The growth and changing policy of Michigan’s short-term rentals and tourism industry
Short-term rentals like Airbnb may have found a way to stay and play in the Great Lakes State.
Michigan’s economy is rebounding from the Great Recession from nearly ten years ago. For example, Grand Rapids, considered to have the fastest growing economy in the United States, grew their workforce 4.4 percent in 2016, according to U.S. Bureau of Labor Statistics. Detroit is going through a rebirth where people are migrating in rather than out, downtown redevelopment is flourishing, and visitation to the Great Lakes State reached 113.4 million in 2014 (figures from 2015-2017 are currently not available). Visitor spending that year generated $2.4 billion in state and local taxes, according to The Economic Impact of Travel in Michigan (TEITM).
According to TEITM, traveler spending on lodging alone accounted for 22.2 percent, topping food and beverage at 20.9 percent and local transportation at 19.2 percent. Lodging, an essential piece to both business and leisure travel, is tracked and reported on annually. However, short-term rentals, such as a private home or bedroom, haven’t been incorporated into the larger tourism economy research for Michigan. Up until now, short-term rental digital platforms, such as Airbnb, have been largely operating without much oversight from local government or the state. Easier said than done, it is a massive undertaking for a city let alone an entire state to police an industry directly responsible for changing the way people travel, share and sell their assets, and stay connected too.
Due to the significant growth of short-term rentals for both business and leisure travel, Michigan has had to “get onboard” with recognizing and regulating the growing industry preferred by some business and leisure travelers. According to articles published by MLive June 2017 and Crains July (2017) articles on the simple regulation and taxing of short-term rentals like Airbnb, Michigan has adopted some policies so that they too can benefit economically from the industry.
According to MLive, Michigan
- Houses nearly 4900 “hosts” on Airbnb alone
- In 2016, booking made on Airbnb were worth about $25.2 million to hosts
- 27,000 guests arrived in Detroit using Airbnb, an economic activity valued at $10.5 million dollars.
Taxes, if collected in 2016 on this activity, would have generated $1.5 million directly to the state. However, prior to July 1st, 2017, taxes were not collected on these activities. As of July 1st, 2017, rentals of 30 days or less will be automatically taxed 6 percent due to an agreement now between Airbnb and Michigan’s Department of Treasury.
An important competent, and one Michigan State University Extension tries to help local government and counties navigate, is establishing zoning ordinances and county accommodation taxes. According to the recent article by MLive, communities wanting to address county accommodation taxes would have to address their own agreement with Airbnb. Fortunately, Airbnb announced in 2016 a 31-page report that serves as a tool to help regulate short-term rentals for local governments. A portion of that policy tool specifically addresses tax collection.
Michigan State University Extension does its best to stay abreast of this growing industry and its impacts on tourism across Michigan. MSU Extension has a professional team of Land Use Educators and Tourism Educators working diligently across Michigan to build communities where people want to live, work, and play.
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