What’s next in the fight over regulating short-term rentals in Michigan?

Susan J. Demas

By Marla R. Miller, Michigan Advance

New Buffalo Mayor John Humphrey has been outspoken about his opposition to the rise of Airbnb-style rentals in his community, which held several packed public meetings in 2021 as the City Council took up the issue.

Tackling short-term rentals was a tumultuous two-year process that included a moratorium on city-issued licenses for rentals in May 2020, and a Nov. 23, 2021, special session where the City Council approved a zoning ordinance amendment that prohibits new short-term rentals in certain residentially zoned districts. 

Many lakeshore communities have enacted similar ordinances in recent years in an effort to preserve housing stock and residential neighborhoods, maintaining that short-term rentals are a commercial use of property. 

But House Bill 4722 narrowly passed the House in a late-night session last October, a move that surprised many who have followed the legislation.

The bill targets those efforts and essentially strips a local municipality’s ability to regulate short-term rentals through local zoning ordinances or make them subject to a special-use or conditional-use permit. 

It’s now up to the Senate to move on the bill in the lame duck session following the Nov. 8 election. While the Legislature is currently controlled by Republicans, Democrats won both chambers, which adds to the uncertainty of what might be on the last session agendas of the year.

There has been some movement. The Republican-led Senate Regulatory Reform Committee in late September moved the legislation to the floor in a 6-3 vote.

“We’re on high alert on that bill,” said Jennifer Rigterink, assistant director of state and federal affairs for the Michigan Municipal League, one organization that opposes the legislation. “There’s definitely work being done to try to get it to a vote.”

Humphrey opposes attempts to legislate the issue from Lansing and says HB 4722 “is a giveaway to private interests at the expense of the taxpayer.” Humphrey said more than 20 community leaders in lakeshore communities in Southwest Michigan have united to oppose the legislation by adopting formal resolutions and contacting legislators.

“It wipes out local zoning control from every municipality,” Humphrey said. “The people in Lansing have no concept about what this bill will do to local municipalities.”

Humphrey said short-term rentals have been “destroying our town for the last seven years.” He moved to New Buffalo, a Southwest Michigan lakefront community 35 miles from Chicago, with a young family and lived the experience in his own neighborhood. A single-family home was sold and renovated into a short-term rental. 

“They replaced it as a 20-person Airbnb that completely wrecked our neighborhood,” he said.  

At the heart of the issue is whether short-term rentals are a residential or commercial use of property. HB 4722 would amend the Michigan Zoning Enabling Act of 2006 to define and add the term “short-term rental” to the Code as a residential use of property that is permitted in all residential zoning districts.

The legislation aims to protect Michigan property owners’ fundamental right to use their dwelling or home as a short-term rental, according to proponents. In addition, it also codifies the right for counties, cities and townships to continue to, or begin to, require the issuance of a locally issued STR license, limit local licenses to two per person, and implement license enforcement policies to meet the community’s standards.

HB 4722 is supported by Airbnb, the Michigan Association of Realtors and the Rental Property Owners Association. Michigan Municipal League, Michigan Township Association and Michigan Restaurant & Lodging Association oppose the legislation and have offered compromises.

“We still oppose it and there’s been no negotiation,” Rigterink said. “We’re still at the table, ready and willing to negotiate if the opportunity arises.”

Proponents of the bill argue that property owners have the right to do what they want with their property, including renting it out as a vacation home without cumbersome regulations. They maintain local communities are in essence banning short-term rentals by limiting the number of licenses and restricting where they can be located.

“There is a growing trend in local government to enact zoning bans that preemptively tell property owners they are unable to rent,” according to a statement on the Michigan Realtors website. “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.”

Both the Realtors Association and Airbnb maintain Michiganders have been renting their second homes for decades when not in use, long before online platforms rose to prominence. Short-term rentals also are popular among tourists throughout Michigan. The practice helps Michigan property owners cover the cost of property taxes and maintenance.

In addition, with inflation and the rising cost of living across the country, many short-term rental hosts rely on the additional income. Listings on Airbnb comprise 0.3% of total dwellings across the state, according to data from Airbnb, and 61% of Michigan hosts are women and over 25% are over the age of 60.

