News Story

Michigan Cities are Banning People From Renting Out Their Property

Panel discusses the positives and obstacles to short-term renting

While cities like Detroit and Grand Rapids have largely embraced short-term rentals, that’s not the case everywhere, meaning that this property rights issue has come to the forefront. Home sharing — where people rent out their residential property through companies like Airbnb and HomeAway — has become increasingly popular in Michigan. And some municipalities are fighting back by banning the practice.

That’s not right, said panelists at a recent event sponsored by the Mackinac Center for Public Policy. Renting out your property for short periods of time has been done for as long as people have owned a cottage “up north.” But modern technology makes the process easy. Vacationers can find a unique place to stay, often at a lower price than hotels, and homeowners can exercise their property rights while earning a little extra income.

Kelli Fickel is a homeowner in Holland. Renting out her second home through Airbnb was quite a success. She welcomed guests from around the world, and even her neighbors rented from her during the holiday season when they wanted a vacation home for their in-laws.

Elaine Page, another Holland resident, told a similar story of her successful rental home. Page considered herself an ambassador for her city. A welcome sign in her home reads, “May all who enter as guests leave as friends.” Page pointed out that short-term rental properties are often second homes, which are taxed at a higher significant rate than homesteaded properties. The additional tax base of second-home properties plays a vital role in the tourism economies of some towns.

Despite the benefits, this practice has some opponents. Hotels and members of the accommodations and tourism industry don’t like the competition. And some residents and homeowners associations don’t like the flow of people coming through the neighborhood. These groups have encouraged local government officials to charge excess fees or even ban these rentals. That’s happened in Traverse City, Grand Haven and elsewhere.

That’s what happened to Fickel and Page. They saw a benefit to home sharing and had no incidents, but the city of Holland shut them down, citing zoning regulations. City council members halted the success enjoyed by Fickel and Page and their customers when they began enforcing ordinances to stop home sharing. The zoning code made it illegal to rent the home for periods shorter than 30 days. Officials also said that short-term rentals were against the character of a residential neighborhood.

Christina Sandefur, executive vice president of the Goldwater Institute in Arizona, argued that the arbitrary enforcement of home sharing laws — to deem it a criminal activity to rent out a home for less than 30 days — severely infringes on property rights.

The Goldwater Institute has filed lawsuits nationwide on this issue. Sandefur talked about instances in Arizona, Chicago and Miami where the practice is being banned or severely restricted.

Brian Westrin, vice president of public policy and legal affairs for the Michigan Realtors, said the picture painted by opponents of home sharing as encouraging “discourteous short-term occupants hurting the neighborhood, is not accurate.”

The problem, Westrin says, is local officials mistreating short-term rentals as commercial activity and outlawing it. He sees the practice as a residential use and argued that classifying it as a commercial use is an infringement on property rights.

“We’re not telling [local governments] not to regulate at all … but you should not use zoning to treat property owners favorably in one sense or unfavorably in another or to ban it outright,” Westrin said.

The situation for home sharing individuals may be changing. Senate Bill 329, sponsored by Sen. Joe Hune, R-Fowlerville, and House Bill 4503, sponsored by Rep. Jason Sheppard, R-Monroe, would forbid local governments from using zoning regulations to prohibit short-term rentals.

The panelists noted that local governments can already use ordinances covering nuisances to address problems that might arise from home sharing, such as loud noise, heavy traffic, unsightly trash and others. As long as the ordinances are applied fairly, home sharers have no issue. The panelists agreed that the bills would address the challenge of both upholding property rights and maintaining clean and safe communities.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.