LANSING, Mich. (Michigan News Source) – It didn’t take too long after the Michigan Democrats regained power in the House for them to take up a ten-bill package that targets the state’s tourism industry, proposing a substantial tax increase on short-term rentals.
The proposed legislation, reviewed during a hearing in the Committee on Local Government and Municipal Finance on Wednesday, April 17th, aims to grant municipalities the authority to enact regulations and zoning ordinances, adds layers of bureaucracy for homeowners wishing to rent their property, homes, apartments, and condos rented for more than 14 days a year, adds a 6% excise tax on their short-term rentals and subjects them to the various taxes currently levied on hotel rooms.
Michigan’s tourism industry is substantial.
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A report from “Tourism Economics” in Michigan released in September of 2023 showed that “In 2022, visitor activity supported 5.6% of all jobs in the state and the increase in visitor activity in 2022 created $250 million more in state and local governmental revenues.”
Now, it looks like lawmakers want to generate more money for the governmental coffers as those revenues go up – and wield more control over entrepreneurs trying to make a living from property that they own.
Millions of taxpayer dollars will be seized.
The estimated revenue from this tax is significant, according to the House Fiscal Agency’s legislative analysis, ranging from $35 to $70 million, with the majority going to local governments. However, critics argue that the tax burden could harm tourism by making short-term rentals more expensive for visitors.
Legislation would add many regulations for short-term renters.
In addition to the existing obligations and tax responsibilities already incumbent upon entrepreneurial homeowners seeking to lease out their properties, this recent legislation imposes extra demands like mandating liability insurance, safety gear, and state certification. Such measures might pose further deterrents to property owners considering participation in the short-term rental sector.
While some aspects of the proposal, such as a statewide registry and local control, have received support, many stakeholders oppose the bill package.
Airbnb and Michigan Realtors Association push back against legislation.
Airbnb and other rental platforms argue that the legislation is overly burdensome and could lead to legal and economic challenges. Additionally, the Michigan Realtors Association and various tourism organizations are criticizing the heavy-handed approach of the bills, which they believe could discourage homeowners from renting their properties.
City leaders from both sides of the debate have weighed in as well, with some advocating for the legislation to address nuisance issues associated with short-term rentals, while others express concerns about its potential negative impact on tourism-dependent communities.
Differing opinions in Traverse City.
Traverse City Mayor Amy Shamroe supports the proposed excise tax, emphasizing the need to regulate short-term rentals at the state level to protect natural resources and lakeshore communities. Shamroe calls the excise tax a “game changer” and something that would help to alleviate the toll short-term rentals and tourists take on local infrastructure and government services stating, “While we have that regulation at the local level, solidifying it at the state level would make a huge impact on us.”
However, Traverse City Tourism doesn’t support the bills. Although they supports local control and the statewide registry, there are other issues that they don’t support. CEO Trevor Tkach says about the legislation, “It leans too far in the opposite direction and penalizes those doing short-term rental business. We are fighting for parity.”
A Traverse City Ticker article in May of 2022, reported that just over Memorial Day Weekend alone, Airbnb hosts in Traverse City pulled in almost $500,000 for their rentals. In the entire country of Grand Traverse, they brought in about $24 million, with $259 million brought in to the entire state. The Ticker added that a majority of that income (about $146 million) “occurred in rural areas rather than in cities or metropolitan areas.”
Additional hearings on the matter will take place.
The chairman of the House local government committee has indicated that additional hearings will be held to further discuss the bill package, acknowledging the evolving landscape of lodging in Michigan. However, no commitment to a vote has been made yet.
Lead sponsor of the bill, St. Joseph Democratic Rep. Joey Andrews said to the committee that the aim is to “find a good compromise here that lets our local governments function, allows the tourism activity to continue, let’s short-rentals continue to exist in properly zoned places and ideally takes a lot of the tension out of this argument.”
The tension he’s describing are the communities where there have been disagreements between local citizens and property owners who are providing rentals through Airbnb or VRBO services.
Complaints from permanent residents who live near the rentals often have issues such as noise, traffic and safety while the communities themselves say that the rentals add to the affordable housing shortage and deplete community resources.
Homeowners argue that all of the rules and ordinances infringe on their property rights.
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