Home Sharing and Short-Term Rentals in Michigan

We all know the old saying “sharing is caring,” but these days, sharing is not only caring, it is capitalizing on unused assets, turning more and more people into overnight entrepreneurs. What am I talking about? I’m talking about the home sharing economy. Defined as a short-term rental where one rents part or all of his or her home for a short period of time, home sharing is on the rise in Michigan. Companies like Airbnb and HomeAway have made it easy for home owners, or “hosts,” to advertise their space, while visitors can browse the sites and choose a place that fits their desired neighborhood, amenity needs and budget. Airbnb recently announced that its Michigan host community earned a combined $25.2 million in supplemental income while welcoming approximately 188,000 people to the state in 2016. Of the Michigan cities contributing to that number, Grand Rapids, Muskegon, Ann Arbor and Holland topped the list. While these figures might be enticing, making it seem like a great idea to rent out a room or your entire home for extra income, you should first make sure you’re not breaking the law.

Renting out a room or your entire home is essentially operating a business, and because most cities prohibit businesses in residential zones, you may be in direct violation of your city’s zoning ordinance. However, specific cities, such as Grand Rapids, Holland, and Traverse City have amended their city ordinances to account for home sharing, with many other cities considering the same. What’s more, each city develops its own unique rules and regulations for home sharing, so what’s in compliance in one city may not be legal in a neighboring town.

Grand Rapids, for instance, only allows one room to be rented at a time and the owner must apply for a Home Occupation Class B License with the City. The permit is $280 for the first year with other fees assessed for each additional year. Upon issuance of a license, all neighbors who live within 300 feet of the property will be notified by the City Clerk. No more than two adults may rent a room at one time.

In Holland, homeowners must obtain a Public Lodging License from City Hall; provide a parking space; register with the Department of Community and Neighborhood Services and post proof of registration on any ads for the unit; obtain insurance that allows for short-term rental use; and apply for a special exception from the city’s Zoning Board of Appeals. To ensure residential districts don’t become too “commercial,” the City of Holland requires that the owner be present in the home when renting out rooms for more than 60 days per year.  Inspections are assessed on an annual basis, which is a stricter schedule than traditional rentals, which are inspected on a three-year or six-year rotation.

Traverse City allows up to three bedrooms of an owner-occupied home to be rented out for up to seven days at a time. Classified as a tourist home, the rooms must be connected to the common areas of the home. The home also cannot be within 1,000 feet of an existing tourist home, and the owner must pay for a city license, which includes a fire inspection and notice to neighbors.

The City of Muskegon has yet to amend its residential zoning ordinance for short-term rentals so, at the moment, lodging services in residentially-zoned areas are prohibited.

In sum, home sharing offers home owners a great way to make supplemental income by simply sharing their home. But before listing your space for rent, it’s important to understand the laws and procedures in your respective cities to avoid unnecessary fines and fees for noncompliance.