Local Governments Face Down The Airbnb Phenomenon

By Patrick Sullivan | April 8, 2017

For some, vacation rentals are an enticing way to own a little bit of heaven Up North – buy a home on the water or near your favorite downtown, stay for a couple of weeks in the summer and pay for it by renting the property short–term for the rest of the year.

That’s been going on since people have taken vacations in northern Michigan, but it’s accelerated in the last couple of years as websites like Airbnb and VRBO have exploded the market for short–term rentals. Now, officials in townships and cities across the region are weighing how to respond.

Permissive vacation rental rules likely raise property values and increase tourism but might also unfairly compete with hotels, strain availability of affordable housing, disrupt the peace and turn off homebuyers who want to live in a residential neighborhood. Shutting down rentals, on the other hand, takes away property rights and income from homeowners and might mean fewer tourists and more houses sitting empty.

A Clamp–Down in Petoskey
In Petoskey, officials worry that the increase in short–term rentals might radically alter the housing market and strain the ability of businesses to hire workers.

“I’m getting a call probably every other week from someone looking to buy a house, and they want to know if they can do a vacation rental – that’s probably the biggest question we get,” said Amy Tweeten, Petoskey’s city planner. “A lot of units that have been workforce housing historically are becoming vacation rentals.”

She said buyers are looking for investment properties they can turn into short–term rentals, and that takes housing stock off the market just as affordable housing (in Petoskey and across northern Michigan) has been identified as a critical need. Petoskey prohibited new short–term rentals in residential areas in 2014.

Now the city is preparing to crack down. Tweeten said letters and notices of violations are being sent out this spring. Civil infractions start at $150, but if a property owner continues to defy the ordinance, the penalty escalates.

“The fees, to start out, are not going to deter anyone, but if they keep doing it, after a couple of citations, we’ll just send it to the court and then the judge will give them an order to discontinue the use,” Tweeten said. “Once you get to a certain point, every day is a violation.”

It’s a challenging ordinance to enforce because some property owners are adept at hiding. Some don’t put photos of their house’s exterior on Airbnb, and the website allows property listings to be vague about location. Others list a minimum stay of 30 days, which would be allowable under the city ordinance, but Tweeten said she doesn’t fall for it.

“If you read the comments of people who are renting, clearly they are doing it for less than that,” Tweeten said.

“The Guts of the Community”
Down the coast and across Grand Traverse Bay, Northport is much more permissive. If you own a home you want to rent short–term, you’re merely asked to register the property with the village.

Barb Von Voigtlander, Northport’s administrative coordinator, said she hasn’t heard of any problems caused by vacation rentals.

“It’s been working fine – we have about 30, 31 short–term rentals that have been registered to date, and so far we have not experienced any complaints with any that we’ve registered,” Von Voigtlander said.

There are around 400 homes in the village, so short–term rentals make up less than 10 percent of housing. Besides, she said, many of the homes now used as vacation rentals were dilapidated and unused before they were bought as investments and restored. Now, at least, the homes host guests and pay taxes.

Susan Ager, a freelance writer and former Detroit Free Press columnist who moved to Northport 15 years ago, said affordable housing has been in short supply in the village since she moved there. She believes vacation rentals are stripping Northport of much of the affordable housing it has left.

“Young families are the future of any village, and we’ve got a few of them, but gosh, we need so much more,” she said.

Ager said she understands the benefits of increased tourism; she has friends who own businesses that depend on tourists. But she’s worried about the fundamental change she sees occurring.

“What troubles me is the sense of the village slowly emptying of year–round residents who own their homes,” she said. “That’s the guts of the community – those people in those houses.”

A Pioneer in Prohibition
One northern Michigan township did away with vacation rentals a decade ago, even before Airbnb was founded in 2008.

Alan Martel, Torch Lake Township supervisor, said his locality decided to enact a vacation rental ban because people love the residential character of the township and don’t want neighbors operating businesses.

“In our township, we have Lake Michigan on one side and Torch Lake on the other, and it’s one long residential strip,” he said. “It comes down to what you want for your waterfront – do you want it to be a commercial enterprise? Or do you want it to be a residential area?”

Martel said officials in his township discovered that vacation rentals were big moneymakers and that people were purchasing homes as investments so that they could rent them out and have them managed by rental management companies. Owners often lived out of state.

Martel believes in the ban so much that he’s become an evangelist for short–term rental prohibition: In January, when Acme Township held a public hearing about what kind of short–term rental policy to enact, he travelled the 22 miles between township halls and spoke in favor of eliminating rentals.

Kim Pontius, executive vice president of the Traverse Area Association of Realtors, counters that if local governments hold public discussions, they will learn that most residents want flexible policies that allow vacation rentals.

He noted that discussions in Suttons Bay Township about an ordinance last year started out restrictive and then became more permissive as additional people weighed in.

“To bar them outright – I think that’s shortsighted, and I don’t really think it’s fair,” he said.

Kathy Egan, the Suttons Bay Township planner, said officials there didn’t intend to ban short–term rentals, but rather they realized between 2012 and 2016 that housing in the township was slowly being consumed by them. They passed an ordinance that requires homeowners to apply for a permit. The township will sort out the details over the next year and make it a requirement in 2018.

