A series of bills in the Michigan House of Representatives would introduce new regulations on short-term rentals — a move opposed by a realtors' association, but supportied by tourism-heavy cities that say they need the funding to offset the infrastructure costs imposed by their visitors.
Those who rent through services like Vrbo and Airbnb would incur a new 6% excise tax, on top of the existing 6% use tax. The bills, HB5437-5446 were introduced by House Democrats. They were debated Wednesday in the Local Government and Municipal Finance Committee.
The Bills
The bills introduce a legislation for short-term rentals. They introduce a 6% tax for short-term rentals used up to and over 15 days. It also requires all short-term rentals to have $1 million in liability insurance. The bills also introduce safety measures for rentals including listed escape plans and local first responder numbers, fire extinguishers, smoke alarms, carbon dioxide alarms, and an emergency contact listing of someone within 30 miles.
The bills would require platforms like Vrbo and Airbnb to pay a $100 annual registration fee per listing, capped at $50,000. In addition, the bill continues to allow cities to regulate short-term rentals, including giving cities the power to limit their number and enforce zoning laws. It also sets up a database and requires yearly certification. A House Fiscal Agency report says the measures could “generate anywhere from $35.0 million to $70.0 million.” The money would be distributed to the local governments where short-term rentals are located. The bills allocate $1 million for the state to administer the collection and distribution.
Opposition
Brad Ward, vice president of public policy and legal affairs for Michigan Realtors, an industry organization, said his group is opposed to the bill package. “These bills set up a regulatory burden that you as a homeowner would have to comply with, the very first night that you chose to rent your property to someone else.”
He questioned the fairness of the proposed 6% tax, which he called a penalty. “We're not talking about a tax that would be equivalent to renting out a hotel or motel or a traditional lodging facility. We're talking about a 5 to 6% increase over those traditional lodging taxes to use a short-term rental,” he said. “We see this very much as a tax penalty for choosing to use a short-term rental.”
Ward said that he understood cities supported a form of registry and a tax to recoup tourism costs, but said the regulations were too harsh. “Our membership has always been open to the discussion about taxing short-term rentals, but that has to come along with addressing the ability — or the right — of the homeowner to be able to do that,” he said. “Our favorite approach would be: put some guard rails around this, put some sunshine on where these short-term rentals exist, and police for bad behavior. If you have a bad-actor landlord, remove their ability to rent through a complaint process.”
He said the various regulations could stretch renters thin. “Our preferred approach in terms of defining short-term rentals would be to kind of leave a lot of this up to the locals,” he said.
Support
John Humphrey is the Mayor of New Buffalo, Michigan, a popular tourism destination on Lake Michigan. He supports the bills, saying they provide a way for cities to recover the cost of tourism. “There is no taxes that get paid back to the municipality,” he said. “For the cost of, for example, my town, a town of 1,800 people, having 20,000 people in it for six months a year.” He pointed to the strain on water, sewage, and roads as examples.
He argued that the regulations would help address a shortage of affordable housing. “We need the excise tax to recover the cost being put on us. We need to be able to protect our local housing stock because people are rapidly being priced out of the market because of short-term rental.”
“No one can afford to buy homes because property values have all rapidly escalated, short-term rentals being a large contributor to that in this area,” he said. Humphrey was cynical about the “right-to-rent” proposed by his opponents.
“They are blowing smoke,” he said. Humphrey pointed to a federal suit New Buffalo won. The court found New Buffalo retained rights over zoning and could deny permits for rentals. “They can put their commission on every home, of course, they want short-term rentals from here to the end of the U.P.,” he said of realtors.
He argued New Buffalo’s property values went down after banning short-term rentals in some areas, making houses easier to buy.
