Local officials and affordable housing advocates in Michigan have been vocally opposed to legislation that would make short-term rentals a permitted use in all residential zones.
Until now, some local governments have banned or severely restricted the use of short-term rentals made popular through sites like Airbnb and Vrbo.
Bills working their way through the state House and Senate would amend the Michigan Zoning Enabling Act and take away local governments’ ability to impose certain regulations on short-term rentals. Senate Bill 446 is sponsored by Sen. Aric Nesbitt, R-Lawton, and House Bill 4722 is sponsored by Sarah Lightfoot, R-Springport.
The legislation defines a short-term rental as the rental of a single-family home, a one- to four-family home, or any unit or group of units in a condominium, for no more than 30 days. Under the legislation, short-term rentals would be considered a residential use and exempt from special or conditional use permitting.
Some municipalities have banned or capped the number of property owners who can rent out their home on a short-term basis in specifically zoned areas. Other local regulations have included buffer zones between short-term rentals and requiring additional layers of inspections.
The bills as drafted would strip municipalities’ ability to adopt these types of local regulations, which also include rules on noise and traffic and occupancy levels.
Realtors on board
Brian Westrin, general counsel for trade group Michigan Realtors, told MiBiz the legislation would restore homeowners’ private property rights in municipalities that severely restrict short-term rentals as well as attract investments in second homes.
“When people are looking at investing in our state, especially with second-home ownership, they do ask those questions of: Can I rent on a short-term basis or at all?” Westrin said.
The legislation also comes amid an active housing market in Michigan as realtors report record sales and houses quickly selling above asking prices.
The Southwestern Michigan Association of Realtors reported a record 1,044 houses sold in April 2021 in Allegan, Berrien, Cass counties and the western two-thirds of Van Buren County, with selling prices continuing to “set new record levels each month in 2021,” according to the organization. The previous record was 965 houses sold in April 2018.
Local opposition
However, local officials who have regulated short- term rentals say the legislation strips away local power and ignores neighborhood concerns.
“What we found when we did our evaluation last year was that (our regulations) met the market need and we thought we put pretty reasonable restrictions in place,” said Holland City Manager Keith Van Beek. “This isn’t just about the property rights of the folks that have a short-term rental, we’re also worried about the property rights of people living around them.”
The city of Holland launched a short-term rental pilot program in 2018 that has since been adopted as part of its local zoning ordinance. The city has a limit of 25 short-term rentals allowed in its traditional neighborhoods and imposed a 500-foot buffer between each short-term rental. The city also requires rental property owners to keep contact information on file with the city in case problems arise during a rental period.
“We put a lot of work into this and had a lot of citizens provide feedback,” Van Beek said. “This additional assurance belongs at the local level of how to allow something and do it in such a way that matches the needs of our local community and local neighbors. That’s why we object to the legislation.”
Housing implications
Local officials are not only concerned about potential nuisance issues with short-term rentals, but also with the risk of further straining the housing supply.
In cities like Traverse City, short-term rentals are part of the local tourism economy but are already having detrimental effects on the availability of housing stock, said Traverse City Planning Director Shawn Winter. He believes the proposed legislation could contribute to the rising cost of housing.
As of mid May, Traverse City had 31 licensed owner-occupied short-term rentals and two applications pending, along with 165 short-term rental properties licensed that are not owner-occupied and 14 with applications pending.
Winter also raised concerns about ownership changing at developments that receive state and local incentives to serve as workforce housing. The fear is that these developments will be changed to condos, making it possible for owners to turn units into short-term rentals, Winter said.
“When you start to have a lot of housing stock tied up in short-term rentals, it’s hard to have people move here,” Winter said. “Our service industry workers can’t find any housing at a reasonable price anywhere in town and are forced to live outside of town and have time and travel expenses, which ends up being pretty significant. A lot of places have a hard time retaining workers, and not just service industries, but manufacturers, too.”
Westrin disputes arguments that the legislation would have a detrimental effect on affordable housing.
“There are so many other variables that we’re working against to make sure housing is affordable in Michigan and short-term rentals are the least of those concerns,” Westrin said. “The bigger issue is the cost of materials, low interest rates, and the availability of the housing stock is currently very low.”
Yarrow Brown, executive director of Traverse City-based advocacy group Housing North, said short-term rentals aren’t necessarily a problem, but communities should be able to regulate them as they see fit.
“We’d like our local units of government to be able to make that decision,” Brown said.
Renting an Airbnb
Travis Hanko explored Airbnb during the COVID-19 pandemic as a way to earn extra income. Business has been scarce during the winter months for his landscaping company, Precision Cutz LLC, so he bought a house in August of 2020 in Benton Harbor near his home in Coloma.
“I needed to figure out something to do to keep my (employees) busy and have supplemental income as well,” Hanko said, adding that he originally intended to buy a house “to flip and sell it.”
Hanko invested about $130,000 to gut and renovate the Benton Harbor property. After learning about Airbnb from a neighbor, Hanko opted to rent his property on a short-term basis instead of immediately selling it.
He also says short-term renting is less stressful and more lucrative than having long-term tenants, while eviction bans during the pandemic further dissuaded him from long term rentals.
Hanko is now in the process of buying another home to renovate and convert to a short-term rental after a promising start with his first attempt.
“We had our first renter two weekends ago and are booked through August every weekend and during every week,” Hanko said
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