This week, news from our State government is relevant to Ann Arbor. At about 2 AM Wednesday morning (October 27, 2021), a Republican majority in the Michigan House approved legislation that prohibits local governments from regulating short term rentals (STR, e.g. AirBnB). According to State House bill 4722, short term rental businesses would be a 'by right' permitted use in residential zoning.
Relevant parts of this legislation:
Short term rental is considered a residential (not commercial) use and is permitted in all residentially zoned areas
Short term rental will not be subject to any special use or conditional use permit or procedure
Local governments cannot implement or enforce any zoning ordinances that effectively prohibit short term rentals
Local governments may limit the number of short term rental units under common ownership (number no lower than two)
Local government can restrict the total number of short term rentals in the whole of the community, but that number cannot be lower than 30% of the total number of existing housing units in the community
Zoning ordinance provisions that create overlay districts for rental (without distinction between long or short term) will not be permitted unless they were in existence prior to July 11, 2019.
Note: This last provision is a specific carve-out for the benefit of the City of East Lansing, which has 21 overlay districts where the rental of single family homes (both long-term and short-term) is prohibited or restricted. Ann Arbor has no such districts.
House Bill 4722 was supported and endorsed by the Michigan Realtors Association and Mackinac Center for Public Policy, a conservative think tank. Among those organizations opposing the bill: the Michigan Municipal League (MML), AFL-CIO, Michigan Townships Association and the Southeast Michigan Council of Governments (SEMCOG). If approved by the State Senate, this legislation would effectively nullify all existing regulation of STR’s in the City of Ann Arbor.
THEN AND NOW
In September 2020, after months of public meetings, analysis by consultants, and recommendations from City staff, Council approved an ordinance that would require licensing for all short term rentals (STR) in the City of Ann Arbor. That ordinance permitted the periodic and owner-occupied STR (i.e. any resident using their own primary dwelling as an STR) but effectively banned all investor, non-owner occupied STR businesses in residential neighborhoods.
Many local residents and housing advocates were relieved to see this effort to protect housing units in our community. A small number of investors were extremely angry.
When a new majority of Council was elected in November 2020, the City’s approach to short term rentals shifted dramatically in order to protect investors. The City adopted a new policy: any investor who could offer evidence that their property had previously been leased for terms shorter than 30 days could continue the business. Those properties would be permitted to function as full-time short term rental businesses for so long as the property owner maintained City licensing for that use.
Based on City staff assessment that STR businesses are a commercial, non-residential use, City Council passed an ordinance: investor-owned short term rental businesses would not be permitted in residential neighborhoods. Investor-owned STR businesses would be permitted in mixed use zoning districts that allow commercial activities. Only owner-occupied STR units would be permitted in residential zoning districts. All STR units would be subject to licensing by the City. The effective date would be March 1, 2021, giving investors six months to wrap up businesses.
New Council is seated. In their elections, all new members had received endorsements from the Ann Arbor Realtors Association. Four new Council Members - Briggs, Disch, Eyer, and Radina - each received $500 from the Realtors PAC of Michigan during their 2020 campaigns.
Mayor Taylor brings a resolution to Council (approved by a new majority), asking staff “to create the appropriate regulatory structure to enable the continued operation of preexisting short term rentals.”
Council received an update from City staff explaining:
As currently contemplated the Ordinance will take effect March 1st. Staff is finalizing the licensing application, the process for review and renewal and recommended fee structure. The licensing process will apply to all impacted properties.
There is a second group of properties that are prohibited from continuing operation by the ordinance, but that Council has directed staff to evaluate for potential “grandfathering”… In concert with the City Attorney’s Office I am moving forward with implementation allowing these properties to continue operation until such time as Council makes its determination.
A letter will be going out to these potentially impacted properties identifying the manner in which they can identify themselves to staff. This list, continually modified and reviewed, will also inform Council on the number of properties, and their locations, that may be requesting grandfathering under the process currently being developed.
