Michigan Considers New Regulations and Taxes on Short-Term Rentals

In February 2024, a package of bills (HB 5437-5446) was introduced in the Michigan House of Representatives to regulate and tax short-term rentals (STRs) across the state. The proposed legislation, sponsored by Representative Joey Andrews (D - St. Joseph), has sparked debate among stakeholders.

Key provisions of the bills include:

• A new 6% excise tax on STR bookings made through platforms like Airbnb and Vrbo, in addition to the existing 6% use tax
• A statewide registry for all STRs
• Mandatory $1 million liability insurance for STR properties
• Safety requirements such as escape plans, fire extinguishers, smoke alarms, and carbon monoxide detectors

Proponents argue the bills would generate $35-70 million in revenue for local governments to offset infrastructure costs associated with tourism. However, critics like the Michigan Realtors Association contend that the regulations are overly burdensome for property owners and infringe on their rights.

During a House subcommittee hearing, the Michigan Short-Term Rental Association (MiSTRA) testified against the bills in their current form. MiSTRA believes the proposed rules attempt to solve tax-related issues rather than problems directly caused by STRs. The association offered suggestions to improve the legislation and make it more favorable for STR operators and hosting platforms.

While many townships support the bills as a way to capture tax revenue from tourism, opponents argue it amounts to double or triple taxation and fails to address underlying tax law flaws. The subcommittee will continue accepting testimony as deliberations proceed.

What's Next - Approval Timeline and Will It Pass?

Based on the complexity and contentiousness of the issue, it seems unlikely that this package of bills will be enacted quickly. There will likely be pushback from local governments and short-term rental owners. You honestly can't rush a crucial process like this one, but one thing's sure: it will take a long time.

Some Lansing insiders predict the controversial bills may be pushed to the "lame duck" session after the November 2024 elections. As the debate unfolds, stakeholders on all sides are closely monitoring these consequential bills that could have major impacts on Michigan's growing short-term rental industry.

It's unclear at this point whether the bills have enough support to pass both chambers. The large Democratic majorities in each chamber improve the odds, but some Democrats may side with local governments. Governor Whitmer has not yet taken a public position on this legislation. She could be hesitant to sign bills that preempt local control. All of these factors can make it quite hard to predict if the Michigan STR bill will get passed.

Despite the short-term rental regulation bills being on the legislative agenda in 2024, their passage is far from certain, and the timeline is likely to stretch out many months or even into 2025. Unfortunately, all we can do for now is patiently wait to see how things unfold.