News Story

If Rentals Not ‘Affirmatively Lawful,’ Court Says They Can Be Considered Unlawful

Court of Appeals rules against Airbnb-type home rentals

A Michigan Court of Appeals ruling that short-term rentals are a commercial use of property and not a residential one could harm companies like Airbnb and their customers because local governments can now restrict such rentals through zoning ordinances.

“This is consistent with case law establishing that commercial or business uses of property, generally meaning uses intended to generate a profit, are inconsistent with residential uses of property,” the appeals court wrote in its decision.

A lower court’s ruling in the case was unpublished, but the appeals court issued a published ruling, which means it establishes a precedent in the Michigan court system.

The decision came in a case brought by an Ottawa County woman who sued Spring Lake Township after officials there denied her application to use her home as a short-term rental.

The plaintiff, Susan Reaume, began using her property for this purpose in 2015 when the township had no restrictions on such activities. But in 2016, the township passed an ordinance that prohibited short-term rentals in an R-1 residential zone, and it required owners of all homes used for short-term rentals to register and get a license. A short-term rental was defined as any dwelling that was rented out for 14 or fewer days.

When Reaume applied for a license, she was denied. She appealed to the Township Zoning Board of Appeals and then went through the judicial system.

“The Township’s mere failure to enforce the Ordinance does not confer upon plaintiff a right to continue violating the ordinance,” the appeals court ruled. “Neither does a statement made by any individual without the power to bind the Township, especially where none of the statements clearly express an opinion that short-term rentals in R-1 zones was affirmatively lawful. Accordingly, the trial court properly affirmed the Township Board’s denial of plaintiff’s application for a short-term rental license.”

Jennifer Rigterink, a spokesperson for the Michigan Municipal League, told the news site The Center Square that local governments ought to have the ability to regulate residential zones. The league represents the interests of local governments.

Short-term rentals change the makeup of a community, Rigterink said, because people are moving in and out of the home on a regular basis. That “changes the integrity of that neighborhood.”

Airbnb declined to comment on the ruling.

Legislation currently pending in Michigan would prevent local governments from prohibiting short-term rentals in residential zones.

Rep. Jason Sheppard, R-Temperance, sponsor of House Bill 4046, told members of the Local Government and Municipal Finance Committee that short-term rentals always had been permitted in residential zones. Certain municipalities, he said, are trying to take property rights away from owners that they previously had.

Sheppard’s bill would allow local jurisdictions to impose regulations on short-term rentals, but not a ban.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

News Story

Tech Company Gets $2M in State Money, Fails Performance Test

After failing employment targets, Rigaku repays $825k

Rigaku Innovative Technologies, an Auburn Hills subsidiary of Tokyo-based Rigaku Corporation, sought and received a $2 million performance-based grant from the Michigan Strategic Fund in January 2013.

The company, a manufacturer of high-tech optical products, planned to invest $55.7 million in its Michigan facility and create 27 jobs, according to the Michigan Economic Development Corporation. At a news conference announcing grants to Rigaku and 13 other firms, then-Gov. Rick Snyder said, “That these companies are choosing to stay and grow in Michigan reinforces our well-earned reputation as America’s comeback state.”

Rigaku is still in Michigan. But after receiving its $2 million grant in April 2013, something happened.

According to the online records of MSF board meetings, in October 2014 the company reported that it “had not maintained its base employment level.” State officials provided Rigaku with a “cure period,” extending to May 2015, but they subsequently deemed the company in default of its agreement. In July of that year, MEDC staff proposed, and the MSF board approved, a plan for Rigaku. It required the company to repay $1 million by September 2017 and adhere to the original agreement and repay half of the original grant in installments from 2018 to 2022.

According to MEDC annual reports on the performance grant program, Rigaku repaid $825,000 in 2016 and 2017. It remained in “repayment” status in the 2018 annual report.

MEDC officials declined to discuss what happened to precipitate the Rigaku default, absent a formal Freedom of Information Act request. Rigaku did not respond to a request for comment.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.