The Michigan Legislature is trying to clear a path for new tourism business by ending local bans on short-term rentals, but cities across the state worry the measure could put an even tighter squeeze on the residential housing market.

The bipartisan legislation, House Bill 4722 and Senate Bill 446, would stop local governments from outright banning short-term rentals like Airbnb and VRBO properties.

Americans are eager to travel and rental owners are eager to host them, generating a big push to restart the short-term rentals conversation in the Legislature, said Sen. Aric Nesbitt, R-Lawton, who authored S.B. 446.

“We’ve tried in past years to look at too much stuff at one time,” he said. “Let’s try to push this conversation to say, ‘Hey we’re open for business. We’re open for tourism.’ We want folks to come here to visit Michigan and have this unique experience.”

Nesbitt said he’s open to having conversations about how to create equity across the state, but the first step is creating options for travel in Michigan.

Previously, the conversation around short-term rentals was framed as a winner-loser situation in which big cities profited the most. A January 2021 survey from Airbnb is showing the trend might be swinging the other way, given post-pandemic comfort levels.

In 2020, the company saw more demand in smaller destinations within driving distance to larger cities, according to the report. Of the 1,036 people surveyed in December, 51% were more interested in being isolated beyond major tourist areas than being “surrounded by people and energy.”

Rural stays near national and state parks are also trending, according to Airbnb data. Michigan’s Upper Peninsula made the list of Airbnb’s top destinations for summer 2021.

A majority of American respondents, 56%, preferred a domestic or local destination versus just 21% who want to visit someplace international and farther away. Additionally, 55% of respondents said they are “extremely” or “very interested” in taking a trip that is within driving distance.

Related: Hot vaxx summer and a labor shortage: Up North braces for tourism surge

While the tourism benefits of increased stay options are enticing, local governments are concerned about the impact on everyday citizens. The initial drafts of H.B. 4722 and S.B. 446 touched on old debates around zoning, which reignited arguments about government overreach.

Grand Rapids Mayor Rosalynn Bliss wrote a letter arguing against both bills, saying eliminating zoning protections opens the door for “mini hotels” and would undermine the safety and culture of neighborhoods.

“Homeowners buy in residential neighborhoods to be away from commercial uses,” she wrote.

Legislators have heard this complaint and responded with a narrower version, said H.B. 4722 author Rep. Sarah Lightner, R-Springport.

The substitute for the bills states short-term rentals cannot be zoned out of existence, but does not prohibit ordinances made by the city to regulate noise, traffic, advertising and capacity among other areas of oversight.

“You can’t outright ban short-term rentals,” she said. “This is a personal property rights issue.”

Cities like Grand Rapids have already put ordinances in place to regulate the growing short-term rental market. The city does not allow renting entire homes where the host leaves during the stay, arguing this type of use is more commercial than “home-sharing,” city planner Kristin Turkelson said.

The modifications to narrow the scope of bills did not impress Turkelson. The guidelines Grand Rapids created in 2014 are working and the legislature stepping in represents government overreach, she said.

“I think every community needs to determine what is best for its own community,” she said. “That is the purpose of local control, which is one of the reasons why we’re opposed to the bill, but also the fact that we have regulations in place that best serve our community.”

She admits that enforcing the regulations happens mostly in a complaint-based capacity and that there are likely short-term rental hosts allowing entire home rentals without the city’s knowledge.

“It’s very difficult for us to monitor an Airbnb website as city staff and intuitively knowing where that home is located,” she said. “It puts the burden to the residents that are there to have to complain and call the police department that has a lot of other critical issues to respond to in the city.”

AirDNA, a company that collects short-term rental data, estimates there are 348 active rentals available in Grand Rapids and 71% are listed as entire home rentals.

In 2019, Detroit put forth a similar ordinance requiring rentals to be a primary residence where the owner would be present during the stay. AirDNA data shows 719 current Detroit listings with 76% being entire home rentals.

Other cities have tried to limit where and how many short-term rentals are allowed.

In Frankenmuth, capacity limits are only placed on residential areas, allowing downtown areas to reap the benefits of short-term rental tourism dollars, said Jamie Furbush, president of the Frankenmuth Chamber of Commerce.

“They’re an important asset to the tourism mix in Michigan,” Furbursh said. “What our board was particular about is a local community’s ability to manage that zoning and ordinances surrounding them.”

Short-term rentals in residential areas are restricted from being closer than 300 feet to any other short-term rental or bed and breakfast. That limits capacity to about a dozen rental properties in Frankenmuth’s residential areas, Furbush said.

Preserving neighborhoods has been a key component to the short-term rental discussion. Some opponents say having rentals in residential areas can deteriorate the value of a neighborhood.

Lightner said she doesn’t buy that.

“I know that was one of the other [concerns], ‘Our neighborhood neighborhood is going to hell in a handbasket,’” Lightner said. “Well, that’s not really true because in order to stay competitive and be able to rent your place out, you have to keep it up.”

An Airbnb internal survey of hosts found 54% used the money they earned to improve their home, an Airbnb spokesperson said.

Related: Millennials are looking for dream homes, but Michigan’s competitive housing market keeps them out of reach

It’s not just the quality, but the quantity of short-term rentals that concerns Turkelson in Grand Rapids.

“We have a critical housing crisis in the country, not to mention a critical shortage of affordable housing and housing generally in the city of Grand Rapids,” she said.

Offering more short-term rentals for tourists will put increased pressure on an already competitive market, potentially pricing out those looking to live and work in the city permanently, she said.

“It’s a supply and demand issue,” she said. “If you decrease the supply of housing for people that want to live and work in a community, then you’ve decreased the affordability because the demand is still there.”

The housing crisis is hitting millennials especially hard as they become the latest generation of first-time homebuyers. Furbush said she was concerned young people from tourist hot spots may be boxed out of returning to their hometowns.

“You can’t come home because you can’t compete with people buying it out for other purposes,” she said.

Some Airbnb data suggests otherwise, showing that the profit from rentals often keeps hosts, especially millennials, afloat financially.

A September 2020 survey of 2,600 U.S. Airbnb hosts found 29% used their hosting income to pay their rent or mortgage during the pandemic. Of the hosts that answered that way, 49% were aged 25-34.

One quarter of hosts have used the income to pay down debt, and 10% have used it to pay for health care, according to Airbnb data.

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