Safety, income concerns clash in Detroit plan to regulate short-term rentals

Detroit — Empty-nesters Char Goolsby and husband Conrad decided earlier this year to open their six-bedroom home in the Boston Edison neighborhood to guests.

Renting out rooms starting at $70 per night through the short-term rental site Airbnb has helped them afford retirement and pay for their health insurance and deductibles, which runs about $750 per month, said Char Goolsby, who works on a limited basis because of her health.

“This is how we make it for the most part,” said Goolsby, 54, as she sat with her husband on a twin bed in a guest bedroom. “This is how we pay our insurance premiums. … It is helpful. We’re grateful.”

The couple and others like them fear that the income they make from their homes could go away — or be greatly reduced — as the city of Detroit crafts an ordinance to regulate short-term rentals.

It’s an issue that has brought out varying viewpoints — from the hosts who want to maintain their earnings, neighbors with safety concerns and the hotel industry seeking a fair playing field when it comes to regulation and taxation.

It’s an issue not limited to Detroit. Other communities in Michigan in recent years have amended their ordinances or are in discussions on how to regulate short-term rentals as the industry grows.

Detroit is working on an updated version of an ordinance introduced in September. It is unclear when a new version will be submitted to the city clerk for the Detroit City Council to review. The discussion surrounding a short-term rental ordinance has increased in recent months.

In early 2018, the city decided not to enforce an ordinance the council approved several months prior prohibiting owner-occupied units to be used for paid overnight guests. The ordinance caught some city officials by surprise and prompted a legal review; it is still not being enforced today.

The latest proposed version of an ordinance introduced in September allows for short-term rentals in owner-occupant properties. Property owners who remain home while hosting guests would not be subject to regulations and do not have to register their properties with the city. 

Owner-occupied properties where owners won’t stay on the premises while hosting guests will be subject to regulations such as a registration fee, a 90-day limit to operate and a 1,000-foot distance between other properties registered as short-term rentals. As currently proposed, short-term rentals would not be allowed in homes that are not owner-occupied.

Councilwoman Janee Ayers, who introduced the ordinance, has said she doesn’t want to stop people from making money but doesn’t want to see neighborhoods turn into hotels. Ayers did not respond to calls for comment.

The city’s law department says the ordinance would address the biggest concern the city receives from neighbors about “party houses” by regulating rentals in which the owner does not remain present. 

'That delicate dance'

Detroit is among communities statewide addressing short-term rentals. Other municipalities include Traverse City, Grand Haven, South Haven and St. Joseph, said Jennifer Rigterink, a legislative associate of state and federal affairs for the Michigan Municipal League, an association of municipalities.

“Those folks who are locally elected, it is on them to do that delicate dance of finding kind of that middle ground to address the concerns of the folks in the community as well as the stakeholders,” Rigterink said.

Traverse City this year put into effect an ordinance amendment requiring all vacation home rentals to obtain an annual license. 

In Ann Arbor, city officials sought public input last month on how to regulate its short-term rental properties. The three meetings were heavily attended by both property owners and neighbors, said City Councilwoman Elizabeth Nelson.

“We do have properties that around football games are becoming party houses,” she said. “That’s a concern from neighborhoods. There’s also a concern from residents who have been living for years in a neighborhood close to downtown, and they’re now seeing that the properties that used to have year-round residents are now just sort of rotating hotels.

"There are concerns in our town that is this really what Ann Arbor is going to become.”

In the midst of local discussions, there are proposed bills in the Legislature. A House bill introduced by Rep. Jason Sheppard in January would prohibit local municipalities from banning short-term rentals. 

"We're trying to make it to where a community can't outright ban short-term rentals within their zoning," the Temperance Republican said. "Nothing stops a community from creating perimeters, from creating ordinances, registries, whatever. I just don't think it's right to outright ban the practice especially since it's been in practice for decades and communities get a lot of tourism because of it."

Sheppard said a workgroup has formed including municipalities, bill sponsors, realtors and other organizations to reach a consensus on some amendments for the legislation so that local governments maintain some control over permitting.

An alternative package of bills introduced by Rep. Jim Lilly, R-Park Township, in May would subject short-term rentals over 14 days to the same taxation as hotels and motels.

The hotel industry wants a fair playing field when it comes to lodging, said Justin Winslow, president of the Michigan Restaurant & Lodging Association.

In the last 10 years, the short-term rental industry has morphed from a host sharing a room in their home to corporate entities purchasing property to operate hotels, he said. Winslow said hotels pay into an assessment added to room rates to fund tourism promotion. Short-term rentals benefit from that.

“We need to find a way for at least fair and equitable regulation,” Winslow said. “We don’t mind competing.

"Airbnb is not going away, short-term rentals are not going away. They’re part of the future of travel, but they need to play by the same standard because they’re essentially benefiting from a standard that they’re not held to.”

Party problems

In recent weeks, Detroit residents and property owners have come before the council to speak on the matter. Many agree there should be restrictions put in place.

“My issue with short-term rentals is that they’re not regulated completely,” resident Tiffany Davis said.

Davis said there are a few short-term rentals near her in the Boston Edison neighborhood, including one with an owner in California.

“You have these people they come in, and some respect that other people are not short-term rentals, we are homeowners,” she said. “The way they treat the neighborhood is something I’m sure they wouldn’t do to their own neighborhood. Staying out real late, partying.”

Davis said she once witnessed a wild party that lasted until the wee hours of the morning. Someone parked a vehicle on her lawn and only moved after she threatened to have the vehicle towed, she said.

 Another renter booked a house to film a movie and took over the neighborhood for the weekend.

“Parking can just be a nightmare,” she said.

When other short-term rental hosts learned of Davis’ issues, she said they spoke with the property’s manager to help get things under control.

“They did what the city did not do,” she said. 

Goolsby says she agrees with some regulations, including a registration fee. What she doesn’t like under the current proposed ordinance is the 90-day limit or any limit at all. Due to her health, Goolsby spends the winter months in Atlanta and would like to rent out her home during that time.

Property owner Stephen Lovett, 43, of Royal Oak said he would gladly pay additional taxes. But under the current proposed ordinance, he'd have to shut down his two short-term rentals in the city because both are non-owner occupied.

“There’s a lot of revenue that comes through this, and I think the city has every right to benefit from that as well,” he said. “We’re willing to do that.”

Lovett said he purchased flats in two Cass Corridor area buildings and fixed them up solely to rent them out short-term two years ago. He also owns 15 long-term rentals in Detroit and four total short-term rentals in Royal and Berkley. He and his business partner saw the need for rentals outside of the central business district.

“They were kind of ideal for short-term rentals,” he said. “The building that they’re in had been vacant for decades, and we were the first use of them in many decades. … We saw that based on kind of the numbers and the pricing, it really only worked well as a short-term rental based on what it costs to invest to get a property ready to go in some of these districts.”

Lovett said guests from around the world have enjoyed the city in a way that’s different from staying in a hotel in the downtown area.

“They’re actually involved in the neighborhood,” he said. “They’re integrating in the neighborhood. They’re patronizing the neighborhood-owned businesses. They’re able to stay longer because it’s more affordable than staying in a hotel.”

cwilliams@detroitnews.com

Twitter: @CWilliams_DN