Tenn. Code Ann. § 67-5-206: Housing authorities

(a) The property of housing authorities shall be exempt from all taxes and special assessments of the state or any county, city, town, metropolitan government or political subdivision thereof; provided, that, in lieu of such taxes or special assessments, a housing authority shall agree to make payments to any county, city, town, metropolitan government or political subdivision of the state for services, improvements or facilities furnished by such county, city, town, metropolitan government or political subdivision for the benefit of a housing project owned by the housing authority, but in no event shall such payments exceed the estimated cost to such county, city, town, metropolitan government or political subdivision of the services, improvements or facilities to be so furnished.

(b) The bonds or notes of a housing authority are declared to be issued for an essential public and government purpose and, together with interest thereon and income therefrom, shall be exempt from all taxes.