Michigan thrives on tourism. Are short-term rentals pushing out long-term residents?

Affordable housing is an ongoing issue across much of the state of Michigan. The problem, already exacerbated by skyrocketing building costs and increased demand during the pandemic, now faces a new challenge — are there enough single-family homes and long-term rentals to keep up with the proliferation of short-term rentals?

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Short-term rentals are primarily aimed at tourists, who flock to Michigan towns — particularly along the lakeshore — each spring, summer and fall. Municipalities have toiled over short-term rental ordinances over the past 24 months, as affordable homes are snapped up for cash and neighbors submit disturbance complaints.

Those ordinances may prove futile if the Michigan Legislature successfully passes House Bill 4722, which would make short-term rentals an accepted residential use statewide. Limits could be placed on the number of short-term rentals per municipality, but could only be capped at 30 percent.

As the cost of living continues to climb, long-term residents face limited housing stock and higher rents. Meanwhile, the questions remains — how much more tension can the Michigan affordable housing market take?

'The greed factor'

According to the American Community Survey Housing Summary, 15 percent of housing units in Michigan were built between 1970 and 1979. Information gathered between 2016 and 2020 shows the estimated average rent is $801. With additional monthly costs factored in, the average gross rent is $960.

These averages reflect costs before the recent surge in inflation. A full-time employee making $15 an hour brings home about $2,600 per month before taxes — pushing the average gross rent dangerously close to 50 percent of their income.

As costs increase, fewer people can afford to buy their own homes, which boosts demand for rental housing in a time when new construction is limited, according to the National Multifamily Housing Council.

Bob Kroondyk, a landlord and builder in Boyne City on Lake Charlevoix, said costs are more manageable because he and his wife, Liz, acquired their 35 rentals in the 1980s. The couple manages a mobile home park and owns and manages long-term rentals, commercial rentals and one short-term rental.

According to Kroondyk, the lowest rent for one of their units is $600 per month and the highest is $900 per month. All of their apartments come with amenities like on-site laundry, full kitchens, private bathrooms and parking.

“We all know that there's a lack of affordable housing," he said. "So, what the greedy people have done is said, ‘Well, supply and demand, it's a normal thing. We can get more money, we're going to charge more money.’ They have no thought of what can someone afford on a single income or a double income."

But not all landlords are greedy, Kroondyk said.

"From our standpoint ... we had purchased a long time ago most of our properties, and so our cost factors were lower. If someone's trying to get (into) the business today, they are spending a lot more money to have the same units that we have. Let's say my 30 units cost me $10,000 apiece, that’s $300,000 — today, they would be over $1 million. So, other people trying to get into the landlord business are going to have to charge a lot more money.”

In 2009, after the housing market crashed, the Kroondyks found themselves with 15 empty units and no tenants to fill them. They decided to move into one of their own units and list their lakeside home as a vacation rental on the website Vrbo. It became a reliable method of income during the recession, while allowing the Kroondyks to keep their home for holidays and family gatherings.

“I think a short-term rental helped save our bacon, so to speak," Kroondyk said. "Now, I see it's just like anything else — the greed factor has jumped in.

"On any given weekend in Boyne City, there might be up to 3,000 people (in) our town because of short-term rentals — and that's probably good for Boyne City's business district, but those 3,000 people that are in, say, 250 of our city-limit homes, that's 250 families (not) living in Boyne City.”

Far from single-room

According to AirDNA, there are 293 active short-term rentals listed in Boyne City, with an average daily rate of $315. Of those rentals, 97 percent are full-home.

If that doesn't sound like the original Airbnb concept, it's because it wasn't. Much of Airbnb's marketing was once focused on renting out an extra room.

In 2016, Jake Wegmann, a professor at the University of Texas Austin, observed that much of Airbnb’s marketing didn’t reflect the reality of short-term rentals. He and co-author Junfeng Jiao looked into the impact of limited regulation around short-term rentals in five cities: Austin, Boston, Chicago, San Francisco and Washington D.C.

“For years, their marketing materials really played up to the idea that, you've got a house and you have a spare bedroom, you can make money and it's fun to make friends around the world, like that kind of home sharing,” Wegmann said.

“What we found instead was, yes, some of that happens, but the vast majority of listings are ones where it's a whole unit. Furthermore, a big subset of those were cases where there were so many bookings per year, that it seemed very unlikely the owner ever lived there at all ... effectively a hotel by another name.”

Landlords are catching on. Many have discovered they can earn more by charging hundreds per night instead of per month, leading some to convert.

One homelessness prevention program claims it served 16 people in the past year who became homeless, in part, because their rent was increased or their landlord converted their unit to a short-term rental.

“Affordable housing options in our region has always been an issue," Sarah Hughes of the Homeless Prevention Program for Northwest Michigan Community Action Agency wrote in an email. "Our region is beautiful and inviting but being the 'go-to' travel destination in the state puts an even greater strain on an already undersaturated housing market.

"That, coupled with the emergence and popularity of shorter-term, higher-price seasonal rental trends like Airbnb has compounded the issue, creating an even larger divide between supply and demand."

The elusive long-term rental

Earlier this year, Alyssa Milazzo and her 13-year-old son lived in Petoskey’s homeless shelter for almost three months as Milazzo hunted for a place to rent.

