Short-Term Rental Bills Call for Tax Hikes, More Regulations – Michigan State Capitol Confidential

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The proposed regulations are addressed to owners who rent properties for longer than 14 days a year

Short-term rental owners may have to deal with more regulations and additional taxes as part of a new package of bills introduced in the Sejm.

Housing Bills 5437-5446 seeks to create a Short-Term Rental Regulation Act that would impose new regulations on certain short-term rental owners. The regulations would apply to properties rented for longer than 14 days in a calendar year. Existing local ordinances will remain unchanged.

The bills would also apply to hosting platforms such as Airbnb and VRBO, which would be required to pay an annual registration fee of $100 per listing, not to exceed $50,000 per year.

State Rep. Joey Andrews, D-St. Joseph, said the bills are intended to enable local authorities to regulate short-term rents.

“In communities across Michigan — especially, but not exclusively, lakefront communities like the ones I represent — STRs cause regulatory problems at best and serious safety concerns at worst,” Andrews said. “It is long past time to introduce reasonable protective barriers that would enable local governments to address STR, respect the needs of permanent residents and strengthen our tourism economy.”

The bills would impose registration requirements, security regulations and the obligation to file documents with the state treasury office.

Mark Florian is a trustee of Lincoln Charter Township in Berrien County and a short-term rental owner. He opposed the plan at an April 17 committee hearing.

“We have an ordinance that regulates short-term rentals,” Florian said. “If we need another law or package of regulations to perpetuate a right or entitlement that already exists, perhaps we should take a step back and remove the ambiguities in the current laws.”

Short-term rental owners already pay a 6% use tax on rental income. If the bills advance through the House and Senate and are passed into law, short-term rental owners renting for more than 14 days in a calendar year would have to pay an additional 6% lodging tax that hotels and motels pay.

Short-term rentals would also be subject to an additional 5% excise tax, which does not apply to hotels and motels.

For example, a landlord who charges $1,000 to rent a property would have to pay $60 in occupancy tax, $60 in lodging tax, and $50 in excise tax. This equates to $170 or 17% of the property owner’s earnings.

The nonpartisan House Fiscal Agency estimated, using limited data on the short-term rental market, that the 6% excise tax included in House Bill 5438 could generate between $35 million and $70 million annually.

The plan provides for civil penalties of $1,000 for short-term rental owners who violate the act or a $5,000 penalty for hosting platforms.

Under the plan, landlords must insure each rental unit with at least $1 million in liability insurance.

HB 4537 was referred to the Labor Committee.