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Ruth Skidmore

Ruth Skidmore

A Solution Looking for a Problem

October 13, 2017

The Michigan REALTORS claim to be concerned that vacationers may not find a place to sleep unless all of Michigan’s residential neighborhoods are opened to unlimited commercial rentals of any home.   Don’t be fooled.

The true purpose of HB 4503/SB 329 is to create more income for rental management companies by converting the house next door to you into a transient lodging business. To accomplish this goal, all municipalities would be stripped of their historical zoning power to protect residential neighborhoods from commercial intrusions — while being simultaneously burdened with an increased demand on local public safety resources.   

Municipalities would not be the only losers under this proposed legislation.  Residents of traditional residential neighborhoods face the risk of a high-end flop house opening next door. The proposed legislation would jeopardize the character, integrity, and future of the neighborhoods that form the backbone of every community in Michigan.   The effect on municipalities will be chaotic — opening residential neighborhoods to unlimited commercial lodging, forcing incoherent definitions into every zoning ordinance, and increasing the demands on public safety without providing a mechanism for funding.

The backlash from voters who wake up to find their quiet, residential neighborhood is now a commercial tourist corridor will likely be fierce.

Casting the Debate

The campaign promoting HB 4503/SB 329 is based on a false premise — the suggestion that all commercial short-term rental operations (“STRs”), such as Airbnb or VRBO, will be banned at the local level unless the state legislature provides absolute and unlimited protection. That’s simply not true. To date, Michigan municipalities have dealt with STRs in a wide variety of ways.  Many communities have already confronted the difficult issues posed by the explosion of STR activity.  Such communities, using the long-established zoning process, have held hearings; collected community input; and carefully amended their local land-use regulations accordingly.

In general, local responses to STRs have sought to strike a balance between the protection of residential neighborhoods and the needs of the tourism industry.  Some communities have permitted STRs in a limited number of residential zones. Other communities have required that STRs be conducted by an owner on site, in order to minimize the nuisances attendant to unsupervised mini-motels.  Some communities have limited STRs because they have a valid public interest in maintaining affordable rental housing which can be negatively affected by the diversion of housing stock into STR activity.  Local government responses have been thoughtful, deliberative, legal, and calculated to serve the best interests of local community residents.

The notion that STRs must be permitted everywhere in Michigan, or else face prohibition everywhere in Michigan, is false.

The real debate is how to accommodate STRs within each community: Where should they be permitted? How many should be permitted in each neighborhood? How many guests should be permitted? How frequently should guest turnover occur? Municipal government is best suited to decide how much STR activity can be absorbed before a neighborhood loses its residential character and becomes a commercial district. This is a local issue which can only be addressed meaningfully at the municipal level. There is simply no problem which justifies the legislature in taking away local government’s power to address this issue.

The Proposed Legislation Upends Existing Law

To understand the far-reaching implications HB 4503/SB 329, one must have a foundational understanding of how current zoning laws operate.     The zoning power is derived from the State’s authority to regulate land use for the health, safety and welfare of its residents.   It is based on the principle that these interests are supported by careful planning that separates incompatible uses into different zone districts so as to minimize nuisance and conflict. 

Typically, an activity is only allowed within a zoned district if it is expressly identified as a permitted use.   For example, a typical low-density residential district will expressly permit single-family residential uses, adult foster care and in-home child care. If a proposed activity doesn’t fall within the definition of one of the expressly permitted uses, it is not allowed.

When STRs have been challenged as a violation of single-family residential zoning, courts have been fairly consistent in their assessment that transient lodging operations that offer overnight stays to the general public do not fall within the definition of “residential use.”  The term “residence” denotes a sense of permanence associated with the activities carried out within a home.     A “residence” is a place where you keep your stuff, a place to which you return, and a place where you carry out the ordinary business of living.    It is not sufficient for definitional purposes that a person within a house is using that house for sleeping, eating and showering if that person is otherwise leaving after two nights, never to return again.

HB 4503/SB 329 seek to overturn this reality with an unqualified, blanket declaration that all STR activity constitutes a “residential use” of property.    This declaration is contrary to existing definitions as laid out in hundreds of municipal zoning ordinances, at odds with numerous court decisions, and utterly inconsistent with common sense.   In continuing the sleight of hand, the legislation makes the additional declaration that STRs do not constitute a “commercial” activity.   This declaration is simply dishonest.    Many STRs bring in tens of thousands of dollars for their absentee owners while moving hundreds of transients through a neighborhood on an annual basis.    Honest operators of STRs readily acknowledge the commercial nature of their own activity by paying Michigan’s 6% use tax just like hotels and motels.