Each day, she scoured the classifieds for a home she could afford — and each day, she returned empty-handed. With the income from her job as a data specialist in the radiology department at Munson Healthcare Charlevoix Hospital, she made too much money to qualify for government subsidized housing, but not enough to afford anything more than $800 a month.

There weren't many options, at any price range, for year-round rentals. When a vacancy happened to come up, Milazzo said, she found herself one of a dozen or more on a waiting list.

Ten days before she was required to leave the shelter, she finally found a place. When the landlord called, she said, she accepted sight-unseen, despite it being over budget.

Milazzo now works four jobs — taking on three additional part-time positions in the food and services industry to offset her housing costs.

Joshua Dhaseleer and his wife, Tenille, an elementary school teacher, own long-term rental properties in the Charlevoix area. When one is available to rent, it doesn’t stay on the market long.

“The last one we had available was only listed for 46 hours and we had 113 people inquire about it,” Dhaseleer said. “A lot of those people are desperately searching for a house to buy, but they can’t find anything, so they're forced into renting.”

According to information from the Charlevoix Area Chamber of Commerce and the Charlevoix Convention and Visitor’s Bureau, there are around 375 hotel rooms in the area — and hundreds of short-term rentals — but there are only a handful of long-term rentals available at any given time, and they're often only known through word-of-mouth.

As of Tuesday, Oct. 25, there were only two houses for sale on Zillow under $200,000 in the Charlevoix area.

In Marion Township, a small rural community in Northern Michigan, a recent meeting saw several local business owners speak in favor of a proposed housing development that promised deed restrictions, requiring the properties be available for year-round residents.

One after the other, they spoke during public comment about potential employees who'd declined their job offers because they couldn't find an affordable place to live.

Bruce Bartlett, the owner of a local furniture store, Bartlett’s Home Interiors, said, “My biggest problem in getting employees is not what I pay them — it's how far they have to drive to get to work.”

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Trouble brewing in West Michigan

The problem stretches along Lake Michigan and into the Holland area, where short-term rentals have a been hot-button topic for months.

Businesses and manufacturers in Ottawa County and Kent County, two of the fastest-growing counties in the state, have announced countless expansion projects over the past three years — but providing housing for thousands of workers needed to fill new positions could prove the most challenging piece of the puzzle.

"In the region, right now, we have an overall need for 37,000 new housing units," said Brooke Oosterman, director of policy and communications at Housing Next. "That's across the rental and for-sale spectrum and across a variety of price points ... we have a very large demand for housing between now and 2025, and I would assume that demand is only going to increase."

Park Township, a municipality just north of Holland that spans the shoreline of Lake Macatawa and Lake Michigan, has become the epitome of the short-term rental versus long-term resident battle. Since early 2022, the township's planning commission has worked to design an ordinance that would regulate short-term rentals, which spread like wildfire along the lakeshore during the pandemic.

Neighbor has been pitted against neighbor, as short-term rental owners insist they're behaving responsibly and long-time residents say they feel like they're living in a resort. The township is still working to decide whether it will adopt a new ordinance or simply eliminate short-term rentals altogether.

But it may prove a moot point.

House Bill 4722 was advanced by a 6-3 vote after no debate in the Republican-led Senate Regulatory Reform Committee in late September. The bill passed in the House narrowly last year.

If passed by the Senate and signed by Gov. Gretchen Whitmer, the law would amend the Zoning Enabling Act to prohibit municipalities from adopting or enforcing provisions affecting short-term rentals.

The bill would make the rental of a dwelling a permitted residential use of property. Municipalities could adopt certain ordinances and practices as long as they're applied to all rentals and residences, including regulation of noise, advertising and traffic — but couldn't discriminate against short-term rentals.

Municipalities could limit the number of short-term rentals owned by the same person or legal entity, as long as that limit isn't less than two, and municipalities could limit the total number of short-term rentals, as long as that limit isn't less than 30 percent.

The bill is supported by the Michigan Association of Realtors and the Rental Property Owners Association, but opposed by the Michigan Restaurant and Lodging Association — and, of course, dozens of municipalities statewide, in particular those struggling with affordable housing.

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"We have such a demand of housing need that, if something like this bill moves forward and we continue to allow it to be easier to have short-term rental properties, we really need to look at what else we're doing to increase housing supply," Oosterman said. "It definitely has a higher impact in our lakeshore communities."

According to AirDNA, there are 238 short-term rentals in Park Township, and 98 percent of them are full-home. The greater Holland area has 418, with 92 percent full-home. The average daily rate is $392 and occupancy rate is 73 percent.

As of Tuesday, Oct. 25, there were only 13 listings of single-family homes or townhomes between $150,000-$250,000 in the greater Holland area.

"We have a constrained market already with very high housing demand, and these types of movements are going to require an even higher priority on solutions," Oosterman said. "We'll see even higher demand and discrepancies in supply and affordability."

— Contact Tess Ware, Annie Doyle and Cassandra Lybrink at newsroom@hollandsentinel.com.

This article originally appeared on The Holland Sentinel: Michigan thrives on tourism. Are short-term rentals pushing out long-term residents?