Statewide bill on short-term rentals not needed, local official says

A proposal in the Michigan Legislature would impose statewide regulations on short-term rental properties and increase their taxes. At least one local official says it’s unnecessary and would subject those properties to usurious tax rates.

The Short Term Rental Regulation Act is one of several items in a package of bills, HB 5437-5446.

Stays at short-term rental properties, as well as at hotel and motel rooms, are currently subject to a 6% use tax. If House Bill 5438 were passed, short-term rentals would also be subject to an additional 6% tax. Various state laws allow for an extra tax on commercial lodging establishments in specific municipalities, but not statewide.

The House Fiscal Agency estimates that an additional 6% tax would cost rental owners and their guests $35 million to $70 million each year. The tax would apply to rooms rented for more than 14 days a year. Up to $1 million of the tax revenue collected would go to the Department of Licensing and Regulatory Affairs, or LARA. The rest would go to local governments.

HB 5438 would also require short-term rental owners to register with LARA , which would create and maintain a database of short-term rentals. The bill also would impose various safety and disclosure requirements statewide. Booking platforms such as VRBO would have to pay an annual registration fee of up to $50,000.

Other bills in the package, which could be enacted only if HB 5438 were enacted, would change state laws that allow for room taxes in specific localities, such as Detroit, Grand Rapids and Traverse City. Local governments would be prohibited from banning short-term rentals outright, according to the House Fiscal Agency.

The legislation is unnecessary, said one local government official. Mark Florian, a trustee of Lincoln Township in Berrien County, sent a two-page letter to the House Committee on Local Government and Municipal Finance and shared a copy with CapCon. When “a single-family residence is being rented to a group of 18 people, whose cars are overflowing into the lawn areas or street, and whose noise is a disturbance to the neighbors,” he wrote, local authorities should “look to your local ordinance and enforce the same.”

“These communities are simply looking to the state to provide a source of unrestricted tax revenue that vilifies STRentals while masking their own budgetary shortcomings,” he continued.

Florian, a short-term rental owner, endorsed extending the current accommodations tax to short-term rentals and giving local officials discretion in how they use the funds.

He condemned the idea of the 5% tax, however. “To add an excise tax and elevate the burden to STRentals to upwards of 17% when hotels/motels are at roughly 11% is not only heavy-handed, but borderline usury.”