Airbnb battle brews in Lansing

The last time the fire suppression system was updated at the historic hotel Bob Pierce manages not far from The Henry Ford in Dearborn, it cost the owner close to $750,000.

Pierce, general manager of the Dearborn Inn, has employees who monitor the property around the clock. Yet he doesn't expect homeowners who take on paid guests to install fire sprinklers or employ a 24-hour surveillance crew if they decide to rent their houses to travelers.

That's what Pierce said bothers him about home-sharing companies like Airbnb and HomeAway, which use digital platforms to connect travelers with individual homeowners who rent out their houses for short stints: They don't have to play by the same, cost-boosting rules.

An effort brewing in Lansing to prevent cities and townships from using their zoning laws to decide how and where homeowners can rent out their homes ‒ in essence, setting up restrictions on Airbnb rentals ‒ has hotel operators squaring off against real estate agents in a debate over the definition of a hotel.

Pierce, and the lodging industry at large, insists he welcomes the competition. But hoteliers think short-term rentals — particularly those with frequent guest turnover — are essentially commercial properties, not homes, and should be regulated as such.

The hotel industry has company from city and township leaders, who say they know better than Lansing about how to govern their specific communities, and from neighbors who say short-term rentals have created a host of problems in their communities, from parking to noise.

They claim that home-sharing as originally intended — people renting a room in a house occupied by the owner — has been superseded by an increasing and, they say, disturbing trend of people snatching up multiple housing units solely to lease them for short vacation stays. Though a national hotel group commissioned a study on the subject, evidence of that happening in Michigan is mostly anecdotal.

Airbnb in Michigan

San Francisco-based Airbnb, a home-sharing company that matches travelers with homeowners who are renting out space in their homes, says it has 4,900 active hosts in Michigan who earned a combined $25.2 million from listing their properties on Airbnb in 2016. The usual host can earn $4,800 per year. The company says 188,000 guests booked Michigan stays last year, and that 33 percent of listings are unused rooms in a home. The typical listing in the state is rented out through Airbnb for fewer than three days each month.

Real estate agents in Michigan, who are rallying behind a set of bills waiting in the Capitol that would prevent local barriers to Airbnbs and their ilk, say it doesn't matter why someone buys a house. The practice of renting out second homes to vacationers, notably in tourist or lakefront destinations, is longstanding in the state — even before companies like Airbnb introduced technology to make the process easier.

"Their definition of an illegal hotel is a vacation rental — again, an industry that has existed and thrived in Michigan for decades," said Ben Breit, a Midwest spokesman for San Francisco-based Airbnb. "Someone's home is not a hotel."

Home sharing, as promoted by Airbnb and other startups, evolved to capitalize on traveler preferences for authentic, unique visitor experiences. Millennials in particular want to experience a new place by immersing in its neighborhoods, Breit said, while empty-nesters — especially women — are the fastest-growing host demographic on Airbnb's platform.

Airbnb has become a disruptive force to hotel chains' business models, forcing them to evolve if they want to compete for visitor dollars. On one hand, it makes it easier for hotel operators to make the case for renovations to the properties' owners, Pierce said, and it has led hotel brands to double down on guest service.

But it also could explain hotels' pushback on short-term home rentals. Homes can be, and often are, cheaper to rent than hotel rooms; the industry argues that owners don’t have to charge the same taxes and fees that drive up hotel room prices.

The hotel industry views the Michigan legislation as part of a national effort "to protect the business model of Airbnb and its counterparts," said Troy Flanagan, vice president of state and local government affairs for the Washington, D.C.-based American Hotel & Lodging Association.

Breit, of Airbnb, disagrees.

Airbnb spreads the benefits of the tourism industry to people who "maybe can't afford a hotel or maybe they specifically do not want to stay in a downtown hotel district, they want to blend in the background, they want to live like a local," Breit said, who also notes that hotel occupancy in Michigan is rising.

"We've always said for Airbnb to win, nobody has to lose."

Republican state legislators have introduced identical bills in the Michigan House and Senate that would define a short-term rental as a single-family home, a multi-family unit that houses up to four families or any number of units in a condominium complex that is rented for less than 28 days at a time.

