Michigan Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Michigan?

Short-term rental regulations in Michigan vary significantly by city and county. Hosts must carefully research the specific rules in their local area to avoid fines and legal issues. While the state legislature has considered bills to create statewide standards, much of the regulation still happens at the municipal level.

Starting a Short-Term Rental Business in Michigan

Before listing a property on Airbnb or VRBO in Michigan, there are several key steps hosts should take:

• Research local regulations: Zoning laws, permitting requirements, licensing, and restrictions on rental days can vary widely. For example, in Detroit, short-term rentals may not be rented out for more than 90 days per calendar year, limiting the ability to operate full-time. Ann Arbor requires all STR operators to obtain a license from the city for $500 per year.
• Obtain required permits and licenses: Many cities, like Detroit, require hosts to obtain a specific short-term rental permit or license. These often have an annual fee attached. Operating without the proper permit can lead to significant fines over $1,000.
• Ensure the property meets safety requirements: Michigan counties often have facility requirements STR hosts must meet. In Genesee County, this includes providing working smoke and carbon monoxide detectors in each sleeping room, fire extinguishers on each floor, and maintaining at least $1 million in liability insurance.
• Understand tax obligations: In addition to state sales tax, some Michigan municipalities charge an additional excise tax on short-term rentals. Legislation has been proposed to add a statewide 6% tax on STRs rented more than 14 days per year.

Consulting with local officials, joining Michigan host forums, and connecting with experienced operators provides valuable guidance. Online communities like Bigger Pockets and the Airbnb Community Center are helpful for navigating the regulatory landscape.

Short-Term Rental Licensing Requirement in Michigan

While there is no statewide licensing requirement for short-term rentals in Michigan, many cities and counties have implemented their own regulations. Here are some examples of local licensing requirements based on official government websites:

Ann Arbor: All short-term rental operators in Ann Arbor must obtain a license from the city and pay an annual fee of $500 per unit. To apply, hosts must submit an application through the city's online STREAM portal, provide a sworn statement of principal residency for owner-occupied properties, and ensure their rental meets all zoning and safety requirements. Accessory Dwelling Units (ADUs) are prohibited from being used as short-term rentals. Failure to obtain a license can result in fines and legal action.

Ferndale: The city of Ferndale requires all short-term rentals to register annually with the Building Department and undergo an inspection. Applicants must fill out a registration form, submit it in person or by mail along with any owed fees, and schedule an inspection. The city limits short-term rentals to 5% of housing units per block and restricts occupancy to 2 adults per bedroom, with a maximum of 8 guests total. Three substantiated complaints in a calendar year can result in a license being revoked.

Traverse City: Vacation home rentals in Traverse City must obtain a license from the City Clerk's Office. New license applications cost $200 and require proof of $1 million liability insurance, a fire escape plan, and a site plan. Licenses must be renewed annually, also for $200, and properties are subject to a Fire Marshall inspection every 3 years. Rentals are only allowed in certain zoning districts, primarily commercial and hotel areas.

The licensing process in most Michigan cities takes around 2-4 weeks, provided all requirements are met and necessary documentation is submitted. Failure to comply with local regulations often results in significant fines, typically starting around $150-$500 for a first offense and increasing for subsequent violations. Repeated non-compliance can lead to a short-term rental being prohibited from operating.

It's critical for Michigan short-term rental hosts to carefully research the specific ordinances in their city and county, as regulations vary widely. Consulting with local officials, joining host forums and networking groups, and staying up-to-date on any legislative changes can help ensure compliance and avoid costly penalties.

Required Documents for Michigan Short-Term Rentals

When applying for a short-term rental license in Michigan, property owners must provide several key documents to demonstrate compliance with local regulations. While exact requirements vary by municipality, here are some commonly required documents:

Proof of Ownership: Applicants must establish legal ownership of the property, typically by providing a copy of the deed or property tax bill. This ensures only legitimate property owners are operating short-term rentals.

Liability Insurance: Many cities, such as those in Genesee County, require proof of liability insurance with a minimum coverage of $1 million per rental unit. This protects both the host and guests in case of accidents or injuries.

Site Plan: A detailed sketch or site plan of the property is often necessary, showing the dwelling location, parking areas, and any outbuildings. This helps officials assess the property's suitability for short-term rental use.

Floor Plan: A floor plan of the short-term rental unit is required, indicating the number and location of bedrooms, exits, and smoke/carbon monoxide detectors3. This is critical for determining maximum occupancy and ensuring guest safety.

