Tomorrow, July 1, 2026, one of the most consequential landlord-tenant laws of the 2026 session takes effect. House Enrolled Act 1210, signed by Governor Mike Braun on March 12, 2026, prohibits Indiana cities and counties from capping or banning the number of residential rental properties in their jurisdictions. The preemption covers both long-term rentals and short-term rentals booked through platforms like Airbnb and Vrbo.
The law passed with broad bipartisan support, and it lands squarely on a fight that had been building in the Indianapolis suburbs. Carmel and Fishers had each moved to limit rentals to roughly 10% of homes per subdivision. Under HEA 1210, that kind of numerical cap is off the table for local government — though pre-existing ordinances get a transition window (reported as running until January 1, 2028) before they must come down.
If you own rental property in Indiana, or you have been waiting on the sidelines because a local cap blocked you from converting a house to a rental, here is what actually changes — and what it means for how your property is assessed and taxed.
What HEA 1210 prohibits — and what it does not
The core of the act is a preemption: local governments may not adopt or enforce ordinances that restrict an owner of residential property from using it as a rental, and specifically may not cap how many rentals exist in a neighborhood or jurisdiction. What survives is everything that regulates how a rental operates rather than whether it may exist.
| Local rule | Status after July 1, 2026 |
|---|---|
| Numerical caps on rentals (e.g., 10% per subdivision) | Prohibited |
| Outright bans on rentals or short-term rentals | Prohibited |
| Rental registration programs | Still allowed |
| Health and safety inspections | Still allowed |
| Building and fire code enforcement | Still allowed |
| Occupancy limits | Still allowed |
The caveat baked into the law: the surviving tools cannot be operated as de facto caps. A registration program that simply stops issuing registrations, or an inspection regime designed to make rentals impractical, runs into the same preemption as an explicit cap.
Note
HEA 1210 restrains local government, not private covenants. Homeowners associations can still restrict rentals through their governing documents. The act does change HOA mechanics, however: reporting on the law indicates that after July 1, 2026, only owners who occupy their property as a primary residence may vote on rental restrictions. Investor-owners lose their say on that specific question.
One more wrinkle from local coverage: the act also reshaped how existing short-term rental ordinances are treated, ending Carmel's practice of regulating STRs under a bed-and-breakfast classification dating to its 2017 ordinance. If you operate an STR in a city with an older ordinance, verify its current status directly with the city — the transition rules are the messiest part of the act.
The tax reality behind the headline
Here is the part the housing-policy coverage skips: the moment a house stops being your homestead and becomes a rental, its property tax treatment changes substantially. HEA 1210 removes a local barrier to converting properties, so more owners will cross this line — and many will be surprised by the bill.
Indiana's constitutional circuit breaker caps a property's tax bill as a percentage of gross assessed value:
- 1% for homesteads (owner-occupied primary residences)
- 2% for other residential — which is where rentals live — and agricultural land
- 3% for commercial, industrial, and personal property
A single-family rental is typically coded property class 511 and sits in the 2% tier. It also loses the homestead standard and supplemental deductions that shelter a large share of an owner-occupant's assessed value. The combined effect is that the same house, at the same assessed value, generates a meaningfully larger tax bill as a rental than it did as a homestead.
Two practical consequences for anyone converting a property after July 1:
- Get the class code right, in both directions. If you convert a homestead to a rental, the county should recode it — and you should stop claiming homestead deductions, because keeping them on a rental invites back taxes and penalties. If you move into a former rental, make sure the 511 code comes off, or you will be capped at 2% on your own home. We cover the mechanics and the appeal path in our guide to the 511 class-code trap in Marion County.
- Claim what the 2% tier now gives you. Senate Bill 1 from the 2025 session created a new deduction for 2%-tier property — rentals and farmland — starting near 6% of assessed value in 2026 and phasing up to roughly 33.4% by 2031. It is applied automatically by the auditor, but "automatic" only works if your class code is correct. Details in our rental and agricultural deduction phase-in guide.
Registration is the new front line
Since caps are gone, expect cities that used them to lean harder on the tools they kept: registration, inspections, and code enforcement. For landlords, that has an assessment side effect worth understanding. Rental registration creates a paper trail that flows toward the assessor's office — it is one of the ways counties identify which parcels belong in the 2% tier and which owners are improperly claiming homestead benefits.
That is not a reason to avoid registering where it is required. It is a reason to make sure your parcel's record — class code, deductions, assessed value — matches reality before the county reconciles its lists, rather than after a retroactive adjustment shows up.
Tip
Converting a property to a rental does not change its market value, and Indiana assessments are supposed to reflect market value-in-use. If your assessed value jumps after a conversion with no physical change to justify it, that is an appealable issue separate from the class-code change. Comparable sales of similar homes remain the strongest evidence for a single-family rental.
What this means for investors
For buyers, HEA 1210 removes a genuine underwriting risk: the possibility that a subdivision's rental quota was already full, or that a future ordinance would strand your exit options. Neighborhood-level rental restrictions now live only in HOA covenants, which you can read before you buy, rather than in a city council's next agenda.
That does not make every Indiana county an equally good buy. Tax rates, assessment practices, and appeal outcomes vary widely across the state's 92 counties — a 2% cap on a high-rate Indianapolis parcel is a very different number than 2% in a rural county. Our county-by-county analysis for rental buyers walks through how to compare them.
Check your parcel before the new regime settles in
HEA 1210 changes who controls whether you can rent. It does not change the arithmetic of what the rental will cost you — and that arithmetic runs through your parcel record.
Start with our Indiana property explorer to pull your parcel's assessed value, class code, and comparables, or use the property lookup tool to check a property you are evaluating. If the record is wrong — wrong class code, missing deduction, assessment above market — the fix is an appeal, and our 2026 appeal guide covers the process end to end. Our tax appeal service builds the evidence and files on your behalf.