The bills — sponsored by state Rep. Jason Sheppard, R-Temperance, and Sen. Joe Hune, R-Fowlerville — were introduced in April but have not yet been given a committee hearing.

Senate Majority Leader Arlan Meekhof, of West Olive, backs the legislation because of the impact of short-term rentals on his Ottawa County district, spokeswoman Amber McCann said.

The legislation would define short-term rentals as residential activity allowed in all residential zones, so municipalities couldn't use zoning ordinances to restrict them from particular districts or neighborhoods. But cities and townships still would be allowed to enforce existing noise and nuisance ordinances if problems arise between tenants and permanent neighbors.

Local government leaders could register short-term rentals if they chose, said Sheppard, who represents parts of Monroe County.

"Creating uniformity in the state is what we're supposed to do," he said. "Locals have a lot of leverage, even with these bills. The only thing we don't want them to do is create arbitrary... zoning."

Bills addressing regulation or taxation of short-term rentals have been introduced this year in 28 states and the District of Columbia, according to data compiled by Alexandria, Va.-based lobbying firm MultiState Associates and shared with the National Council of State Legislatures. Four states — Idaho, Nevada, Utah and Virginia — have approved legislation, according to the group.

Supporters paint the issue as protecting private property rights.

Municipal leaders who use zoning laws to restrict or ban short-term rentals from certain neighborhoods or entire cities or townships — perhaps prompted by neighbors' complaints about loud parties, or who believe short-term rentals are commercial uses that don't belong in residential neighborhoods — trample on a homeowner's ability to decide how to use his or her home, said Brian Westrin, public policy and legal affairs director for Michigan Realtors, an industry trade association.

Buyers of second homes consider whether they might be able to rent out the property when they're not using it before deciding to purchase, especially if it's used part time, he said. Uncertainty could lead them not to buy.

The Michigan Realtors' group has created a couple of radio advertisements meant to drum up support for the legislation. Westrin would not disclose how much the group planned to spend.

But Michigan Realtors is one of the most prolific campaign spenders among Lansing interest groups; it had more than $650,000 in its political action committee as of July, according to state records. The Michigan Campaign Finance Network ranked the Realtors' political action committee the seventh-largest PAC in the state for fundraising from January to July 20, based on state disclosures.

Sheppard, who works as a commercial real estate agent, received $2,650 from the Realtors’ PAC between May and June, records show. He said the group supports real estate agents and the contributions are not directly tied to his support of the legislation.

Hune received $250 from the Realtors' group on April 25, the day his bill was introduced in the Senate. Hune did not respond to messages seeking comment.

On a national level, the hotel industry is fighting back. The New York Times reported in April that the American Hotel & Lodging Association has $5.6 million budgeted for regulatory work and plans to invest in research to fight Airbnb's growth.

"We're not threatened by anybody who's competing with us under the same set of rules and taxes that have been foisted upon us," Flanagan said. "We're not even competing by the same rules, so it's hard to say they're even competition."

'The party house'

Pauline Smith's family has owned lakefront property in Oakland County's White Lake Township since 1925. She now lives down the street from a house she says changed ownership a few years back and is now a short-term rental.

"It becomes the party house," she said.

The home has hosted weddings, bachelor and bachelorette parties and graduation parties, Smith said. She said she has doused tenants' campfires when they were left to burn all night, and had to ask someone to move a car parked across her driveway.

"If people want to run a hotel," she said, "they should go buy a hotel."

Data provided by Airbnb, however, suggest homes listed on its site aren't churning through guests: 48 percent of the company's listings in Michigan are rented for 30 or fewer days out of the year, according to the company. That figure is 70 percent when expanded to 60 or fewer days.

Hotels have their own data — a March report from CBRE Hotels' Americas Research, a division of real estate firm CBRE Inc., paid for by the American Hotel & Lodging Association's nonprofit foundation — that found that homeowners who list two or more homes made up nearly 40 percent of Airbnb revenue in the U.S.

City of Detroit lawyers are reviewing proposed ordinance changes that would clarify that short-term rentals are not allowed in city residential districts.