Photographs: Applicants must provide current photographs of the rental property, including exterior and interior views. These images assist with property identification and documenting compliance with local ordinances.

Homeowners Association Approval: If the property is governed by a homeowners association or condominium board, written approval for short-term rental use may be necessary. This ensures the rental operation aligns with community bylaws.

Emergency Contact Information: The name and contact details of a designated local representative, often required to be within a certain distance of the property, must be provided. This person serves as an emergency contact for guests and officials.

Parking Plan: Some municipalities require a detailed parking plan specifying the number and location of guest parking spaces to mitigate traffic and parking issues in residential areas.

Inspection Certificates: In some cases, passing inspections from the fire department, building department, or health department is required prior to licensing. These inspections verify the property meets safety and habitability standards.

Signed Affidavits: Certain cities, like Ann Arbor, require a signed and notarized affidavit of principal residency for owner-occupied short-term rentals in residential zones. This confirms the property is the host's primary residence.

These documents are typically submitted as part of the short-term rental license application, either online through a city portal or in-person at designated government offices. The specific procedures and fees vary by city and county, so it's essential for hosts to carefully review the requirements in their local jurisdiction.

Failing to provide the necessary documentation can result in the denial of a short-term rental license or fines for non-compliance. By gathering and submitting these required documents, hosts demonstrate their commitment to operating safe, legal, and responsible short-term rentals in Michigan.

Michigan Short-Term Rental Taxes

When operating a short-term rental business in Michigan, it's essential to understand the various taxes that apply to your rental income. Failing to comply with these tax obligations can result in penalties and legal issues. Let's explore the different types of taxes short-term rental owners must pay in Michigan.

State Use Tax (6%): Michigan imposes a 6% use tax on short-term rentals of 30 days or less. This tax applies to the total rental charge, including cleaning fees. STR hosts are responsible for collecting this tax from guests and remitting it to the state.

State Income Tax (4.25%): Rental income earned from short-term rentals is subject to Michigan's state income tax, which has a flat rate of 4.25%. This income must be reported on your Michigan income tax return.

County and City Taxes: Some counties and cities in Michigan impose additional taxes on short-term rentals. For example:

1. Wayne County: Detroit has a 6% Accommodations Tax that STR hosts must collect from guests in addition to the state use tax.
2. Genesee County: As of May 1, 2024, Airbnb collects a 5% Accommodation Tax on the listing price, including any cleaning fees, for reservations 29 nights and shorter.

Check with your local municipality for any county or city-specific taxes.

Federal Income Tax: Short-term rental income is also subject to federal income tax. The amount you'll owe depends on your total taxable income and filing status. STR income and expenses are reported on Schedule E of your federal return.

It's important to note that even if you don't have any rental income during a particular filing period, you're still required to file "zero dollar" returns with the state and local tax authorities to remain in good standing.

Possible Write-Offs and Deductions

To offset some of the tax burden, short-term rental owners can take advantage of various write-offs and deductions. These may include:

1. Mortgage interest
2. Property taxes
3. Utilities
4. Cleaning and maintenance costs
5. Supplies and amenities provided to guests
6. Depreciation of the rental property
7. Insurance premiums
8. Advertising and marketing expenses

If you rent out a portion of your primary residence, expenses must be divided based on the percentage of the home used for rental purposes. Consult with a tax professional to ensure you're claiming all the deductions you're entitled to and reporting your rental income correctly.

In addition to these existing taxes, proposed legislation in Michigan could introduce a new statewide excise tax. House Bill 5438, part of a larger short-term rental regulation package, would impose a 6% short-term rental excise tax on all rentals that are rented for more than 14 days per year. A portion of the proceeds would go to the local government where the tax is paid.

By understanding the tax obligations of running a short-term rental and taking advantage of available deductions, hosts in Michigan can stay compliant and maximize their profits. Careful record-keeping and professional tax advice are essential for success in this rapidly growing industry.

Does Michigan Strictly Enforce STR Rules?

Based on discussions among hosts and investors on forums like BiggerPockets and Reddit, it appears that enforcement of short-term rental regulations varies significantly across Michigan. While some cities like Detroit are known for being particularly strict and unfriendly towards Airbnb, others are more lenient.