Airbnb says HB 4722 and HB 5605 would modernize Michigan’s regulation of short-term rentals. HB 5605, which Rep. Graham Filler (R-DeWitt) introduced in December 2021, proposes an excise tax on short-terms at a rate equal to the tax of traditional lodging, along with a requirement that accommodation intermediaries such as Airbnb be responsible for the remittance of all their hosts’ taxes. 

“Families across Michigan rely on home sharing to supplement their income and welcome visitors whose spending supports the state’s businesses and tourism economy,” said Vincent Frillici, a public policy regional manager for San Francisco-based Airbnb, in a statement. “Airbnb will continue to work with leaders across the state on balanced rules that protect property rights, help address community concerns, and support the state’s tourism economy.”

Those in opposition counter that year-round residents also have rights to live in residential areas without the issues that come with short-term rentals, such as trash, noise, parties, and parking issues, and local zoning ordinances are designed to minimize conflicting land uses in neighborhoods.

“By common sense, these are commercial uses of property,” said Keith Van Beek, city manager of Holland. “You can’t all of a sudden convert a single-family house into a store or an auto mechanic shop. … It just doesn’t make sense and it does nothing to protect against the rights of the property owners that live around that vacation rental.”

Holland is another West Michigan community that has enacted local ordinances to manage short-term rentals, permitting them in commercially zoned areas such as the downtown. The city also launched a pilot program for non-owner occupied short-term rentals in residential areas with various regulations that was adopted as part of its local zoning ordinance.

“In general, we definitely feel that the bill as proposed really doesn’t have any compromise built into it,” Van Beek said. “We’re not fundamentally opposed to short-term rentals. We feel local communities are best equipped to deal with planning and zoning issues. We have had a long history of dealing with short-term rentals and a set of regulations that are strongly supported by our community.”

In addition, many lakeshore communities are grappling with a shortage of available, affordable, year-round housing for service-industry workers or people who want to relocate to the community for employment. 

“My biggest fear is housing and apartments for our seasonal and everyday laborers in Petoskey; that it will take up those spaces with short-term rentals knowing someone can make one month’s rent in a week during the busy season of the year,” said Petoskey Mayor John Murphy.

Petoskey has an ordinance that permits short-term rentals in a business district with a city license. The ordinance has been in place since 2014, prohibiting new vacation rentals in residential districts, but Petoskey still has a problem with STRs operating illegally. The city even took an illegal STR operator to court after they were cited numerous times and won.

Murphy said the bill would “void our efforts and the will of the people here in Petoskey.”

In Leelanau County, another popular vacation destination, villages and townships continue to grapple with the issue. The Village of Suttons Bay, Suttons Bay Township, Village of Northport, Bingham Township, Empire Township, Leelanau Township, Leland Township and Elmwood Township have adopted short-term rental ordinances.

The Village of Suttons Bay is reexamining its current ordinance after complaints from residents and even hired a firm, Beckett & Raeder of Ann Arbor, to research short-term rental regulations in communities around Leelanau County and elsewhere. The village issued a moratorium on short-term rental licenses in June and recently extended it for an additional 90 days.

Based on the Beckett & Raeder report, the village currently has 61 operating short-term rentals, which represents 13% of the community’s total housing stock. The current ordinance permits short-term rentals in residential areas. 

The average limit is 6.4% of the housing stock based on other Leelanau County communities that have short-term rental caps. Under HB 4722, the cap is up to 30% of a community’s existing housing stock, which opponents say is unreasonable for small communities.

“I do support the [HB 4722] legislation, but I think that a local government’s ability to police these, which still seems to be preserved in that legislation, is still the most important angle,” said Jason A. Metcalf, an attorney and short-term rental owner in Suttons Bay who has been monitoring the developments at the local and state level. “If 30% becomes the number, then enforcement becomes a huge issue.”

The Village of Suttons Bay has decided to grandfather in existing short-term rental licenses and reduce the number through attrition, while looking at ways to update the ordinance and right-size the number of short-term rentals. 

Metcalf lives in the area and has several short- and long-term rentals in and around Suttons Bay, which he manages and maintains. He rallied STR owners to attend Suttons Bay council meetings on the issue. 

