New York City, Detroit and Honolulu don’t share much in common, but all three essentially ban short-term rentals, such as those supplied through Airbnb and VRBO. In Michigan, more than a dozen cities make short-term rentals in residential zones illegal. One county in the state’s Upper Peninsula even bans short-term camping, outlawing property owners from accepting payment from someone camping on their vacant land.
These bans are inappropriate. They violate property rights, preventing people from using their homes, condos, apartments or land how they see fit. No one is harmed when property owners agree to rent their space, so there is no justification for state intervention.
Overregulation of Airbnb, VRBO and other short-term rentals is also bad for the economy. It means less tourism, higher prices for vacationers, more inconvenient stays for families and less capital investment into communities and into improving properties.
One can, nevertheless, sympathize with some of the complaints and arguments against short-term rentals. Few buy a home in a quiet residential neighborhood expecting to live next to a constant flow of vacationers. Some communities didn’t expect to become vacation destinations and may feel taken over by rental properties and out-of-town investors. School districts may face enrollment declines as family homes are replaced by investment properties for vacationers.
But there are two key points to keep in mind regarding these complaints. First, private property is private property. As long as someone is not violating the rights of others or endangering them, he or she should be free to do with their own property as they wish. Second, these arguments apply almost equally to long-term renters or regular homeowners or traditional businesses. In other words, banning short-term rentals will not solve these problems.
This is why local governments and city councils should not be allowed to outright or effectively ban short-term rentals. Government should not be micromanaging the private property owners in this way.
This does not mean, however, that government officials can do nothing to regulate property use. For decades, local municipalities have used zoning laws in order to try to plan out the design of communities. Historically, zoning has been used to protect property values, which disproportionately benefits the wealthy, while making it harder for lower-income residents to buy property in certain cities or neighborhoods. Today, these regulations range from specifying what types of structures can be built to banning all renters to substantially raising the costs of new construction or remodeling. The general consensus from economists is stricter zoning rules means less investment, fewer places to live and higher housing prices.
So how should the government balance this issue?
The first step should be to prevent local municipalities from banning short-term rentals wholesale. Many states, sometimes by judicial orders, prevent their cities from banning long-term rentals, and they should follow that same path here. That’s a route Arizona took in 2016. It’s also important to ensure that cities cannot overregulate short-term rentals in a way that essentially bans them.
The second element of a balanced approach is to continue to allow local governments to regulate property use through zoning laws. There are important safety codes and rules that cities have that they should be enforcing — especially in areas with a lot of vacationers. If cities are concerned about the use of short-term rentals, they should have these types of regulations that could apply equally to all types of rental arrangements.
In Michigan, bills introduced in the state House and Senate strike a middle ground appropriately. While they ban the bans by not allowing municipalities to prohibit short-term rentals, they explicitly allow cities to enforce ordinances related to noise, traffic, advertising, the number of occupants and other nuisance-related issues. Importantly, municipalities can enforce inspections or any other regulations provided they are done in a manner that treats short-term rental properties the same way that they do long-term rentals and other homes.
Many local government officials oppose this law. Most people, especially public officials, disagree with anything that removes even a little bit of their power. One city manager testified that, “The backbone of our civilization is zoning.”
But elected officials have a responsibility to all of those they govern. It’s their job to protect private property rights and to protect public health and safety. This can be done effectively by balancing the varying interests of property owners, vacationers and the community.