The Latest on Short Term Rentals in Grand Traverse County

TC is a vacation rental hot spot. But is the market cooling?

Grand Traverse County—with Traverse City at its core—is often cited as one of the hottest short-term rental (STR) markets in the state. AirDNA, a STR data tracking company, shows over 4,400 unique listings in the region (extending into Leelanau) that each had at least one booking in the last month.

However, that number has dropped nearly five percent over the past year. That may be a sign the market is cooling, as several local leaders and realtors believe. Would-be renters must also navigate a wide range of regulations, which vary from outright bans to market caps to permissive licensing, depending on the municipality.

We check in on the state of STRs, including efforts to regulate vacation rentals statewide and the push for a tourism tax that would offset the impact of visitors on local communities.

Where Are STRs Allowed?

It’s a seemingly straightforward question, but the answer is complicated. Taylor Brown, a Traverse City realtor with Real Estate One, maintains a guide to dozens of township and city rules across Grand Traverse and other northern Michigan counties on his website (TaylorBrownRealtor.com). The color-coded map makes it clear: In some communities, STR rules are non-existent—the “Wild West,” Brown calls such jurisdictions—while others have taken a zero-tolerance stance on STRs.

In Grand Traverse County, STRs are banned outright in Garfield, Peninsula, and Whitewater townships. Whitewater Township, which is adjacent to Acme Township and thus Horse Shows by the Bay, a highly lucrative summer rental audience, has discussed potential loosening of its restrictions in recent years but has yet to lift the ban.

While some property owners still choose to operate illegally, others have flocked to neighboring jurisdictions like Acme and East Bay townships.

Regulations vary widely in other townships, with several—like Green Lake, Long Lake, and Fife Lake townships—factoring in septic and/or bedroom capacity to determine occupancy. Brown advises anyone either looking to operate or rent an STR to check the specific rules of that community, not only because they vary widely but because local leaders are often updating them.

East Bay

East Bay Township adopted a new STR licensing ordinance in 2023. “One of the main changes was that the township board enacted a cap of 145 STR licenses,” explains Township Director of Planning & Zoning Claire Karner. “When the ordinance was first enacted, we had close to 180 that were licensed. We grandfathered everyone in but said over time through attrition that the number would decrease.”

East Bay has a geographic restriction that requires a 1,000-foot separation between any new STRs. Units can also turn over only once every seven days, limiting the revolving door of different nightly renters that sometimes occurs elsewhere. Licenses do not transfer with properties, so when an STR is sold, the buyer must apply for a new license.

Licenses cost $450 annually and are available on a first-come, first-served basis each spring following a fall renewal window for existing licenses. The geographic encumbrance has indeed led to market attrition, with 130 licenses operating in East Bay Township today. That means 15 licenses are available, in large part because the hottest neighborhoods are off the table.

“I think we are maxed out geographically,” says Karner. “A lot of the homeowner associations already restrict STRs, like in Holiday Hills. So they don’t allow them, and then you basically can’t get any new license in the Pine Grove or lakes areas [because of the geographic restriction]. We’re at our maximum from a concentration standpoint.”

Acme & TC

Acme Township and the City of Traverse City both maintain a two-category system for vacation rentals. STRs, in which a renter can rent out an entire unit or home without the owner present, are more restricted in both communities. In Acme, they’re only allowed in the agricultural district and some existing single-family homes in the commercial and corridor flex districts. They’re banned in residential neighborhoods, as they are in the City of TC.

The city allows STRs in a variety of commercial or mixed-use districts. Many of those have caps, meaning that in some districts STRs can account for no more than 25 percent of the units in the building. Other districts, like in the downtown area, allow up to 100 percent. However, city officials are looking at reducing those levels in several districts and evaluating other STR issues, ranging from fee structures to regulatory tools to enforcement.

Both Acme and the city also have a category of rentals called tourist homes, or owner-occupied rentals where only a portion of the home or unit is rented out (like a bedroom or an accessory dwelling unit). In Acme, tourist homes are allowed in all districts with a license. The township offers 50 licenses each for both STRs and tourist homes, with “many available licenses,” according to its website.

In the city, tourist homes are allowed by license in residential neighborhoods and are regulated by the intensity of use (how many nights of stay are occurring annually) with a 1,000-foot separation required between homes. The city currently has 567 licensed STRs and 21 licensed tourist homes for 2026, according to the city clerk’s office.

Is the Market Cooling?

That previously mentioned AirDNA drop seems to indicate: yes. Karner and Taylor are also seeing signs of a declining market, if only incrementally or in certain areas. Because of the inability to get licenses in certain neighborhoods of East Bay Township, Karner says she’s seen a leveling out of property prices in those areas, which could be beneficial for long-term home buyers.

Brown believes one of the most saturated areas of the market is downtown Traverse City, particularly 1-2-bedroom units. Downtown has several major hotel projects coming online as competition, and owners of apartment or condo STRs in multi-family developments have few ways to differentiate their units from other identical units in the same building.

“Your neighbors set your rate, and the only thing you can do differently is decorate,” Brown says. He cites Trailside45 on Garfield Avenue as an example of a property “where you always see listings available.”

Owners take even more of a hit if they’re paying someone else to manage their STRs, he says. “Everyone in COVID bought downtown, and property managers take 20 to 30 percent, so it becomes barely break-even,” he says. “If you’re a local and can deal with managing it yourself, it becomes profitable again, but that’s a lot of work.”

Brown’s advice? “You better have another reason to own the property, especially if [STRs] become not allowed,” he says.

Renters are also increasingly flocking to unique STR experiences, from farm stays to tiny waterfront cottages to large-group homes with on-site event amenities. Brown believes the market remains strong in communities that have four-season tourism draws, like nearby ski resorts, as well as those that are “underserved from a rooms perspective,” meaning there are few nearby hotels. He cites Frankfort in Benzie County and rural parts of Leelanau County as examples.

“In places like that, I think they’re actually needed in a way to help handle the tourism,” Brown says.

State & Tourism Impacts

Legislators have considered one solution to the widely varying landscape of STR rules in townships across Michigan: enacting statewide regulations to address them.

Currently, Michigan doesn’t regulate STRs at the state level except to require them to pay a six percent use tax. But bills have been introduced—and strongly debated—multiple times to either create a statewide licensing and registration system or prohibit communities from banning STRs outright.

So far, those bills have not made any significant headway. But another discussed component of them—taxes—is gaining ground as a hot topic of conversation. Both Traverse City and Grand Traverse County commissioners have expressed support for a tourism tax that would be levied against accommodations and used to offset impacts from visitors to local infrastructure and public services. That would be different than the hotel tax that tourism bureaus collect today, which only goes toward marketing and promotion.

City Manager Benjamin Marentette says enacting the taxation change through the legislature is “not something that’s going to happen quickly,” but is gaining momentum with communities throughout Michigan.

“I think there’s enough collective interest there, as long as it’s something that works for the diverse needs of different communities across the state,” he says. “It’s a long road to pursue, but I’m optimistic about it.”

Pictured: Short-term rentals on Gillis St. in Traverse City.

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