News Story

New Buffalo City Council Divides Residents Over Airbnb-Type Rentals

First they impose restrictions, then a moratorium

An effort by a southwest Michigan resort town to limit short-term vacation rentals of residential property has led to a series of restrictions and moratoriums by the city council, contentious public meetings and a federal lawsuit.

The controversy in New Buffalo, similar to others around country, pits owners and users of Airbnb-style vacation properties against year-round residents who contend that transient visitors are disruptive and damaging to neighborhoods.

City officials, led by Mayor John Humphrey, have tried to fashion an enforceable set of rules and penalties for short-term rentals since 2019.

They insist that their efforts are not aimed at outlawing the practice, an integral part of the community’s tourism-based economy. But critics argue that the city is stripping rights from property owners in a ham-handed and illegal fashion.

“Many people who own multiple properties have done a horrible job,” Humphrey said in a city council meeting late last month. “We have a lot of people here who are willfully failing to follow the law. The goal is to keep people who are irresponsible from renting their homes.”

William Lenga, who has owned a vacation home in New Buffalo for decades and rented it to short-term visitors for five years, said the city is killing the golden goose.

“There are two main industries here, real estate development and tourism,” Lenga said. “Instead of putting up a welcome mat (for tourism), you’re putting up barbed wire.”

New Buffalo officials are trying to amend a 2019 ordinance, adopted to regulate short-term rentals, by upping the penalties for noncompliance and requiring those who own multiple properties to hire city-approved managers.

The city imposed a moratorium, in May 2020, on new registrations for short-term rentals. In December, it imposed a moratorium that will last through August.

Dan Hatch, an attorney who represents a couple who purchased and renovated a home in New Buffalo in 2014 with plans to use it as a short-term rental property. He sued the city in federal court after his clients were denied a permit to operate.

The lawsuit claims the moratorium was unlawfully adopted, violates property owners’ constitutional rights, and violates the city charter.

“My clients and many other property owners in New Buffalo are trying to comply with the ordinance, register short-term rentals, and obtain permits,” he said. “But the city is preventing them from doing that.”

“My clients have the constitutional right to use their property and operate their business without arbitrary government interference. Here, the moratorium does not further a legitimate government interest because it was unlawfully adopted and prevents property owners from complying with the ordinance that the city enacted. In effect, the city has adopted certain requirements that property owners must comply with to legally operate . . . and, at the same time, prevented property owners from complying with those very same requirements.”

Hatch said his clients have operated their property as a short-term rental for seven years, always receiving their New Buffalo property taxes and water bills at their permanent residence in Illinois. They became aware of the ordinance, he said, only when a compliance officer notified them that their property was being illegally rented early this year. They promptly applied for a short-term rental permit and were denied because of the moratorium.

Lenga said the city’s response to isolated problems at a few properties is out of proportion and could be addressed through enforcement of existing measures, such as prohibitions against late-night parties. It is, he said, unreasonable to impose requirements that property owners be responsible for the misbehavior of tenants, including the possibility (as in the proposed amendment to the registration ordinance) of a three-year suspension of the right to rent.

“For our property, that would be the equivalent of a $170,000 fine for a nuisance violation,” he said.

The short-term rental of rental property, especially in resort areas, has been contentious in other Michigan communities as the popularity of the practice has burgeoned with online booking through Airbnb, VRBO and other services.

Michigan courts have, so far, given municipalities considerable leeway to enact restrictions on short-term rentals, including bans, said Derk Wilcox, an attorney with the Mackinac Center Legal Foundation.

The Legal Foundation represents a homeowner who is banned by the city of St. Clair Shores from renting out his property on a short-term basis. The case is on appeal to the Michigan Supreme Court.

The issue of repealing the right of property owners to avail themselves of short-term rentals, and the means by which a city seeks to do so, is a complicated one, Wilcox said.

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.