new homes sold directly between builder and buyer outside the MLS. Custom homes built on land the owner already holds usually never show up in that series. The low median describes the new homes that happened to be listed, and it says little about what a custom build in Gillespie County costs.
Outside the city limits, the rules change
The city's STR guide addresses the extraterritorial jurisdiction, the ETJ, directly. A property there needs no city STR permit. Hotel occupancy tax must still be remitted to the City of Fredericksburg. Under Chapter 41, Article IV of the city code, the local hotel tax is 7%, filed quarterly. The State of Texas adds 6%, which is remitted to the Texas Comptroller, so guests are charged 13% in total. The city's guide also tells anyone considering a purchase to confirm first that the address is inside city limits and zoned for STR use, and it provides city-limits and zoning maps for that check.
That changes the arithmetic for anyone weighing land against a finished house. Inside the city, a guest-house use generally has to come with the purchase. In the ETJ, the city's permit requirement does not apply, though the tax obligation does, and the buyer pays for the land and the construction directly. The Texas Real Estate Research Center put the Austin-Waco-Hill Country region at $8,040 per acre in the second quarter of 2026, up 8.63% year over year, with a typical tract of 199 acres. The center describes those figures as general regional indicators, so they don't price any particular Gillespie County tract.
Questions to settle before an offer or a land contract
Each of these can be answered from city records and the city's STR office, which can be reached at [email protected].
- Is the address inside Fredericksburg city limits or in the ETJ? The city's STR locator lists data as of Oct. 1, 2026.
- What is the zoning? R1, R2 and R3 lead to very different answers under the 2024 ordinance.
- Does the property hold an active permit now? Is it occupied or unoccupied, and what occupancy does it allow?
- If a permit exists, what does the transfer process require, and how does the 90-day window line up with the closing date?
- If the plan includes renovating or rebuilding, how has the city handled occupancy for permitted structures? DEV-2026-110 is one recent example.
FAQ
Can I buy a house in Fredericksburg and get a new unoccupied STR permit? In R1 and R2 zoning, the 2024 ordinance allows no new unoccupied permits. The only route is the stranded-property special exception before the Zoning Board of Adjustment, and R3 allows no STR of any type.
Does an existing permit come with the house? The city's memo says grandfathered permits may transfer within 90 days of the sale. They must then meet the newer requirements at renewal, except parking and occupancy.
Is a property in the ETJ free of city requirements? No city STR permit is required in the ETJ. Hotel occupancy tax must still be remitted to the City of Fredericksburg.
This post is general information, not legal, tax or financial advice. Confirm how these rules apply to a specific property with the City of Fredericksburg and with your own attorney or tax professional.
When guest use is part of the plan, the location of the property and the zoning it carries shape the design, the budget and the timeline from the start. BGA Design + Build can help you weigh a Fredericksburg-area lot against an existing house before you commit, and then plan a build that fits the rules that apply to it. Contact BGA Design + Build to start that conversation.