Airbnb boom means mixed bag for Michigan communities

The lakefront near downtown Traverse City. | Sam Easter

Carole and Terry Tufts live in suburban Kentwood, just 20 minutes from downtown Grand Rapids, in a gray four-bedroom home.

Carole and Terry Tufts sit in their living room in their four-bedroom home in Kentwood. Three of those bedrooms are available on Airbnb | Sam Easter

There’s a plush floral couch in the living room, and a large dinner table where they host their four-child, 12-grandchild, two-great-grandchild family. Their lawn slopes down to a creek, with a park and playground just beyond. Terry cheerfully points out the neatly arranged plastic cereal bins under the counter, awaiting hungry guests.

And you can be one of them for just $30 a night.

The couple, who are ex-Baptist missionaries in their 70s, first listed spare bedrooms in their home — where they’ve lived 10 years — on Airbnb last July. Their retirement income was only barely keeping up with expenses. And without the $1,500 or so they now make every month from the hosting service, they’d have little room for the inevitable flat tire or other unexpected expense.

Carole Tufts prepares lunch in her and her husband’s four-bedroom home in Kentwood. | Sam Easter

“That [money] means we can travel,” Carole said. “That means we can help our kids if they need it — our grandkids. That means that we can go out to eat.”

“It’s just freed us up to not worry about every cent. We could have downsized, because we have a big home … but we have quite a big family, and so we wanted to still be able to have holiday parties and everything with our family here.”

The Tufts are model hosts for Airbnb, the San Francisco-based home-sharing service founded in 2008 that the company says has since grown to more than 6 million listings in 191 countries.

Carole and Terry Tufts in their kitchen in their four-bedroom home in Kentwood | Sam Easter

Along the way, the startup touts that it’s created financial opportunities for hosts like the Tufts, who say it contributes about one-third of their income. This Memorial Day weekend, thousands of guests will likely stay in rented homes like theirs.

The service touts itself as a hyper-convenient way for travelers to book a hotel alternative. Airbnb has a handful of competitors — like VRBO and HomeAway —  but safely dominates the home-sharing market.

Michigan government response

But in much of Michigan, what’s been a boon for homeowners has been a headache for policymakers.

In tourist hotspots like Traverse City, South Haven, Grand Haven, and even denser cities like Detroit, Airbnb and its competitors have raised questions about local identity as their spread threatens to reshape neighborhoods.

The State Theatre in downtown Traverse City. One community leader calls Airbnb’s presence there a “mixed blessing.” | Sam Easter

Ben Breit, a spokesman for Airbnb, says the company’s model “encourages guests to seek local … experiences and get to know new neighborhoods.”

But not everyone is convinced.

“For a lot of people in Traverse City, they want to know their neighbor,” said City Commissioner Michele Howard. “And that same small-town feel is exactly why people come to visit. The idea is people want to keep their residential areas residential, and they want visitors to not take over their area.”

Airbnb traces its official debut to just months after the beginning of the Great Recession in December 2007. That month, national unemployment reached 5 percent — a number that it wouldn’t reach again until late 2015.

In Michigan, the economic shock of the recession was particularly profound. Unemployment was at 7.2 percent in December 2007. By mid-2009, it crested at 14.6 percent, and remained above 10 percent through late 2011.

Airbnb headquarters | Steve Jurvetson, Wikimedia Commons

The downturn is an important part of Airbnb’s origin story. Global Policy Chief Chris Lehane said in 2016 that the company has provided a key “platform for the middle class” as Americans grappled with the lingering effects of the 2008 financial crisis. In 2012, company brass argued that the service helped owners keep their homes after the financial crisis.

But despite what Airbnb and its ilk can do for hosts, the business model has also been shown to drive a rise in housing costs. According to a working paper featured in April in the Harvard Business Review, Airbnb’s home-sharing growth “contributes to about one-fifth of the average annual increase in U.S. rents and about one-seventh of the average annual increase in U.S. housing prices.”

Edward Kung, an assistant professor of economics at UCLA and one of the co-authors of the paper, points out that the kinds of home-sharing that shift prices the most are those that take an entire home — like a full apartment — and remove it from the long-term housing market.

Edward Kung

He said that whether Airbnb is good or bad for a community can depend on which members of the community you’re talking about.

