July 31, 2021

Long-term Headache

By Stephen Tuttle | June 19, 2021

The Michigan Legislature is contemplating yet another bad decision. This time they'd like to strip away the right of local communities to regulate short-term residential rental properties. It is, they say, all about private property rights. 

It would mean Traverse City's somewhat complicated ordinances declaring where short-term rentals can and can't exist, and the rules governing them, would be meaningless. The proposed legislation would allow them anywhere residential dwellings exist. Local noise, traffic, and nuisance ordinances would still apply. 

It is supported by the Michigan Association of Realtors, which says it is a fine thing allowing homeowners to “maximize” the value of their home by supplementing their income. The region's Airbnb rentals alone generate about $5,300 annually for rental properties, and Grand Traverse County is the second most requested destination. (Wayne County, home to Detroit and 1.8 million residents, is first.)

It might not increase the true value of a home, but it would most certainly inflate the price of that home and those in the immediate vicinity, encourage speculative investors to overpay for properties on the promise of lucrative weekly rental income and, in a worst-case scenario, destroy the integrity of well-established neighborhoods.

This region is already experiencing dramatic increases in home prices as the housing bubble keeps growing. Unless you're one of the relative handful of people selling your home, it just means an increase in your property taxes. If you're a buyer, it means the number of homes in your price range will continue shrinking.    

It's fairly easy to understand why some legislators are favorably inclined to such legislation or don't care; tourism and short-term rentals aren't much of an issue in their districts. It's quite a bit more difficult understanding why those supposedly representing our interests — State Representative Jon Roth and State Senator Wayne Schmidt — would support replacing local control with a one-size-fits-all bit of business that likely won't fit us at all.

It's doubly odd since both Roth and Schmidt like to claim their conservative bona fides, including strong support of local control. Local control of public schools, local control of medical and recreational marijuana rules, even local control of COVID-19 restrictions or lack thereof. And they're quick to criticize the yoke of Big Brother, federal or state, oppressing the local governments that are, after all, closest to the people they represent. But not local control of housing?  

Schmidt characterizes as “garbage” the notion that real estate agents have bought his support. Maybe, but he has received $26,100 in campaign contributions from Realtor PAC, the political arm of the Michigan Association of Realtors, over the last decade. It isn't the most special-interest money Schmidt has gobbled up, but it is in the top 10.

As I've written before, we have a real-world example of the consequences of similar legislation elsewhere. Arizona passed such a law stripping localities of the right to regulate short-term rental properties, and it is in the process of destroying Sedona, a tourism-dependent community of just under 11,000 in the beautiful red rock country about 100 miles north of Phoenix. Affordable housing was always scarce there, but since the local government no longer controls short-term rentals, it's virtually non-existent. 

Median home prices have skyrocketed to $625,000, fully 20 percent of Sedona's housing inventory is now short-term rentals (more than 1,000 are listed as short-term rentals, while only about a dozen long-term rentals are available), and 40 percent of the Sedona workforce live outside the city. 

If Traverse City cannot regulate its housing inventory, we might see a repeat of Sedona here. 

Meanwhile, TC continues its Quixotic quest for something akin to workforce housing downtown. The current windmill tilting is to convert a city-owned surface parking lot into a four-story retail/residential building aimed at the “missing middle,” those making between $45,000 and $78,000 annually. Now, all they have to do is find people willing to move downtown because there aren't many people working down there full-time making almost $22 per hour, the amount you'd need to earn to get to the $45,000 annual income level. 

It's not as if we, and the entire northwest Lower Michigan region, don't need the housing; by most accounts, we are hundreds if not thousands of residential units, both rental and owner-occupied, behind what we need.

Apartments.com has less than a dozen long-term rental properties currently listed for Traverse City and no in-town apartments. Zillow isn't much more hopeful or helpful. Median home price here has soared to $329,000, so ownership is no more attainable than finding a reasonably priced rental. (Somebody can afford them, though, since homes for sale are quickly purchased and rental units quickly occupied.)

Legislation creating a land rush of short-term rentals and prohibiting local elected officials from doing anything about it will only make both housing availability and costs much worse. Short-term rentals will become a long-term headache as we sacrifice our sense of community to the delusion of easy money and greed of the speculators.        


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