South Haven, home to short-term rentals for 100 years, has residents who want them gone

South Haven is a small city on Lake Michigan in the western part of the state. It has long been a tourist destination, and short-term rental websites have made it easier for tourists to visit and homeowners to rent out their properties. But short-term rentals are divisive, with some residents fighting to ban them in many parts of the city.

In 2018, the city enacted a local ordinance that requires short-term rentals to be registered and undergo annual inspections. The ordinance also requires owners of rental property either to have a local property manager or to live near the property themselves. Today, there are 550 registered short-term rentals in South Haven.

“The ordinance is working wonderfully well. There are less than ten complaints a year, and if you actually read the complaints, they are about locals, not renters,” Ryan Servatius, a property manger, told Michigan Capitol Confidential. “It’s sad because the town has become very divided. We’ve had buyers decide not to purchase a home in South Haven because they’ve read our chatlines and don’t want to move to a town that’s so divided.”

Servatius manages 23 short-term rental units in South Haven, where he lives. Servatius said short-term rentals allow tourism and its related industries, such as cleaning services, to thrive. According to the rental platform Airbnb, Michigan property owners have collectively earned more than $660 million in rental income. Governments in the state as well as business interests routinely promote Michigan as a place that welcomes tourists.

During the Great Recession, Servatius saw people use short-term rentals as a way to stay afloat. They would use the rent to pay off mortgages and keep their homes.

“Short-term rentals don’t hurt the neighborhood. They actually enhance it,” Servatius said. “These houses would sit empty for eleven months out of the year otherwise, which brings in crime. But whether it’s a family or a couple staying there, these houses are getting used by being rented out.”

The city has handled the issue poorly by allowing members of the group known as Neighborhoods Need Neighbors to hijack city council meetings, Servatius said. The group is vocal and has publicly insulted short-term rental owners. 

“They say they are not anti-rental, but want a balance,” Servatius said. “The problem is their balance is whatever they feel is correct, and we already have a cap on short-term rentals in the city of South Haven based around 583, which we have never hit. We have fewer short-term rentals now than we did in 2018 when we started the rental ordinance. The idea of limiting even more property rights means placing a deed restriction on every homeowner’s property in the city limits, which hurts values and takes away a homeowner’s constitutional rights that have been worked hard for in this country.”

Neighborhoods Need Neighbors has posted over 300 signs around South Haven, each bearing its name.

Todd Heinrich, a member of the group, said it is an activist organization with a goal of limiting the negative economic and social impacts of short-term rentals. The group has hired an attorney to petition the city for an ordinance restricting short term-rentals. Heinrich maintains that people have had issues with parties in neighboring rental units. Clubs and churches, he told CapCon, are seeing significant loss of membership, and short-term rentals have raised the prices of houses, resulting in new residents not moving to South Haven.

“My wife is a physician, and she can’t find a new doctor willing to move here for her practice, which has never been a problem before,” Heinrich said. “A house that used to cost $250,000 now costs $600,000. Even a family practitioner can’t afford it.”

David Veenstra, another member of Neighborhoods Need Neighbors, said he is not against short-term rentals but is concerned with their growing numbers.

“I am not opposed to short-term rentals — far from it. I think they can be a positive, by fixing up houses,” Veenstra said. “But they compete with other buyers to raise prices of houses. When we have absentee landlords who are unavailable or unresponsive to concerns, sometimes there are properties that turn into party houses.”

The Michigan Legislature is considering bills that would prevent local governments from banning short-term rentals. The would still allow cities to enforce ordinances that serve to protect public health and safety, and avoid nuisances.

Gary Walker had been marketing and taking reservations for his short-term rental property. The city notified him in April that the housing inspection process changed, which could put the renewal of his renter’s certification in jeopardy. He had already booked renters for the summer.

“There is a lack of places to stay in South Haven. Small cities in Michigan don’t have the hotel infrastructure of other big coastal cities, and tourism is South Haven’s primary industry,” Walker said.

The city is enforcing a new regulation about window sizes, Walker said, even though Michigan residential codes have many exceptions for older homes. Typically, people are required to bring their houses up to code only when renovating.

“They are making up their own rules that are not industry standards, that are not industry codes, and we’re backed into a corner of facing fines for renting, even though we’re already booked for the summer, until the window is fixed,” Walker said. Owning the property is part of his long-term strategy for retirement, and he said the city’s changing expectations is putting financial stress on his family.

“The council doesn’t understand the full, long-term consequences of (restricting) short-term rentals,” Walker said.

The council has commissioned a study on the effects of short-term rentals on the South Haven community. It is being conducted by the Kercher Center for Social Research at Western Michigan University and the W.E. Upjohn Economic Institute.

Short-term rentals have been in the city for over 100 years, said Kate Hosier, South Haven’s city manager. At city council meetings, rental opponents have claimed that the community will lose its character and that there won’t be enough volunteers for city government or enough kids in the school system.

“Both sides are very passionate about their views, and some are very committed to making sure regulations are followed to a T,” Hosier said. “It can be a polarizing conversation.”