“There are winners and losers. So the hotel sector, you might think, are losers,” he said, referencing the well-documented competition Airbnb is giving its more traditional rivals.

“People who rent might be losers. People who own and might have spare [home] capacity … are winners. And tourists may be winners. It’s hard for me to say whether it’s an overall net positive or net negative.”

Winners and losers

But question of who benefits and who doesn’t is a big deal for communities that have big gaps between their wages and their housing prices.

According to the federal government, fair-market rent for a two-bedroom apartment in the Detroit metro area has gone up more than 21 percent since 2010. At the same time, median family income for the area has only gone up about 9 percent.

Lisa Cohen, a representative for Airbnb, pointed to a survey of housing experts from late 2016 that downplays the corporation’s effects on the rental market, with almost 60 percent responding that short-term room rentals like the Tufts’ home don’t have a “meaningful” impact on rents.

But the same survey said that more than 55 percent of experts thought whole-home rentals, like a full apartment, have at least a meaningful, if small, impact on prices.

Creative Commons

The company also passed along a report that downplays Kung and his colleagues’ research, noting that Airbnb growth appears to result in relatively fractional rent increases.

Kung pointed out, however, that other academics have reached similar conclusions about the positive relationship between Airbnb and rent — and that the startup is growing quickly.

Michigan impact

It’s difficult to quantify Airbnb’s Michigan footprint in detail because the company’s booking website doesn’t offer an easy means of counting the number of rooms in any given area.

Data provided by the company, however, show that hosts in Michigan earned a total of $78 million from about 600,000 guest arrivals across the state in 2018.

Wayne — the state’s most populous county — also was the most popular destination, hosting about 80,000 people in 2018 for $9.2 million in income for local hosts. Grand Traverse County was the second most popular, with $8 million in host income and about 53,000 guest arrivals.

Traverse City Commissioner Michele Howard | Facebook

But Howard, the Traverse City commissioner, calls that income a “mixed blessing.” At the margins, higher housing prices and lower supply ultimately could lead to an increase in homelessness, and students and young people could struggle more to find a place to live.

“And if (homes are) being bought up to turn into rentals, regular people can’t compete against investors from Chicago,” she said.

Policymakers share those fears literally around the world. In Dublin, The Guardian reports, there were 3,165 full properties available on Airbnb in mid 2018 — more than twice as many in the long-term rental market. The city is a place, the newspaper reported, where it’s said that “homeless families stay in hotels, and tourists stay in houses.”

In August 2018, Parisian officials announced levying more than $1.5 million in fines against rentals that had not registered with the government.

Paris | Creative Commons

However, not everyone is comfortable regulating home-sharing services.

Michigan is still grappling with the issue. A bill introduced by state Rep. Jason Sheppard (R-Temperance), which is now in committee, would reclassify “short-term rental” units as a “residential use of property and a permitted use in all residential zones.”

Jason Sheppard

It’s identical to bills introduced in 2017 that stalled in committee and would have hamstrung communities’ efforts to locally regulate short-term home rentals like Airbnb and its competitors.

In short, homeowners would be able to briefly rent out their properties as they see fit, without local zoning laws in the way. The bill carves out an exception for regulating things like “noise, advertising [and] traffic” — but cuts to the heart of an issue that pits private property owners against collective interests.

Sheppard’s office did not respond to a request for comment, but a staff member previously told the Grand Rapids Business Journal that the matter is “a property rights issue. If you buy a house, you should be able to do with it what you want.”

The Legislature also is weighing a suite of bills that would help regulate Airbnb-style rentals much more like regular hotels and motels.

Lilly
Jim Lilly

Many of those are dependent on the passage of House Bill 4554, which would create a statewide database of short-term rental properties and require owners to carry liability insurance. The bill has been lauded by leadership with the Michigan Restaurant & Lodging Association.

“Short-term rentals certainly have a place in our economy,” Lilly said in an emailed statement. “They allow residents and tourists to see places in our state that are not currently being serviced by traditional lodging facilities. The issue is allowing short term rentals to operate in a way that protects residential neighborhoods (including the rights of all property owners) while responsibly promoting tourism.”

Don’t regulate me, bro

But Airbnb has a well-documented history of avoiding regulation.

