The Real Issue is Inventory, Not Short-Term Rentals
With legislation regarding short-term rentals recently passed out of the Michigan State House and Senate Committees (House Bill 4722 and Senate Bill 446 respectively), conversations have renewed on the impact of short-term rentals in our local communities. When it comes to short-term rentals, a balanced approach is required. So, let's see how House Bill 4722 and Senate Bill 446 measure up.
It has been generally understood in Northern Michigan that the tourism industry is a major contributor to our region’s economy. According to a study conducted by Traverse City Tourism in 2012, visitors generated more than $1.23 billion in economic activity for the Traverse City area, of which $1.18 billion went directly to local businesses. This study also found tourism to be responsible for creating and maintaining nearly 12,000 jobs in the Traverse City area, representing nearly 30% of area employment with a 4.5 percent growth rate since 2006. Needless to say, tourism is an important contributor to our regional economy.
So where is the balance between tourism and long-term residence? The best way I have heard this balance described is at the nexus of citizens’ right to the quiet enjoyment of their property and property owners’ basic rights to sell or rent their property, if they so choose. Sounds good on paper but what does this look like?
In Michigan, House Bill 4722 and Senate Bill 446 have been introduced by Representative Lightner and Senator Nesbitt, respectively. These bills would establish that all residential property owners should have the same rights to rent out their homes - whether short or long term - regardless of the city, township, or village in which they reside. However, they would still be held to all the same standards as their fellow neighbors for inspections, occupancy levels, taxes, noise, and “other conditions for the prevention of nuisances.” I commend our State Legislators for their efforts to strike this tough balance.
Underlying this balance between tourism and long-term residence is a concern for a proliferation of short-term rentals taking away homes from long-term or potential long-term residents. A commonly referenced statistic is from a report put together by Networks Northwest stating that the northwest region of Michigan is home to only 3% of the state’s population, but contains 25% of the state’s STR listings. That sounds like a BIG number, but what does that really mean in our local communities?
Let’s take Elmwood Township, who has been working on a suitable short-term rental policy for over two years now. Along with Elmwood Township Residents, a group of short-term rental owners known as Citizens Hosting Elmwood Renters (CHER), conducted a study to learn more about how short-term rentals affect housing inventory. What they found is that prior to the short-term rental moratorium put in place in March of 2019, just over 100 out of over 2,000 total housing units in Elmwood Township were operating as short-term rentals. That’s roughly 5% of the total housing units in their community. This seems to be a consistent percentage across our region.
I recently ran a search on AirDNA, which pulls its data from the most popular short-term rental websites (Airbnb, HomeAway, and VRBO). As of June 2nd, 2021, there were a total of 4,731 short-term rentals in the 10-county region. This may sound like a lot, but it actually represents just 2.5% of the 186,338 housing units in the region (according to the US Census). Again, this is a region where 30% of area employment is dependent on tourism. It’s also worth noting that in a 6-county region (Antrim, Benzie, Grand Traverse, Kalkaska, Leelanau, Wexford Counties) only 19 of 103 cities, townships, and villages felt the need to establish any short-term rental policies that would be affected by the passage of HB 4722 and/or SB 446.
The need for long-term housing is much greater than the 4,731 units that make up our short-term rental inventory. A study conducted in 2019 by LandUse USA on behalf of Housing North and Networks Northwest concluded that our 10-county region is in need of 3,000+ new housing units PER YEAR. This would put our region on course to reach the 15,540 new housing units (10,880 rental units and 4,660 ownership units) the LandUse USA study calls for by 2025. So even if you assume all of these short-term rentals in the 10-county region are operating at a full-time or part-time capacity thereby preventing them from operating as a residence for long-time owners or renters (a broad and unlikely assumption), they would still only provide for less than a third of the region’s housing need. And this demand for housing units has likely only grown over the past year and a half as our region has seen significant price jumps in Median Home Prices. In fact, the May 2021 statistics for the 5-county region (Antrim, Benzie, Grand Traverse, Kalkaska, and Leelanau County) showed a 38% price increase year-over-year in Median Home Selling Price; from $229,500 to $317,000.
We all live in a beautiful place, who wouldn’t want to live here. To provide housing for everyone fortunate enough to already live in our community and those to come, we need all the tools we can get. For some, one of those tools is short-term rentals. Like in Elmwood township, where a young family owns and operates a single short-term rental and manages a second one for their parents. The supplemental income they make from their short-term rental has allowed a third-generation Leelanau native (with 4th generation children) to afford to remain in Elmwood Township while other siblings moved away for better work or a lower cost of living. To make significant progress in providing housing, we need communities to identify housing as a priority issue and to take the steps to create an environment ready and supportive of housing development.
The good news is this work is happening, but it needs your support. It is happening in Traverse City, where the Traverse City Planning Commission and Traverse City Commission have identified housing as their number one priority issue. There is consideration on various housing development projects, including recent conversations on receiving requests for proposals for potential developments of parking lots G, O, T, and X and decreasing the minimum lot size on which two principal dwellings can be developed. In Bellaire, they have passed a resolution supporting housing options within their village and endorsed the Homes for Our Future campaign to “raise awareness and support for housing solutions such as the consideration and adoption of common-sense local policies and practices that will increase the supply of housing” and advance “state-level policies that expand and improve access to housing resources for all communities.” Leelanau County has been operating a Housing Action Committee since 2017, which developed a Housing Ready Checklist adopted and utilized by Housing North through their Homes for Our Future campaign across the 10-county Northwest Michigan region to help communities evaluate their own standards, strategies, plans, and ordinances to ensure they are designed in a way that meets local needs for workforce housing.
Aspire North REALTORS℠ is working at a local level with Housing North to advocate for increased housing attainability for all and breaking down barriers to housing development. This includes involvement in Housing North’s Advocacy and Communications Committees and financial support for Housing North efforts with a Housing Opportunity Grant and our association’s sponsorship of the Housing Summit since its inception in 2015. At a state level, Aspire North REALTORS℠ is also working alongside Housing North, our state association Michigan REALTORS℠, Traverse Connect, Michigan Home Builders Association, Grand Rapids Chamber of Commerce, and numerous other partners at a state level as a member of the Housing Michigan Coalition to increase Housing Attainability with policies like:
- The First-Time Home Buyers Savings Account – Annual Tax deduction and tax-free growth savings account to save for home purchases
- Abandoned Mobile Home Titling – outline a new process to get Mobile Homes re-titled and on the market for interested buyers
- Attainable Housing and Rehabilitation Act
- Employer Support of Workforce Housing Tax Credit
- Neighborhood Enterprise Zone Expansion
- PILOT (Payment in Lieu of Taxes) Option for all Local Governments
- And more
Progress is also being made at the state level, which you can track through the Aspire North REALTORS Current Real Estate Issues webpage and through the Housing Michigan Coalition website. It's going to take all of us to make real progress on the development of housing options in our region. So, let’s stop fighting over the uses of the limited housing we have available and focus on the real issue of creating the environment, tools, and resources to build the homes needed for our communities now and in the future.