Traverse City News and Events

Short-Term Rentals In Traverse City: Demand And Debate Intensify

By Craig Manning | July 26, 2019

The Traverse City area is one of the fastest-growing vacation rental markets in the U.S., according to a new study from vacation rental search engine AllTheRooms. The study ranked Traverse City at 295, tallying 586 vacation rental listings on sites like Airbnb and VRBO for the month of May 2019. That figure was up 29.65 percent from the same time the year before.

Last December, Airbnb reported Grand Traverse County property owners had hosted 53,000 guests during the year and pulled in $8 million in revenues – more than 10 percent of the state total. Those figures were up more than 80 percent from 2017 and had more than tripled since 2016.

These gains have occurred even as a battle has raged locally about how to regulate short-term rentals. Peninsula Township does not allow homeowners to rent out properties on a short-term basis. East Bay Township has an annual $450 short-term rental licensing fee, along with septic tank inspections and a signed affidavit confirming that neighbors have been notified.

Perhaps the most hard-fought battle has occurred within the city limits. As of February 1, any homeowner in the City of Traverse City can apply for a Low Intensity Tourist Home Permit, allowing a homeowner to rent out up to two rooms for up to 14 nights at a time, as long as they abide by a few requirements. First, all guest stays must be “hosted stays,” which means the homeowner must be present. Second, the home must be the homeowner’s primary residence. Third, low intensity tourist homes can only record up to 84 guest nights per year. Any adult guest renting part of a house for a night counts as a guest stay – which means two adult couples, renting out a pair of rooms in a low intensity tourist home for one night each, would count as four guest nights.

High Intensity Home Permits, meanwhile, have no limit on the number of guest nights per year, allow for rental of up to three rooms for a maximum of 14 nights at a time, but still required hosted stays and cannot be within 1,000 feet of another tourist home.

For years, a local “Responsible Home Sharing” group has campaigned for liberalization of the city ordinances. According to Diane Kolak, a member of that group, recent ordinance changes that went into effect in February were just the first small step toward a fairer local home sharing market. The group’s next priority is to fight for the right to offer unhosted stays, which are typically more attractive to renters.

“When the new ordinance passed in December, some of the city commissioners said that they would like to assess and reconsider the issue in a year or so,” Kolak says. “We'll be there to offer data and evidence that we need to further update the ordinance to allow anyone to share their primary residence as they see fit, with or without a host. This is where many U.S. cities have landed in their efforts to curb the housing shortage and maintain a neighborly atmosphere.”

Kolak adds that one of the commission’s reservations in loosening regulations was that it would create a deluge of homeowners wishing to rent their properties. That hasn’t happened. “Even with this relaxed ordinance, fewer than 20 tourist home applications have been processed since the changes went into effect last winter,” she notes.

So how is the local short-term rental market growing so substantially even given these regulations? The numbers that AllTheRooms and Airbnb have reported cover the Grand Traverse area as a whole – not just the city limits. And city ordinances only apply to properties in residential zones; commercial zones throughout the city, as well as the Grand Traverse Commons and the Hospital District, allow short-term rentals with very limited regulation. Property owners with houses, condos, or apartments in these areas are free to rent on a short-term basis if they purchase a permit and undergo a fire inspection.

Kolak and the Responsible Home Sharing group question the benefits of the city regulating only in residential zones.

“We'd like city officials to recognize that unrestricted short-term rentals in commercial zones are a major contributor to the housing shortage,” Kolak says. “Homeowners sharing a room or renting for a week while they are away does not affect the supply of long-term rentals and should be subject to fewer restrictions. Instead, we are more heavily regulated and monitored.”

The other concern about local short-term rentals is their impact on tourism. On the one hand, Airbnb and VRBO give tourists more options of places to stay in town. But Trevor Tkach, president of Traverse City Tourism (TCT), says there is currently no mechanism in place for these sites or their hosts to support the overall tourism infrastructure: Hotels pay a five-percent room assessment to TCT, which then uses the funds to promote the area; Airbnb and VRBO pay no such assessment.

“The increased supply and the growth [of the short-term rental market] is clearly having an impact on traditional hotel business,” Tkach says. “The market is flooded with alternative lodging options, many of which are not being regulated, taxed, and assessed at the same rate as hotels, creating an unfair business advantage.”

Tkach wants short-term rental properties to pay the same assessment that hotels do, and for sites like Airbnb to share more data about occupancy and revenue with TCT.

CORRECTION: A previous version of this article incorrectly stated that Acme Township does not allow homeowners to rent out their homes on a short-term basis. Acme Township implemented a new ordinance in December 2017 that allows for the issuance of up to 50 tourist home permits per year.

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