A Wired report described the company’s “guerrilla war” against local zoning, accommodation and tax regulation around the country, in which Airbnb has struck agreements with local governments to collect occupancy taxes. Those agreements often serve the company’s interests in making it difficult to find and regulate local hosts while forgiving back taxes.

airbnb
Airbnb headquarters | Wilkimedia Commons

Airbnb has at least three such contracts to collect taxes in Michigan: a statewide contract for the 6-percent Michigan use tax, and one each with Kent and Genesee counties for local accommodation taxes.

Genesee and Kent counties both provided to the Advance their agreements, which were finalized in May and July 2018, respectively.

The county documents, which are almost identical, both say that Airbnb can’t be audited for more than one 12-month period every four years, and both relieve the company and its hosts of any responsibility for back taxes.

Genesee County Administration Building | Facebook

Airbnb told Wired it’s eager to pay their “fair share,” and that its tax agreements around the country are aimed at tax collection, not regulation.

Ron Leix, a spokesperson for the state Department of Treasury, said that Michigan’s agreement is shielded by taxpayer privacy law. The company did not respond to a question about its agreement with the state of Michigan.

Money-saver

It’s easy to see why travelers often choose home-sharing.

A hotel room in Grand Traverse County and neighboring areas rarely costs less than $50 on a weeknight. For upcoming weekends, those same prices often soar past $100 — or even $200 in Traverse City itself.

Sleeping Bear Dunes | Susan J. Demas

But Airbnbs in northern Michigan can often be found for less than $40 per night — if a renter books early enough — and sometimes even below $30 on a typical weeknight.

In fact, a 10-person coastal cottage near Frankfort, about an hour’s drive from Traverse City — and firmly in Michigan’s beach-vacation mecca — is listed at only $19 per night. As of this writing, travelers could still book a mid-June weekend stay for $70 per night in a room in a private home on the Old Mission Peninsula, minutes from Traverse City itself.

A crowded street in downtown Traverse City. | Sam Easter

Justin Dumois was on a mission trip to Traverse City in early May with more than a dozen people, staying at a home hastily booked through an Airbnb competitor that very week. It was midday on a Saturday when he stopped to talk, and already Traverse City’s Front Street — lined with restaurants and shops — was teeming with people.

“It was really quick and easy for us to get a hold of and find spots for 15 people,” he said. “It was cheaper, definitely. Because we’ve got —

“Fifteen people,” his friend Audrey Miller interjected. “That’s like, how many hotel rooms?”

“It’s on this little lake, which is gorgeous,” he continued. “The view is awesome; the neighborhood is pretty quiet.”

Traverse City | Jim Sorbie, Flickr

Lawsuits in other cities might predict where regulators will go next. In New York, a major Airbnb market, there’s a bitter legal fight underway over a law that would require Airbnb to provide a list of hosts to the city. That list would allow the city to more effectively police which hosts are complying with local law, which prevents hosting in many buildings.

The New York Times reports that if it were implemented, as many as 50,000 homes could be delisted from the service.

Detroit leaders are still weighing the city’s path forward. The city had previously clamped down on overnight rentals in one- and two-family homes in early 2018. That move reportedly caught Mayor Mike Duggan  — a supporter of the serviceby surprise. The ban’s enforcement was suspended soon after.

Detroit Mayor Mike Duggan
Mayor Mike Duggan | Andrew Roth

The city’s corporation counsel, Lawrence Garcia, said in an emailed statement that the city has since been working toward a new short-term rental policy since early 2018, with one likely to be enacted early this spring.

Until then, “All of Detroit’s other regulations regarding zoning, off-street parking, noise, nuisance, disturbing the peace, etc, are still in effect and enforceable.”

“The city will not stand in the way of new business models that bring more visitors to Detroit, but at the same time, the city is aware of the need to protect the interests of Detroiters with traditional living arrangements,” Garcia said.

Carole Tufts sits in her Kentwood home in one of the bedrooms guests can rent on Airbnb | Sam Easter

But for many Airbnb hosts who depend on the service — be it in Detroit or Traverse City or elsewhere — the answer is clear cut. Carole Tufts says her Kentwood rentals aren’t just an important part of her own income, but a valuable way to bring tourists to town — not to mention functioning as healthy capitalistic competition for hotels.

“That is why the free market works,” she said.

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