The Proposed Legislation Ignores Local Needs, Resources and Community Input

For those communities that have already addressed the rapid growth of short-term rental activity driven by internet-based platforms like Airbnb and VRBO in their zoning laws, the proposed legislation will render meaningless the hundreds of hours of public hearing, deliberation and careful drafting that were invested in that amendment process.   HB 4503/SB 329 will require that every municipality permit commercial lodging everywhere and without regard to the impact on the neighboring uses.   Many carefully crafted zoning ordinances designed to address the appropriate location and density of STRs will be scrapped. 

Residents who have participated in their local zoning processes and weighed in to affect the balance between the needs of residential neighborhoods and the needs of the traveling public will feel cheated and unheard—unheard, that is, until they are given an opportunity to cast a vote against the state legislator who sold them out in favor of the realtors and commercial developers.        

For those communities that haven’t yet directly addressed the rapid growth of STRs, current zoning for single-family residential districts likely provides protection against the influx of commercial operators based on existing definitions for “residence,” “residential use,” and “single-family dwelling” as set forth in their own ordinances and interpreted by Michigan courts.    The proposed legislation turns the existing paradigm on its head by declaring that transient lodging operations are “residential” with complete disregard for how each municipality has already defined the terms.    This newly imposed definitional standard fails to provide a reasonable justification for the greater regulation imposed on substantially similar operations, i.e., hotels, motels and traditional owner-occupied bed and breakfasts.    Accordingly, zoning ordinances will be rendered incoherent, irrational, and vulnerable to equal protection challenges.             

An Unfunded Mandate

Motel and hotel districts demand more public resources to effectively address the increased pressure on public safety.   So, too, do clusters of STRs.   A concentration of tourists and vacationers produces far more negative externalities than a typical family residing in a home.   This is especially true in the case of vacation renters for whom more turnover means more traffic, more fireworks, more bonfire smoke, more alcohol, more parties and more noise, combined with an ignorance of property boundaries and community rules and standards.    

Proponents of the legislation suggest that regulating the negative externalities through noise and parking ordinances will solve the problem.   This suggestion amounts to wishful thinking and otherwise misses the point.   

Residents should not be forced into service as the local posse tasked with calling 911 and registering complaints to report violations.   By the time such calls and complaints have been made, the disruption to peace and quiet enjoyment has already occurred.  There are certain negative externalities that are simply inherent to a transient population and that are fundamentally incompatible with true residential uses.   No amount of regulation changes the transient nature of an STR operation.    

The bottom line:  The proposed legislation will require that every neighborhood become a tourist district for mini-motels with no on-site supervision, and every municipality will be tasked with increasing its police and fire protection accordingly.    

A Strain on Affordable Housing       

In a number of large cities across the country, the higher profits associated with the operation of an STR as compared to residential leasing has caused some landlords to convert their stock to Airbnb, with the result being a shortage of affordable housing.   Municipalities faced with this problem have responded wisely by severely restricting STRs in order to preserve housing opportunities for residents.    HB 4503/SB 329 will render it impossible for any Michigan municipality to take similar protective action, leaving the Michigan REALTORS richer at the expense of low-income residents who find themselves priced out of the market.       

An Irreversible Mess

This is not legislation that can be effectively undone after its disastrous impact is realized.    Once a use has been established as lawful under zoning, a subsequent change in zoning cannot take away the existing use right without just compensation.   Accordingly, existing uses are “grandfathered” and permitted to continue despite amendment to the law.   In other words, if HB 4503/SB 329 pass, floodgates will be opened that cannot be entirely closed again.   Unlawful operations that are rendered lawful upon the passage of this legislation, and the multitude of new operators who will smartly rush to stake a claim, will be immune from any subsequent effort to reign in the activity.  The operators who’ve set up their commercial tents in the middle of your neighborhood will get to stay.   

A Place for Everything, And Everything in Its Place

The proposed legislation is not designed to protect the traditional 2-3 weeks of rental of the family cottage to cover taxes.   HB 4503/SB 329 is designed to protect the interests of commercial developers and management companies who profit in the construction and operation of commercial lodging in neighborhoods that traditionally consisted of…neighbors.      While there is certainly a place for such activity and a necessity in many tourism-driven economies to accommodate the traveling public, these truths should not translate into a wholesale abandonment of the traditional residential neighborhood.  Legislators must allow for the protection of neighborhoods comprised of true residents who participate in their community, care about their school system, and are invested in the social fabric. 

A place for everything, and everything in its place.   

The questions of real import — “where is STR activity appropriate?” and “what density of STRs can a neighbored absorb before it loses its residential character?” — can only be answered intelligently at the municipal level by residents and local officials sensitive to the needs and resources of that community. 

Ruth Skidmore is a partner with McShane & Bowie, PLC, specializing in real estate and land use litigation. She has represented numerous homeowners in deed restriction and zoning enforcement matters related to short-term rentals.

October 12, 2017 · Filed under Ruth Skidmore



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