Additional Thoughts (Dec 19, 2020) - Amending the Short Term Rental Ordinance

The following was originally published in my Dec 19, 2020 Newsletter in the "Additional Thoughts" section.

This week, the agenda item most concerning to me is DC-1, asking staff and the Planning Commission to offer amendments that would weaken our Short Term Rental ordinance. On 9/8/20, Council passed an ordinance to license short term rentals, requiring operators to register with and pay fees to the city. The ordinance would permit owner-occupied short-term rentals, but prohibit dedicated, full-time short term rental units in neighborhoods of the city that are not zoned for commercial activities. Toward the end of discussion, this ordinance was amended to delay implementation until March 1, 2021, in order for “current investors to get their house in order.” Agenda item DC-1 is an effort to amend the ordinance before it is implemented.


Staff tell us that the majority of the approximately 1400 short term rentals in Ann Arbor are in single family residential districts. Most of those STR’s are likely the homes of year-round residents: individuals and families who have found that renting their homes for a few weekends a year is a way of earning extra income and paying for some of the high cost of living in our community. All of those owner-occupied short term rentals are perfectly allowable under the current ordinance, with the caveat that the city will now require registration and maintain records of where they exist.


The STR’s that are impacted by the current ordinance are owned primarily by investors, people who have purchased an extra home to be rented for thirty days or less on AirBnB or a similar online platform. Some investors have built and developed properties specifically for the purpose of rental on a short term basis in areas that are not zoned for commercial businesses. Under the ordinance passed on 9/8/20, such short-term rental arrangements will only be permitted in those areas of the city that are zoned for mixed use or commercial.


We have been talking about this issue since March 2019. A consultant conducted multiple public engagement meetings. The topic was on the agenda of three additional Council meetings (8/5/19, 1/6/20, 8/6/20) before Council finally approved the language recommended by staff on 9/8/20. At every point in this long process there was significant pushback from investors in our community, people who have structured businesses that depend on the ability to rent furnished homes for a few nights at a time, in residential neighborhoods.


In 2019, professional STR managers estimated that there might be upwards of 200 full-time, non-owner occupied STR’s in the city of Ann Arbor. One of my former colleagues estimated that these investor-owned STR’s represented “well over 100 units of housing… 300 bedrooms that are no longer available to community members and potential community members… By expanding our deficit of housing by removing 300 beds, that has a real human toll on 300 potential community members who could live here long-term” (CM Ackerman 9/8/20). Another one of my colleagues understood regulation of STR’s as a housing issue: “we often are battling for small numbers of [housing] units at a time, so I don’t think this is very different than one where we are advocating for ten units in a high rise” (CM Grand, 1/6/20).


Council has discussed how the value of short-term rentals to visitors does not outweigh the value of families being able to live in a house, or the value of someone not living next to a commercial enterprise. The value of residential neighborhoods is for people who will be able to live in our City, walk to work and school and enjoy the amenities of our community day to day. To quote one of my colleagues:


Folks that avail themselves of AirBnB’s or short term rentals, they do not become part of our community and people who move into residential districts have an expectation that they’re moving into a neighborhood, that they’re moving into a community. The proliferation of short term rentals in residential neighborhoods frustrates that expectation… the absence of community is unanswerable and of particular importance. (Mayor Taylor, 1/6/20)


It has been argued that this is a “fairness” issue, that investors have some right to conduct the business of short term rentals in the houses that they own. In the course of discussion, my colleagues have clearly articulated the distinction between a dedicated short term rental and other permitted uses in a residential neighborhood. There is a difference between a resident who teaches cello lessons out of the home they live in, and a property investor who does not live in a home but facilitates tourism in and out of a neighborhood, like a hotel. Council has acknowledged many reasons why this is not an issue of fairness and why the interests of the broader community outweigh the interests of a small number of investors.


In the course of discussion around investment and loss, Council did contemplate the possibility of “grandfathering” those businesses already in existence. One of my former colleagues stated plainly that grandfathering would be “awarding a great reward to the folks that are here now, giving them quite a bit of a monopoly” (CM Smith, 9/8/20). I agree.


Two of my colleagues have previously suggested that “grandfathering” STR businesses might be similar to what was done when medicinal marijuana businesses were legalized and the City implemented procedures for licensing and a cap on the number of businesses. Staff clarified, however, that for the marijuana businesses, “you had uses that were in the zoning districts they were supposed to be in from the beginning” and the licensing caps allowed for “discretionary review of them within the zoning district that staff and everybody agreed was appropriate for those facilities. The difference for us, in the instance of Short term rentals… We are recommending that rentals for less than 30 days, where you don’t create a resident - in that facility, in the home, in that structure - is not an appropriate use for a residential zoning district. We see a difference in that comparison” (Derek Delacourt, 9/8/20)


Agenda item DC-1 is notable in acknowledging that “Short term rentals are an emergent industry in Ann Arbor,” as if we accept this growth as a positive, economic stimulus (“industry”). The resolution specifically asks staff or the Planning Commission to consider amendments to the STR ordinance that will "enable the continued operation of preexisting short term rentals.” In other words, we are asking staff to craft exceptions that will protect the investments of people who are already in this market, grant them a monopoly, and simply accept the loss of those housing units in our residential districts.


I hope that my colleagues will not support DC-1 and that after two years of study, public engagement, and Council discussion we can move forward with implementation of the ordinance recommended by staff.

Elizabeth NELSON

DEMOCRAT for Ann Arbor City Council Ward 4

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