Marcell Todd, director of Detroit's planning commission, said planning staff believed short-term rentals already were illegal under city zoning law. But after the proposed changes were presented to City Council, he said, questions came up about the city's current practice for short-term rentals. A public hearing is set for Nov. 2.

Asia Hamilton has rented her apartment in Detroit's New Center neighborhood since 2015 as a way to make some extra money. A freelance photographer, Hamilton said she charges $105 per night on Fridays and Saturdays when she's gone to help take care of her mother, who she said is disabled.

Staying in someone's home is a completely different experience than staying in a hotel, she said.

"Trust me, you don't want any crazies at your house," she said, adding that positive guest reviews are critical to landing future business.

Airbnb has reached more than 350 partnerships with states and cities across the country on regulations ranging from short-term rental registries to remitting taxes, Breit said. Airbnb also has a tool on its website for neighbors to report problems with tenants at its listed homes. The company says it has removed hosts from its website as a result of neighbor complaints.

In June, Airbnb signed a voluntary agreement with the Michigan Department of Treasury to submit 6 percent use tax on bookings in the state starting July 1. A Treasury spokesman would not confirm the amount of tax revenue received so far, citing state law.

"The way we're approaching this is: Take the bans off the table, wherever they may be, and then we can have a detailed and productive discussion about what fair rules and regulations look like," Breit said.

Pierce, of the Dearborn Inn, say the tax agreement doesn't go far enough. Not only is he required to pay use tax on his room bookings, he said, but he also charges 8 percent more than a homeowner would, partly to account for a tax he is required to collect for tourism promotion on behalf of the regional visitors' bureau.

Airbnb does not collect that hotel tax in Michigan.

Hotels up their game

Home-sharing companies do compete with hotels, particularly in the extended-stay segment, though it's difficult to determine the extent because Airbnb and other sites don't track data the same way hotels do, said Jeff Beck, interim associate director and an associate professor in the School of Hospitality Business at Michigan State University.

Hotels have faced pressure on prices from short-term rentals, he said, though they still have a responsibility to generate revenue for the hotel owners and management companies. They also have to consider the types of amenities they offer as home sharing grows.

"It's kind of like silent competition, if you will. You know it's there, but you don't know all the ramifications of it," Beck said. "It makes hoteliers get to the top of their game."

The Dearborn Inn will be renovated again in 2018, a cycle that started independently of proliferation in Michigan's Airbnb listings, Pierce said.

But Airbnb arguably has influenced the amenities, from more walk-in showers, flat-screen TVs and on-demand entertainment options such as Netflix and Hulu.

"That all is very healthy," Pierce said. "But again, their business model would change, I believe to a certain extent, if they had to comply in the same way that we have to comply."

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Comments

Matt
Tue, 10/17/2017 - 8:43am

Another area of Michigan government needing drastic reform.Michigan has too many governing entities with too little delineation of who has jurisdiction over what. Should
Ann Arbor be able to ban internal combustion engines? Or Ottawa county have t's own restrictions on abortion clinics? Or Bumpkin township in all effect have it's own building code? Having hundreds of townships, villages and other governing entities makes it worse no to mention the extra expense that could go to better use.

Rick
Tue, 10/17/2017 - 9:59am

Matt, in your world, all cities and townships are the same. This is why we need local control - so each place has its own character and we can pick where we live (rather than we all have to live in the big box world of sprawl and traffic). The character, walkability, zoning, building codes, environmental views, school districts and type of commercial and industrial development decisions belong to each local community, not the State. We have the need to house summer workers in my city that other communities do not need or want. There are some great local officials that donate their time and energy to make their communities unique and prosperous. I think we need control over our communities at the local level.

Matt
Tue, 10/17/2017 - 7:26pm

Likewise Rick, in your world the fact that someone invests their hard earned savings in a given asset means nothing. Anyone with any gripe no matter how remote their interest, should be able to step in Post Hoc and up end this investment? Local officials are far from the least corrupt in the food chain and due the little attention paid to local government, they are given are held to the least account.

Anonymous
Wed, 10/18/2017 - 5:27am

Excellent comment.

