Michigan could open the floodgates on short-term rentals, overruling local governments

Rep. Sarah Lightner (R-Springport Twp.) |House GOP photo

By Marla R. Miller, Michigan Advance

Imagine buying your first home in a coastal community — or even your dream home on a lake — and creating a peaceful backyard oasis. But when warm weather rolls around, you soon discover a revolving door at the house next door. Loud music, late-night bonfires, even PA systems, beer pong and extra tents take over the yard.

These are some of the issues created by short-term vacation rentals, according to local government and municipal officials who oppose recent state legislation that would preempt local regulations on short-term rentals.

“The general feeling in our community — and not just in resort towns, but all communities — is that we’re not supportive of efforts to do land-use planning from Lansing,” said Grand Haven City Manager Pat McGinnis.

In a late-night vote last week, the Michigan House of Representatives approved a bill that essentially nullifies local ordinances on short-term rentals — which have become increasingly popular with the growth of companies like Airbnb and VRBO — in the name of protecting private property rights. 

The legislation prohibits local municipalities from adopting zoning regulations that outright ban short-term rentals or make them subject to a special-use or conditional-use permit. The San Francisco-based company Airbnb has a long history of fighting local regulations across the country.

Proponents say House Bill 4722, sponsored by Rep. Sarah Lightner (R-Springport Twp.), protects an owner’s right to rent. 

But opponents say short-term rentals should be regulated at the local level. Noise, trash and nuisance complaints, and a lack of affordable housing for year-round residents, are some of the issues associated with too many short-term rentals in a community. Other studies show short-term rentals deplete housing stock and increase rent for long-term renters

Under the bill, local governments can continue to create and enforce ordinances related to inspections, noise, traffic and other nuisances that apply to rentals and owner-occupied residences. However, local officials say that does little to address the erosion of neighborhoods, quality of life issues, home values and other problems associated with short-term occupants.

Lightner first introduced the bipartisan legislation back in April. House Bill 4722 was not on the Oct. 26 agenda, but an amended version passed 55-48 after the GOP-controlled House stayed in session past 2 a.m. Oct. 27. 

“I was very surprised it moved on [Oct. 27] in the way and fashion it did,” said Jennifer Rigterink, a legislative associate with the Michigan Municipal League (MML), which opposes the bill. “Nobody knew they were voting on it.”

Amid the wrangling, three of the bill’s co-sponsors — Reps. Sara Cambensy (D-Marquette), Samantha Steckloff (D-Farmington Hills) and Brad Paquette (R-Niles) — withdrew their names from the bill, in a somewhat unusual move. The bill was referred to the Senate Committee on Regulatory Reform.

Back in the spring, Steckloff agreed to add her name to the bill after being told it was about personal property rights — not short-term rentals. She called it a “freshman mistake” and fielded complaints from constituents and local officials in her district for months. Steckloff had to wait to withdraw her name from the bill until the House took it up. She voted no last week.   

“You cannot approach this as a one-size-fits-all,” she told the Advance Thursday. “This is a local issue.”

Lightner’s office declined a request for an interview, but sent the Advance her statement.

“The measure approved by the House is a solid compromise that provides both certainty for private property owners across the state and flexibility for local municipalities that deserve to have some control over the planning and zoning of their communities,” Lightner said. 

Both the Michigan Realtors, an advocacy group for Michigan’s real estate professionals, and the Mackinac Center for Public Policy, a free-market think tank, support the legislation. 

“The key thing here is, from our perspective, we’re very strong on private property rights, and people should be able to do what they want with their own property,” said Mackinac Center Director of Marketing and Communications Jarrett Skorup, who testified in favor of the bills in May.

“The reason it is a big deal now is the internet and Airbnb,” he added. “It’s skyrocketed in popularity.”

Calls to Michigan Realtors were not returned for this story, but the association does have a statement on its website, maintaining that local governments can enforce nuisance ordinances and housing codes to protect public safety and address any unruly behavior.

“There is a growing trend in local government to enact zoning bans that preemptively tell property owners they are unable to rent,” the group says. “The rental of residential property is important to Michigan second home markets and in urban areas around event destinations. Banning the right to rent harms property owners and local businesses in many communities all over Michigan.”

