A lawsuit in New York City may serve as an example for Michigan and other states’ regulations on short-term rentals. A ruling in this case could serve as an example to governments across the country.

Local governments in Michigan restrict or ban short-term rental services such as Airbnb and Vrbo. Though this issue gets attention in major media centers, less populated areas like New Buffalo, Michigan are also struggling with rental regulations.

In early June, Airbnb filed a lawsuit challenging New York City’s recently enacted rules on short-term rentals. Airbnb, a short-term rental company that serves more than 150 million people per year, called the city’s new ordinance “its most extreme and oppressive regulatory scheme yet, which operates as a de facto ban against short-term rentals in New York."

The company claims the ordinance will result in only a small number of hosts being granted approval by the city to rent their property on a short-term basis. The new rules require hosts to certify that their properties comply with a battery of regulations or face thousands of dollars in fines.

Restricting short-term rentals violates basic principles of free markets and property rights. It artificially reduces choices for people seeking short-term stays and prevents people from using their property as they choose. But New York is not the only place this is happening.

Michigan has its own history with regulating short-term rentals. In 2017, St. Clair Shores homeowner Michael Dorr was issued a $150 fine for violating city ordinances after he rented out his cottage through Airbnb. There was no zoning law explicitly banning residents from home sharing.

The Mackinac Center Legal Foundation represented Dorr in his legal dispute with the city.

“The city attorney seems to be taking the position that anything the zoning laws do not specifically allow is prohibited,” argued Derk Wilcox, Mackinac Center senior attorney. “But using this logic, if you paint your house beige, and the city code doesn't say specifically that it can be that color, then they can fine you $500 or put you in jail for up to 90 days.”

During the peak of the COVID-19 pandemic, Governor Gretchen Whitmer used unilateral emergency powers to ban short-term rentals for an extended period. Though this decision was made in the name of public health, it served as an example to local government officials.

The New Buffalo City Council passed in November 2021 an ordinance restricting short-term rentals in specific zones of the city, despite opposition from the local community. This decision has been controversial, and a U.S. District Court judge ruled earlier this year that Mayor John Humphrey violated a pro-rental resident’s rights when he had police remove her from a 2021 city council meeting, as Michigan Capitol Confidential reported.

Park Township, near Holland in Ottawa County, recently chose to enforce a 1974 ordinance that completely bans short-term rental properties.

The Michigan House appears to differ with these local bans on short-term rentals. In October 2021, the House passed House Bill 4722, which would have prohibited local bans. The bill states, “A local unit of government shall not adopt or enforce zoning ordinance provisions that have the effect of prohibiting short-term rentals.” But the bill was not passed by the Senate nor signed into law by the governor.

“The unfortunate reality is that people have issues with their neighbors all the time,” said the Mackinac Center’s Jarrett Skorup, who has studied this issue closely. “The challenge is to balance the rights of property owners to use their homes as they see fit and simultaneously to protect the community from harmful nuisances.”

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