John Saari
Sun, 10/22/2017 - 7:37am

I agree 100 per cent. Communities Rule. They are more knowledgable, honest, transparent and efficient than the State or Federal gov. We should take back control of everything possible. Call it a revolution.

John Saari
Sun, 10/22/2017 - 7:30am

Hard to tell a community to give up their democratic rights. If they want to prohibit or encourage it is their right.

Fred
Tue, 10/17/2017 - 12:49pm

This is a clear example of how our legislature has been bought by the realtor lobby. This inane legislation should never have been introduced. The issue is local and should be left to local government to manage.

Suz
Tue, 10/17/2017 - 3:17pm

As a new Airbnb host in northern Michigan, I find the structure of the Airbnb company to be very helpful and informative. There are 'house rules' and the host website shows a clear message of checking with your local laws before starting. in my area, many single, older homeowners are using this method to utilize empty rooms in their homes and several of my guests are contractual employees for our little local hospital, summer employees for local businesses or IT employees of local banks, upgrading their security systems. These are NOT your hotel/motel guests, it's just NOT affordable...I do believe many of the complaints, in the residential neighborhoods, come from hosts not informing guests of things like 'Noise Ordinances' or Parking laws that can already dictate any of the neighborhood issues via the local law enforcement guidelines. In this state, do we really want more people booted out of their houses because they cannot afford them or NOT providing some kind of short tern rentals for necessary worker-bees, etc. in most communities...?

John A Sullivan
Tue, 10/17/2017 - 4:43pm

Local control is best. The state set up zoning legislation which local government units can use, now the state is considering an exemption because the real estate lobby wants it. I urged my representatives in Lansing to vote NO on the proposed exemption. Please join me in a citizen lobby for a NO vote.

Waterboy
Tue, 10/17/2017 - 8:10pm

Wait. Wait.. is this the party of small government trying to micromanage the local communities? Is the goal to make every community part of urban sprawl so they all are alike and local control be damned. If so, we can do away with local control and save a lot of money by letting Lansing do it all. Like they did to Flint Water and Detroit schools.

WWW
Wed, 10/18/2017 - 9:48am

Waterboy, do you think Flint and Detroit had NO responsibility for their citizen's health and maintenance and management of their infrastructure?

WitWithWisdom
Wed, 10/18/2017 - 9:46am

Last weekend was the first vacation I could afford in two years. Two weeks ahead of time, I could not find an AirB&B location available in Benzie County. The only availability was downtown Traverse City in the next county, the lowest Saturday night price for hotel was $185. I found a motel in Benzie County for $65. Where do you think I stayed? What's the big deal here? It's all about the rich getting richer - you can't tell me the hotel owners are hurting in Benzie County. I will support the small home operated business every time. Spend my tax money on real issues like infrastructure instead of debating how the hotel owners can get richer. And, for those who don't like a home share in their fancy neighborhood, go take a vacation in Traverse City.

Matt
Thu, 10/19/2017 - 7:50am

as far as Air BnB, what happened to consenting adults in the privacy of their home?

Anonymous
Thu, 10/19/2017 - 8:16pm

Please read this very informative article by one of the leading experts on short-term rentals. You'll understand why this legislation is a problem.
http://domemagazine.com/skidmore/rs101317

John Saari
Sun, 10/22/2017 - 7:27am

A desired location and short term rentals increase the buzz in the neighborhood. Property ownership rights should not be given up to the State. King of my castle, I should be able to take in boarders, room mates, girl friends and otherwise rent out any portion of my property for residential uses.

J Hendricks
Sun, 10/22/2017 - 1:10pm

We have used VRBO and Home Away (home rental sites in existence long before the trendy Airbnb exisred) as vehicles for family reunions. Show me a hotel that can provide six bedrooms, a dining table that can handle 16, and 4 bathrooms, and I will give it consideration. These home rental sites serve a purpose that the lodging industry (lemmings that they are) have totally missed. In this modern world with families spread over several states we need this kind of lodging.
Second point: this is not a State problem. Should be handled completely at the local level where local government can find the right balances that serve everyone.