“All the trends show that it’s going to keep increasing, so we learned that now is the time to address it, before it’s a critical issue,” Egan said.

A Discussion Takes Place in Acme
Acme Township Supervisor Jay Zollinger said he learned at that January public forum that short–term rental policy is a complicated balancing act between competing property rights and that there isn’t a simple answer.

“It’s a real tug of war both ways, and neither is particularly wrong,” he said. “There are some [rentals] that have been here for years and have never been a problem. We also know people who have been renting and there’s always been a problem.”

That sentiment was echoed by many commenters at the hearing where 27 speakers voiced opinions – 20 were more or less in favor of vacation rentals and seven were opposed. Many pointed out that one or two rentals seemed to be giving the whole concept a bad name because of noise and garbage left behind.

The planning commission is scheduled to take up the matter Apr. 10 and will eventually make a recommendation to the board, either that short–term rentals should be banned, that they should be allowed or that they should be allowed with conditions.

Pontius said Michigan Realtors is pushing for state legislation that would prevent local bans. He said the topic deserves a lot of debate so that townships can craft ordinances that allow sensible short–term rentals and preserve property rights.

“I’m in favor of having a larger discussion on it rather than just a ban, an outright ban,” Pontius said.

Pontius said there have been vacation rentals in northern Michigan for as long as anyone can remember and that they are part of the region’s economy and culture. They prop up real estate prices, they pump money into the local economy and they enable sons and daughters who inherit the family cottage to be able to afford to keep it.

“That’s something that’s happened for decades. I mean, there are a lot of people who have done that for years and years and years,” he said.

Pontius disagrees that vacation rentals significantly impact the availability of low–income housing in most places because the homes that are rented by the week tend to be on the water or in the center of town, places that wouldn’t be affordable even if they came on the market for sale or rent.

Level the Playing Field
Trevor Tkach, Traverse City Tourism president, said that in many cases, the way short–term rentals compete against hotels is not fair or sustainable.

Tkach said he hears over and over from hotel operators that vacation rentals hurt their businesses and that the playing field should be level. For example, hotel operators believe that fees and assessments like the five percent room fee local hotels pay by state law to fund the state–wide convention and visitors’ bureau should also be paid by short–term rentals.

“I’d say, at the very least, that the systems in place should be fair and equitable so that if a hotel or lodging facility is being held to a certain standard, everyone should be held to that standard,” he said. “That should always be consistent – no one group should have an upper hand.”

For example, Tkach said that short–term rentals should be held to the same fire code and accessibility standards as hotels and should be required to have someone available in the middle of the night to handle complaints.

“Every space is different, and it’s up to the local municipality to create the rules and enforce them,” Tkach said. “I think some have rules they aren’t enforcing currently, and other municipalities are basically avoiding the situation entirely.”

If you open Airbnb’s Traverse City page, the market for vacation rentals looks robust. While Traverse City doesn’t allow short–term rentals in residential areas, there are several exceptions to that rule – short–term rentals are allowed in certain developments, at tourist homes and in the downtown business district, for example.

Dave Weston, Traverse City zoning administrator, said he enforces an ordinance against short–term rentals when he learns of violations. He said he hasn’t issued any tickets so far this year, but letters have been sent out and the city code enforcer has followed up and driven by homes to look for signs of vacationers. Last year, one homeowner on the base of the peninsula received a second–offense ticket, but Weston said most people stop once they receive a warning letter.

“We haven’t had a lot of issues or complaints about weekly rentals,” Weston said.

Meanwhile, in Acme…
Rick Valley is one of those Acme Township residents who attended the January public hearing in opposition to vacation rentals. He didn’t speak, but his wife spoke out against vacation rentals.

Valley’s position is nuanced. He happens to live next to a rental that has been trouble, he said. It’s been the scene of noise, garbage and illegal use of fireworks, nuisances not quite severe enough to warrant calling the police.

But Valley isn’t necessarily against vacation rentals altogether. He said he understands that they are necessary for guests of Horse Shows by the Bay, for example. He just believes there should be something in the ordinance that requires owners to be around and be accountable.

“What we have noticed is that if the owner isn’t involved in these rentals or keeping an eye on them, they get out of control,” Valley said. “The [renters] come up and kind of think they own the place…If the owner was more involved in his rental, I don’t think it would be a problem. In fact, I’m sort of for these, in general. I wish I had some of these.”

Margy Goss, another Acme resident who spoke at the meeting, believes the township should take its time to come up with an ordinance to allow vacation rentals.

“As far as I’m concerned, there’s no hurry,” Goss said. “There should be no rush to judgment on this because I believe Acme needs to get it right.”

She noted that residents at the hearing were almost three to one in favor of allowing some kind of short–term rentals.

“Acme desperately needs to be able to offer these rentals – we have some really cool stuff going on here in the summertime,” she said. “We don’t have a huge problem, so for our township to act as if it is a huge problem and to proceed in a rash manner is silly.”