Local control

Many local officials say communities should have the final say over regulations for short-term rentals. They say the proposed law also sets a precedent for issues that impact local communities, giving Lansing the authority to dictate local laws.

“It’s a big challenge for us,” said Traverse City Mayor Jim Carruthers. “We’re the ones that live here and try to make it a livable place for everybody and set the rules and priorities.”

The MML, a nonprofit association representing municipalities and their leaders, calls HB 4722 “disastrous” and said it essentially gives unfettered approval to short-term vacation rentals across the state.

“When it comes to the property rights issue, there seems to be a lack of acknowledgement that everybody has property rights,” Rigterink told the Advance. “Why are they getting more out of this than the person who lives next door? That seems to be lost.”

Rigterink has been fielding plenty of calls from members after the surprise vote. One issue hinges on whether short-term rentals are considered commercial use. HB 4722 specifically states short-term rentals are not a commercial use of property. Rather, it is a residential use of property and should be permitted in all residential zones.

Rigterink disagrees and said that is the whole point of zoning for conflicting uses. “If you want to open a mechanic shop in your garage, you can’t do that,” she said.

Permanent residents also have the right to enjoy their property, negate nuisances and protect property values. For instance, many vacationers stay up later — and may have bonfires, parties or play loud music — while the person next door is trying to sleep and get up for work the next day.

“We are not opposed to short-term rentals,” Rigterink said. “They have said that communities are banning short-term rentals. We don’t agree with that, but they should have the ability to regulate them to balance the need of full-time residents as well as accommodate visitors. …Like any land use, too much of one thing becomes a negative impact on other things.”

While those opposed to the bill say communities aren’t banning outright short-term rentals, Skorup argues that municipalities like Holland Township and St. Clair Shores essentially have full bans through their zoning. And several destination cities, including Detroit and Traverse City, prohibit short-term rentals in residentially zoned areas. 

The heated debate continues in New Buffalo, a Southwest Michigan community that recently extended a moratorium on new short-term rental licenses until Dec. 13. 

“They haven’t fully banned them, but you’re banning it for the vast majority of property owners,” Skorup said. 

Lakeshore communities

Short-term rentals are more prevalent in lakeshore communities that attract tourists and those that host sporting events, but they also are located on small inland lakes and in rural parts of the Upper Peninsula. 

Typically, tourists, vacationers and some business travelers rent them for a brief stay, or not more than 30 days, through platforms like Airbnb, VRBO, Vacasa, Turnkey and others. 

Many lakeshore communities have already adopted short-term rental ordinances that officials say are in the best interest of local residents and homeowners. Some municipalities, including Traverse City and Grand Haven, have taken the stance that short-term rentals are a commercial activity and local zoning rules prohibit other commercial activities in residential neighborhoods. Several communities in Ottawa County have regulations on short-term rentals or continue to examine the issue, while also opposing the bill.   

Grand Haven welcomes short-term rentals, but there needs to be a balanced approach, McGinnis said. In 2017, the city developed a short-term rental ordinance in response to complaints from residents who showed up at public meetings. The city allows short-term rentals in specific zoning districts and requires out-of-town owners to designate a local agent to manage the rental and address problems. 

The proposed law states communities cannot restrict short-term rentals to less than 30% of the number of existing residential units in the local unit of government. In Grand Haven, that means up to 1,500 homes could convert to short-term rentals.

“Right now, we just have under 300 short-term rentals,” McGinnis said. “Multiply that by five, and they’re much more likely to occur near water, and those neighborhoods could become completely overrun with short-term rentals and that’s just not good for our town.”

In today’s digital economy, it’s relatively easy for an outside investor or homeowner to advertise their property as a short-term rental. In Traverse City, Grand Haven and other lakeshore communities, the demand is there, and so is the lure of making money. But having too many short-term rentals on one residential street causes unintended problems.

“It’s the change in use that is the problem for that neighborhood,” McGinnis said. “Effective land-use planning results in fewer conflicts.”