Detroit is often cited as one of the least Airbnb-friendly cities in Michigan. In 2018, the city quietly passed restrictive ordinances that effectively banned non-owner occupied short-term rentals in many residential areas by requiring a $500 annual license and limiting rentals to 90 days per year1. Hosts have reported receiving hefty $1,200 fines and misdemeanor citations, even those with no guest complaints.

On the other hand, hosts in Genesee County generally describe a more welcoming atmosphere. While the county does require STR operators to register with the County Treasurer's office and collect bed taxes, many hosts report being able to run Airbnbs without facing strict enforcement or penalties. As one host on BiggerPockets put it, "Genesee County seems more open to short-term rentals than cities like Flint or Grand Blanc."

This pattern of varying enforcement is common across the state. In tourism-heavy areas like Traverse City, short-term rental regulations are often more restrictive and strictly enforced. However, in more rural counties, hosts may be able to operate with fewer hurdles, as long as they are respectful of neighbors and follow basic rules.

Despite the patchwork of regulations, there are certainly many hosts who continue to operate short-term rentals in Michigan, even in stricter cities like Detroit. However, they do so at the risk of facing significant fines if caught. As one Detroit host shared on Reddit, "I've been operating an Airbnb without a license for 2 years. I'm always nervous I'll get a knock on the door from the city."

Overall, while Michigan as a whole may not be the most Airbnb-friendly state compared to others with more consistent regulations, the level of enforcement clearly varies by location. Hosts in stricter cities like Detroit should carefully weigh the risks before operating off-the-books, while those in more lenient areas like Genesee County may have an easier time navigating the rules. Thoroughly researching the specific regulations and enforcement practices of one's local jurisdiction is essential for any Michigan resident considering starting a short-term rental business.

How to Start a Short-Term Rental Business in Michigan

Starting a short-term rental business in Michigan can be a lucrative venture, but it requires careful planning and compliance with local regulations. Here's a step-by-step guide to launching your STR business in the Great Lakes State:

Research local regulations: Before investing in a property or listing your space, thoroughly investigate the specific short-term rental rules in your city and county. Zoning laws, permitting requirements, and rental restrictions vary widely across Michigan. Connect with local officials, join host forums, and consult with experienced STR operators to understand the regulatory landscape.

Choose a suitable property: Select a property that aligns with your target market and local regulations. Consider factors like location, amenities, and rental demand. If you're in a city with strict owner-occupancy requirements, ensure the property will be your primary residence. Keep in mind that some jurisdictions, like Traverse City, only allow STRs in certain zoning districts.

Obtain necessary permits and licenses: Apply for any required short-term rental permits or licenses through your local government. This process often involves submitting an application, paying fees, and providing documentation like proof of ownership and liability insurance. Allow ample time for approval, as the process can take several weeks.

Prepare your property: Ensure your rental meets all safety and habitability requirements, such as smoke detectors, fire extinguishers, and adequate exits. Invest in quality furnishings, linens, and amenities to create an inviting space for guests. Consider hiring a professional photographer to showcase your property in its best light.

Create a compelling listing: Craft an attractive and informative listing on platforms like Airbnb and VRBO. Use high-quality photos, write a detailed description highlighting your property's unique features, and set competitive rates based on market research. Be transparent about any house rules or rental restrictions to manage guest expectations.

Automate your operations: Streamline your STR business by leveraging technology and automation tools. Use a dynamic pricing tool to optimize your rates, a smart lock system for contactless check-in, and a channel manager to sync bookings across multiple platforms. Consider hiring a reputable cleaning service to ensure consistent quality between guests.

Comply with tax obligations: Register with the Michigan Department of Treasury and obtain a sales tax license to collect and remit the required 6% use tax on short-term rentals. Set up processes to track your rental income and expenses, as you'll need to report this information on your state and federal income tax returns. Consult with a tax professional to ensure compliance.

Be a responsible host: Foster positive relationships with neighbors by being responsive to concerns and enforcing house rules. Provide guests with detailed check-in instructions, local recommendations, and emergency contact information. Regularly maintain and update your property to ensure a high-quality experience for every guest.

Stay informed and adaptable: Keep abreast of any changes to local short-term rental regulations or tax laws that could impact your business. Join local host groups and attend industry events to network with other STR operators and stay informed about best practices. Be prepared to adapt your strategy as market conditions evolve.

By following these steps and remaining compliant with Michigan's short-term rental regulations, you can build a successful and sustainable STR business. While the path may not always be easy, with careful planning and execution, operating a short-term rental can be a rewarding entrepreneurial venture in the Great Lakes State.

