The Short-Term Rental Economy in Michigan: Implications, Policy Options & Potential Solutions
DOWNLOADJuly 30, 2025 - Yuxin Shen; Tyler Augst; Mark Skidmore, Ph.D.; and Erika Rosebrook, Ph.D.
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EmailThe rapid expansion of the short-term rental (STR) economy presents both economic opportunities and policy challenges, requiring a careful balance between economic growth and regulation. While STR platforms such as Airbnb contribute to local tourism economies and provide additional income for property owners, they have also exacerbated housing shortages, increased rents, and raised affordability concerns. The impacts of STRs vary by region and community, differentially affecting housing markets, urban development, and local policy responses.
Key Findings
Prevalence and Growth
The STR market in the United States was valued at $100.8 billion in 2022 and is projected to reach $228.9 billion by 2030, with an annual growth rate of 10.8%. Michigan has seen particularly strong STR expansion in rural and waterfront communities, such as Traverse City and Frankfort.
Housing Market Impacts
STRs may contribute to rising rents and home prices, especially in supply-constrained markets. The impact may be particularly significant for larger, family-sized rental units that are converted to short-term use.
Regulatory Fragmentation
Michigan lacks common requirements such as universal licensing, tax compliance standards, and data obligation for STR platforms. Consistency statewide along these lines could help improve transparency, thus empowering local governments to tailor regulations and enforcement strategies based on local housing conditions and needs.
Community-Level Externalities
STRs introduce neighborhood disruptions, such as noise, parking shortages, and declining housing availability for long-term residents. STR regulations vary widely across Michigan local governments, contributing to compliance challenges.
Policy Trade-Offs
While restrictive STR policies may help stabilize housing markets, they risk reducing tourism-driven economic benefits. Regulatory strategies include zoning-based restrictions, licensing caps, occupancy limits, and tax policies that may help to mitigate negative externalities while preserving STR-related economic activity.