Council receives another update from Staff: a postcard would be sent to 2,700 single family rental properties in residential districts, “requesting information of STR activity prior to the ordinance implementation date of March 1st.” Also from that update:
These properties, when verified, will be the potential pool of “grandfathered” properties considered by Council. This specific criteria and final properties will be determined by ordinance language, if approved by Council.
Staff will withhold enforcement of these properties, after identified, until Council makes a final determination on their status.
Council approves, at first reading, proposed UDC amendments that create a “legal nonconforming use” status for any short term rental investment properties in existence before March 1, 2021. Questions to the agenda and answers from City staff:
Question: Q5. Was March 31 a hard deadline to assert “legal nonconforming use”? (Councilmember Nelson)
Response: No, this was established to try and learn the extent of possible impact prior to City Council consideration.
Question: Q6. If March 31 was not the hard deadline (and a property owner might still assert a “legal nonconforming use” moving forward), does staff believe there should be a hard deadline? (Councilmember Nelson)
Response: No, the nature of a Non-Conforming Status is that the property either meets the test, or does not. This determination can be made at any time.
Question: Q7. At what point would it be too late to assert “legal nonconforming use” for a specific property under this ordinance? (Councilmember Nelson)
Response: Please see response immediately above.
Question: Q8. At this point, does the City have any way of knowing the specific number of long-term housing units that would be lost to this category of “legal nonconforming use”? (Councilmember Nelson)
City Council approves, at second reading, amendments to the 2020 ordinance, adding short term rental to the UDC code as a “permitted use” in zoning tables and also qualifying short term rental businesses for status as a “permitted nonconforming use” where property investors can demonstrate that their business was pre-existing.
In advocating for these amendments, a new majority of Council argued that regulation of STRs was “punishing” investors, that the “small number” of units already in existence didn’t have much of an impact, and that these non-owner occupied units actually “provide benefits within our neighborhoods.” I wrote about it here:
I began receiving inquiries from residents who could find no information about how to license their own homes for periodic (not full-time) short term rental. The City website at that time offered no information about how an owner-occupied short term rental could get a City license, only information for investors about how to register as a pre-existing nonconforming use.
The City finally launches an online licensing system for all short term rentals.
COUNTING OUR LOSSES
This summer, I was grateful for residents who alerted me to a problem that had apparently existed for several months: in the process of setting aside the 2020 ordinance, City staff activities focused mostly on efforts to protect investors and make sure that all of their needs were met in qualifying for exemptions as pre-existing businesses in residential neighborhoods.
When a majority of Council voted to protect investors, the list of potential properties qualifying for exemption - i.e. those property owners that had chosen to respond to a postcard sent in February - was 141. Those properties can be seen on this map:
This map was, unfortunately, only the beginning. The City continues to receive requests for this exemption. I’m told that the current number of permitted STR businesses in residential neighborhoods now exceeds two hundred and continues to grow. (Note: last Tuesday, I asked for an updated list of how many STR’s have been licensed under this policy but I did not receive a response in time for publication in this newsletter.)
This year, a new majority on Council aimed at (and achieved) the same goal as the State House Republicans: protecting the interests of investors who run short-term rental businesses in residential neighborhoods. The work of a previous Council was largely undone by a new majority which was all-too-eager to meet the needs of property investors. The new Council’s amendments to the STR ordinance meant the loss of over 200 (and counting) units of long-term housing units in our community. While the news out of Lansing is disappointing, it is merely an extension of the work already done by our local leaders in Ann Arbor.
In preparing this newsletter, I called our State Representative Yousef Rabhi to ask about what is happening. The State House approval of 4722 was close, decided by one vote (note: Rep. Rabhi opposed it). This bill could be considered by the State Senate as soon as Tuesday. It is especially important that State Senators hear from us loud and clear: in communities where short-term rentals are a highly profitable venture, local governments must be able to regulate those businesses in order to preserve housing supply for the benefit of long term residents.