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November 23 2021

Michigan House Passes Short-Term Rental Legislation in Late-Night Session

By: Alexander P. Henderson

In the early morning hours of Wednesday, October 27, 2021, the Michigan House of Representatives passed House Bill 4722 (“HB 4722”), which significantly limits how local governments may regulate short-term rentals. The House Committee on Commerce and Tourism approved the bill on May 25, 2021. No legislative action had been taken on HB 4722 in the five months between when it was referred out of Committee and the legislative session when it was brought to a vote before the full chamber of the House. During the House session, which lasted from 1:30 p.m. Tuesday, October 26 until a few hours past midnight, the bill was read to the House for its second time, then amended with a substitute bill, and then the substitute bill was presented to the House for the bill’s required third reading before the full chamber could vote on it. The final result of the House vote was 55 in favor, 48 opposed, and 6 abstentions.

HB 4722 would amend the Michigan Zoning Enabling Act to establish the rental of a dwelling—including, but not limited to, short-term rentals—to be a residential use of property that is permitted in all residential zoning districts, and not to be considered a commercial use nor subject to any permit requirements different from those applicable to other dwellings in the same zone. The bill would not prohibit zoning ordinance provisions that regulate noise, advertising, traffic, or other nuisances related to the rental of a dwelling, but only if such regulations are applied consistently to owner-occupied residences as well.

The substitute bill adopted by the House adds several additional provisions to the version reported out of the Commerce and Tourism Committee. Under the substitute bill, local governments may limit the number of short-term rentals under a common owner to two or more. However, the bill loosely defines “common ownership” as “ownership in whole or in part by the same individual, individuals, or legal entity.” Consequently, it seems that an individual could potentially circumvent a limit on the number of short-term rental units under common ownership by forming business entities to own additional units. Although the substitute bill would allow local governments to limit the total number of units that may be used as a short-term rental in their jurisdiction, the bill requires that any such limit not be less than 30% of the total number of residential units in the municipality. This means that at least 30% of the residential units in each municipality could be potentially used as short-term rentals.

The new version of the bill contains an exemption for existing zoning ordinance provisions that regulate the rental of dwellings by overlay district without distinction between short-term rentals and rentals for longer terms if the ordinance provisions were in place as of July 11, 2019 and initiated by petition. This exemption is remarkably narrow and specific; it does not seem to further a distinguishable public policy purpose, but rather it appears to be a byproduct of political maneuvering among legislators.

Before HB 4722 can become law, it still must be passed by the Senate and then signed into law by Governor Whitmer. HB 4722 has been referred to the Senate Committee on Regulatory Reform, which approved a bill earlier this year that was identical to the previous version of HB 4722 approved by the House Committee on Commerce and Tourism. Governor Whitmer has not yet commented publicly as to whether or not she would sign the bill into law if it is passed by the Senate. The bill does not appear to have enough support in the legislature to override a veto.

If HB 4722 becomes law, it will have the effect of invalidating many regulations crafted and implemented by municipalities across the state to address issues presented by short-term rentals at the local level. The municipal law attorneys at Mika Meyers will continue to monitor developments and reports regarding HB 4722 and its potential impacts on local governments. Municipal officials should contact Mika Meyers for assistance with any questions or concerns about the effects of HB 4722.