Airbnb rental explosion splits Traverse City

Traverse City — With their three children grown and gone, Gary Schilkey and his wife, Lisa, spruced up a small studio apartment at the rear of their century-old home, hoping to earn a few extra dollars in retirement with bookings from the many tourists who frequent Traverse City.

The couple, who have lived for some 30 years in the same tidy neighborhood of mostly two-story, wood-frame houses just a few blocks from downtown Traverse City, listed their home with Airbnb, the popular vacation rental platform. Last summer the couple hosted about two dozen guests, mostly couples, from Michigan and Chicago.

“Our house is not fancy. We cleaned up the apartment to make it look good. It has the basic amenities,” said Schilkey, who retired a couple of years ago from the security industry. “We had a very positive experience and got great ratings. Our guests were respectful, the kind of people you would want to associate with. There was nothing negative.”

The couple, however, soon found themselves at odds with the Traverse City government, which has restrictive regulations on what it defines as “tourist” homes.

The city has been cracking down on violators who have grown with the proliferation of short-term home-share rentals through Airbnb, VRBO and HomeAway. The couple was given a cease-and-desist order and warned of fines. They withdrew their listing from Airbnb, which, like other sites, collects fees for connecting homeowners with paid renters.

“We have this big house and we want to stay in the neighborhood,” said Schilkey, a fan of Airbnb who has used the home-stay service while traveling in the U.S. and abroad. “It’s our turn to be the old folks in the neighborhood and watch the kids play. Airbnb provides us with a little bit of income to allow us to stay in the neighborhood.”

With the recent growth of Airbnb and other short-term home-stay rentals, Traverse City, like other resort communities in Michigan and across the country, finds itself in a quandary: how to manage demand for short-term vacation rentals in one of the most popular tourist destinations in the state, which draws upwards of 3 million visitors each year

On one side are residents like the Schilkeys who want regulations relaxed to allow more short-term rentals. Such rentals provide residents with extra income to maintain aging homes and pay high property taxes. They also provide more lodging options during peak events such as the National Cherry Festival, which attracts some 500,000 people. The region is home to more than 5,000 hotel, motel and bed-and-breakfast rooms.

Opponents argue that expanding the number of tourist rentals will have a negative impact on stable, picturesque neighborhoods in the 8.1-square-mile city and lead to higher property values, preventing young families from moving into the city and further eroding an already limited housing stock. There are also concerns about rowdy behavior, traffic and other nuisances.

“It’s one of our top issues here in the state of Michigan,” said Deanna Richeson, president and CEO of the Michigan Lodging and Tourism Association, which doesn’t oppose short-term rentals but would like a more level playing field by having those dwellings collect state taxes and service fees.

“Airbnb is probably the largest and most widely known example of short-term rental companies,” she said. “It started out as a mom-and-pop home-sharing site that has grown so quickly that it has been able to grow within loopholes of tax laws. There are a lot of examples where technology is raging forward, faster than the government or legal systems can keep up with the changes to keep laws relevant.”

Currently, Traverse City allows certain “tourist homes” in residential areas by licensing them. Under the terms of licensing, owners must occupy the home during all stays by tourists. Licensees are allowed to rent up to three rooms, with three guests per room. Guests cannot stay more than seven days. The homes must meet other criteria, including being located 1,000 feet away from another tourist home. The city has licensed 18 tourist homes. Home-vacation or longer-term vacation rentals are allowed in commercial zones.

“In the last couple of years, this has become a hot issue. We’re really struggling with what to do,” said Russ Soyring, Traverse City’s planning director, noting officials have been looking at other Michigan communities for solutions.

Soyring and others hope the city Planning Commission, which is set to discuss the issue Tuesday, will provide some direction. The tourist-home regulation has been in place since 1999. The issue has been in discussion for more than a year.

“It’s not going to be resolved Tuesday night. It’s just too complicated,” Soyring said.

Among those pushing to loosen tourist-home regulations is Dave Durbin, who listed his 110-year-old home on Airbnb for two summers before being shut down with a cease-and-desist order. He created a Facebook page, Responsible Home Sharing - Traverse City, to encourage conversation and drum up support for relaxed regulations, including eliminating the 1,000-foot-distance requirement between tourist homes and allowing unhosted visits.

“We’re a world-class tourist town. We should embrace this and create something cool,” said Durbin, who lives in Old Town, about eight blocks from the city’s Front Street, a destination with its multitude of restaurants, bars, boutiques and movie theaters. “We can bring in more tourists and we don’t need to add infrastructure. There’s an economic impact not just for the hosts, but for the businesses — bars, restaurants, kayak rentals. We all benefit from this. If we do it responsibly, there are no negatives.”

According to Airbnb bookings, Traverse City, with a year-round population of 15,000, is the second most-popular destination in Michigan, behind only Detroit. As a destination, Traverse City, which includes the surrounding townships, hosted 29,300 Airbnb guests in 2017, contributing $4.38 million to the local hosts, the organization said.

Statewide, there were 364,000 Airbnb guests in 2017, a 90 percent increase over the previous year. There are just under 6,000 Michigan hosts who share their homes via Airbnb, typically earning about $6,300 annually in supplemental income, according to the home-sharing service.

Last June, Airbnb began collecting Michigan state use-tax on behalf of its hosts in the Great Lakes State. Airbnb said $1 million in tax revenue was delivered to the state during the first three months. The company is working to secure additional tax agreements with Michigan municipalities this year.

“The hardest part of this issue is finding balance,” said Michele Howard, a Traverse City commissioner. “Obviously, we’re a tourist town and tourism is highly important to us. We want people to come here. We need to do something.”

Although Howard said she is not personally in favor of expanding the short-term, home-stay regulation, she realizes something must be done. “The current system is causing a lot of heartache for people. If we can fix this somehow, that would be great.”

The issue has not gone unnoticed by state lawmakers. Separate bills have been introduced in the House and Senate that would prevent local governments from enacting zoning ordinances that ban or restrict owners from renting out homes or condominiums for short-term stays.

“We are very opposed to those bills as they’ve been introduced,” said Jennifer Rigterink, a legislative associate with the state affairs team of the Michigan Municipal League. “This is a very localized issue that needs to be discussed locally.”

“I applaud Traverse City for going through the process and having this conversation,” she said. “What going on in Traverse City is different than in Grand Haven, South Haven or Holland. There are a lot of different destination communities with a healthy tourism economy, but there are also full-time residents and full-time economies. There needs to be a balance.”

The Michigan Lodging and Tourism Association also opposes the legislation, introduced last year, and is part of a coalition of local officials, homeowners, beds-and-breakfasts and organizations lobbying against the measures.

The coalition argues the bills would give short-term rentals an unfair advantage over hotels and allow unregulated rentals to overrun neighborhoods. The group is also against prohibiting local governments from enacting zoning rules to meet a community’s unique needs.

The dilemma that communities face isn’t lost on Airbnb users either.

Molli Kiser, a Chicago architect who visited Traverse City for the first time last summer, enjoyed the serenity of the Boardman neighborhood. She and husband, Patrick, stayed at Gary Schilkey’s studio apartment while taking sailing lessons on Grand Traverse Bay.

“It was a very quiet area. We didn’t experience anything negative staying in the neighborhood. It looked like everybody lived there,” said Kiser, adding the couple walked downtown to restaurants and local markets.

“On the one hand, you have people who want to preserve the communities and neighborhoods and not live in a transitional place,” she said. “I understand that and it’s something I struggle with. As a tourist, the experience is so much more pleasant staying in private residences.”

Greg Tasker is a Michigan-based freelance writer.