Who to Contact in Michigan about Short-Term Rental Regulations and Zoning?

If you have questions about short-term rental regulations and zoning in Michigan, it's best to start by contacting your local city or township officials. Many municipalities have dedicated staff members who handle STR licensing and enforcement. Here are some examples:

South Haven: The City of South Haven has two Short-Term Rental Coordinators who can assist with questions and applications:

1. Kelly Tungate: (269) 637-0790 / ktungate@southhavenmi.gov
2. Megan Blodgett: (269) 637-0791 / mblodgett@southhavenmi.gov

Ferndale: For STR registration and inspection services in Ferndale, contact the Building Department at (248) 546-2525 ext. 115.

Ann Arbor: Questions about Ann Arbor's short-term rental ordinance can be directed to the Planning and Development Services Department. Apply for licenses online through the city's STREAM portal.

East Bay Township: The Planning & Zoning Department handles STR licensing and enforcement. Reach them at (231) 947-8681 ext. 1 or via email.

Charlevoix: Contact the Zoning Administrator at planner@charlevoixmi.gov or (231) 547-3265 for information on Charlevoix's STR regulations and registration process.

In addition to local officials, there are several online communities where Michigan STR hosts connect to share experiences and advice:

1. The "Michigan Short Term Rental Hosts" private group on Facebook has over 800 members discussing topics like regulations, insurance, and property management.
2. The "Michigan - Airbnb Hosts" forum on BiggerPockets is an active community where hosts ask questions and share updates on Michigan STR laws and best practices.
3. The "Michigan Short Term Rental Alliance" (MSTRA) is a non-profit trade association representing the interests of Michigan STR owners and managers. They provide educational resources and advocate for fair regulations.
4. The "Michigan Lake to Lake B&B Association" welcomes STR owners and offers member benefits like legislative advocacy, an annual conference, and marketing opportunities.

By connecting with local officials and experienced hosts in these communities, STR owners and managers can stay informed about the ever-changing regulatory landscape in Michigan and ensure compliance with all applicable rules and ordinances.

What Do Airbnb Hosts in Michigan on Reddit and Bigger Pockets Think about Local Regulations?

To get a sense of how short-term rental hosts in Michigan feel about local regulations, it's helpful to look at real-life experiences and discussions on popular forums like Reddit and BiggerPockets. Here are a few relevant threads and comments:

Reddit - r/airbnb_hosts

In the thread "Is anyone a host in Ann Arbor or Detroit, MI?", hosts discuss the challenges and opportunities of operating STRs in these cities. One host notes that in Ann Arbor, "Your booking will be 100% tied to whatever is happening at the University. Basically for football weekends you can jack up your rates by as much as 500%. Same goes for parent weekends and especially graduation weekend." However, they caution that outside of busy college-related events, bookings can be inconsistent.

BiggerPockets Forum - "Michigan - Airbnb Hosts"

In a thread titled "Advice for Starting an Airbnb in Detroit", hosts discuss the city's restrictive ordinances that require a $500 annual license and limit rentals to 90 days per year. One host shares their experience: "I've been operating an Airbnb without a license for 2 years. I'm always nervous I'll get a knock on the door from the city. I know a few hosts who have been fined."

Another Detroit host says they've had success operating in the city, but emphasizes the importance of being a responsible operator: "I've been doing Airbnb in Detroit for 3 years now. The key is to be respectful of your neighbors, keep a low profile, and make sure your guests aren't causing any issues. If you do that, you can fly under the radar."

Reddit - r/Flint

In the Flint subreddit, a prospective host asks about the feasibility of starting an Airbnb in the city. One commenter notes that while Flint itself has strict zoning laws that prohibit STRs in most residential areas, the surrounding townships in Genesee County are more lenient.

They write, "I operate an Airbnb just outside of Flint in Genesee County. The county requires you to register and pay some taxes, but they don't have the same zoning restrictions as the city. As long as you follow the rules and don't cause problems, they mostly leave you alone."

These snippets of real host experiences and opinions highlight the complex and often contentious landscape of short-term rental regulation in Michigan. While some hosts chafe at restrictive local ordinances, others acknowledge the need for sensible rules to mitigate community impacts. The general consensus seems to be that operating a successful STR in Michigan, while challenging, is still possible with careful research, compliance, and good neighbor practices.

Disclaimer: While we here at BNBCalc strive to keep all of our regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each area and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.