“It was sounding a lot more like they were going to limit it down to nothing, which concerned me,” Metcalf said. “There is a tradition up here, long before Vrbo and Airbnb, of short-term rentals. It was just done through less formal means.”

While Metcalf feels for people who live next to problematic short-term rentals, he said local communities need to focus on enforcement of occupancy limits, noise, parking and nuisance violations. He also worked to dispel arguments that short-term rentals are driving up prices and displacing locals.    

“It’s a misnomer; it’s a fallacious argument,” Metcalf said, noting his Airbnbs often help subsidize the units he rents out to year-round workers. “It’s the desirability of the area. If short-term rentals didn’t exist here at all, either they would be sold at high prices or they would be rented at high prices, which would preclude workforce housing.”

Local officials maintain a one-size-fits-all approach does not work when it comes to short-term rentals because each community has different needs, demographics and public safety and housing concerns.

“To me, this is a prime example of cities being allowed to legislate for themselves,” Murphy said. “Local elected officials know better what is good for a small community such as ours rather than it being dictated to us out of Lansing.”

The legislation would give local governments the authority to limit the number of short-term rentals owned by the same person in an effort to prevent investors from buying up multiple homes. It also caps the total number of short-term rentals as a percentage of all residences, but officials say the proposed 30% cap is unreasonable for small communities.

“If it’s 30% as proposed, right now it would allow up to 500 short-term rentals in the city of Petoskey, and I think that’s way too much,” Murphy said.

Humphrey agrees, saying New Buffalo has 150 rentals with active licenses plus a number of illegal rentals that the city struggles to police. Under HB4722, that number could increase to 750 short-term rental units.

Local governments could still enforce ordinances related to parking, noise and nuisance complaints as long as such regulations are applied consistently to owner-occupied residences as well.

Humphrey argues that short-term rental owners don’t pay any additional taxes, other than the non-homestead tax rate, or fees to local communities, like a lodging or tourism tax. But short-term rentals do bring added traffic, nuisance and public safety issues. They also create added costs for inspections and code enforcement, which are a strain on public resources.

“Short-term rentals incur a much larger cost due to the number of people they bring in,” Humphrey said. “They should be paying lodging taxes, a tourism tax to supplement the municipality.”

An unintended consequence is a decline in population, school enrollment and quality of life for year-round residents.

“We’ve had a 33% decrease in school population in 10 years,” Humphrey said. “They [legislators] don’t understand that people need to live here to pay for public safety and infrastructure.”    

Lawmakers and opposing groups have worked to introduce compromise legislation that recognizes the difference between homeowners who rent their properties a few weekends a year and those who buy up properties to operate them as “mini hotels.” House Bills 5465 and 5466 are supported by a coalition of organizations representing local government, public safety, the restaurant and lodging industry.

Representatives from Michigan Township Association testified in opposition to HB 4722 at early House committee hearings and worked on the compromising legislation, but it hasn’t gained traction, said Judy Allen, MTA’s director of government relations.

“We have put forth compromise after compromise,” Allen said. “Each community is different. I don’t have two identical townships. Each one has different needs and different makeups. … The state wants to come in and say, ‘We know better,’ preempting them from the work that they have done.” Suttons Bay | Susan J. Demas

Zoning is intended to regulate conflicting land uses and problems that ensue, and communities zone based on master plans, local needs, and the Michigan Zoning Enabling Act.

“If the sole purpose is to be a commercial activity to make money that is different from families who live, work, raise their children there, and want to have a quality of life in a community,” she said.

Those looking for a compromise say HB 4722 fails to address a key issue, which is how to distinguish between homeowners with a second home who occasionally rent it out versus owners and investors that buy up homes and operate them from out-of-state as for-profit enterprises. They often never visit Michigan, or the city where the home is located, and have no stake in the community other than profit.  

Although short-term rentals have been a concern in resort communities for several years, the issue has expanded to inland cities and rural townships due to a general housing shortage. Businesses that want to relocate to a community worry about housing for their employees.

“Homes are being purchased and not available when they have a business locate in their community,” Allen said. “Where are people going to live, and is there a quality of life that employees are going to want?”

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.

close

Sign-up for our free daily newsletter to receive local news & culture in your inbox