There’s also some opposition from business groups, like the Michigan Restaurant and Lodging Association, which says the legislation would add to the challenges the hotel and lodging industry faces while continuing to recover from the COVID-19 pandemic. Besides taking business away from traditional hotels, short-term rentals aren’t subject to the same taxes or regulations.

President and CEO Justin Winslow said 70% of voters oppose legislation that strips power from local governments to control short-term rentals and 79% believe they should be taxed the same as hotels.

“Bill 4722 is not a thoughtful solution to a complicated issue that needs to balance residential safety, fair competition and property rights — it is a tone-deaf handout to mostly out-of-state corporations that will erode neighborhoods, increase crime and cost jobs,” Winslow said in a statement.

Lack of affordable housing

While Traverse City has a short-term rental ordinance, permitting them in commercially zoned areas, Carruthers said “a lot of people have been doing it on the down low.” 

Area residents are turning garage apartments and even backyard tents into short-term rentals, and investment companies also are buying up homes for vacation rentals.

“Taking away local control ties our hands on this, and it could be many other things,” Carruthers said. “If we let it go hog wild, we won’t have neighborhoods.”

One of the biggest challenges facing Traverse City is having enough quality housing for a range of incomes and demographics, including families, retirees, single individuals, young professionals and a growing homeless population.  

Skyrocketing housing costs have pushed hospitality and service industry workers into outlying areas or forced them to relocate. The city has offered incentives to developers to build more affordable units, but even those are becoming short-term rentals in commercially zoned areas.

“Our restaurant workers are having a hard time living here [and] we’re a foodie town,” Carruthers said. “It does erode the long-term opportunities for people to live here.”

McGinnis said Grand Haven deals with more problems and noise complaints during the busy summer months, and it would take more staff to enforce noise and nuisance ordinances associated with more short-term rentals. 

In addition, the city’s infrastructure — water, sewer and other utilities — were built for a year-round population. A 30% reduction in use during the winter months has other implications.  

“We are doing it well; we are doing it the way it was meant to be done,” McGinnis said. “This is simply special-interest lobbyists who are influencing our state legislature to benefit themselves to the detriment of all of the communities of Michigan.”

Short-term rentals take away year-round housing stock, and affordable housing is already an issue for local residents and service-industry workers who live in tourist towns.

“People who work here need to have a place to live,” McGinnis said. “This is not a false concern. It really could happen and you would have all of these communities where the population could dip 20 or 30%.”

 Traverse City | Susan J. Demas

Legislative, litigation loopholes

Short-term rentals have been on the Michigan Legislature’s radar for several years, but bills haven’t gained traction until last month. 

Lawmakers contend HB 4722 strikes a balance between property owners who may want to buy an investment property or a second home and then rent it out while still giving local municipalities some authority in how to regulate the industry.

Steckloff said she appreciates short-term rentals and she does use them, as do many businesspeople who visit the Farmington Hills area for work. But she said there are problems with the bill, particularly the stipulation that permits short-term rentals in up to 30% of existing residential units. 

“You cannot legislate for the entire state of Michigan,” she said. “In my district, 30% is almost 15,000 of our housing stock.”

McGinnis has attended previous legislative hearings in Lansing to address attempts to change the law. He was surprised about the late-night vote on the bill.

“That’s the worst kind of public policymaking,” he said. “I would hope the Senate is more levelheaded. Let’s talk about it — how can we make it so people can reasonably use their properties without destroying communities?”

Rigterink sees the law as ripe for litigation. Who determines the 30% of property owners eligible to have a short-term rental while denying the other 70% — is it based on location, a first-come, first-serve application process, housing density or other factors?   

“If 30% wanted to locate in your most desirable neighborhood, you have now turned that residential district into transient mini-hotels and completely crushed anybody who is actually living there,” she said.

In addition, the law allows local governments to limit the number of units under common ownership used for short-term rentals to two. Proponents say that will prevent outside investors and corporations from owning too many units, but opponents disagree. 

“The definition of common ownership has a loophole big enough to drive a semi through it,” Rigterink said. 

Michigan Advance is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Michigan Advance maintains editorial independence. Contact Editor Susan Demas for questions: [email protected] Follow Michigan Advance on Facebook and Twitter.