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Ann Arbor Short Term Rental Regulation: A Guide For Airbnb Hosts

Ann Arbor, Michigan

What are short term rental (Airbnb, VRBO) regulations in Ann Arbor, Michigan?

With its vibrant college town atmosphere and proximity to nature, Ann Arbor has become an increasingly popular destination for travelers looking to experience all that southeast Michigan has to offer.

As demand for short-term accommodations has grown via sites like Airbnb and VRBO, the city of Ann Arbor has implemented regulations to balance this emerging market with community needs.This article provides an in-depth look at the current rules, requirements, and considerations for operating short term rentals in Ann Arbor.

We will cover topics such as zoning restrictions, licensing, taxes, enforcement practices, and first-hand perspectives from local hosts. Whether you are an existing operator looking to ensure full compliance or an interested entrepreneur exploring this business opportunity in Ann Arbor, this guide aims to provide comprehensive information on successfully navigating short term rental regulations.

With clear explanations of ordinance language paired with real-world contexts, our goal is to create an accessible reference that empowers property owners to make informed decisions. The regulations reflect Ann Arbor's efforts to allow short term rentals in appropriate zones while also preserving neighborhood character.

This nuanced approach has evolved over recent years and will likely continue adapting. By understanding the ins and outs of the current framework, hosts can pursue this income stream while respecting the community.

Starting a Short Term Rental Business in Ann Arbor

Ann Arbor presents a unique opportunity for those interested in the short term rental business. As a popular destination for University of Michigan visitors and travelers, demand for short term accommodations is high.

However, hosts must follow specific regulations and licensing requirements to legally operate.While short term rentals are allowed in Ann Arbor, not every property qualifies. The city zoning code designates eligible zones, with dedicated rentals (entire home/apartment rentals) limited to mixed-use or commercial areas.

Renting a spare room or accessory dwelling is possible in additional residential zones if it is owner-occupied. Review the zoning code carefully before assuming your property can operate as a short term rental.All hosts must obtain an annual short term rental license, which allows the city to enforce regulations related to safety, taxes, noise and nuisance issues.

The license costs $500 per rental unit per year, and the city may deny applications if requirements are not met. Licenses must be displayed publicly in the rental unit.As part of the licensing process, hosts must submit documents like floor plans, site maps, and parking arrangements.

The city checks that the unit meets codes for things like smoke detectors, carbon monoxide alarms, and maximum occupancy. Hosts also must show proof of insurance that specifically allows short term rental use.

Short Term Rental Licensing Requirement in Ann Arbor

Operating a short term rental in Ann Arbor requires hosts to obtain an annual license for each rental unit listed. This licensing system allows the city to regulate issues like noise, trash, parking, and neighborhood impact that short term rentals can create.

The annual licensing fee per unit is $500, paid at the time of application or renewal. Licenses must be renewed each year and the city may deny renewals if rules were violated. Approval also requires submitting documents like floor plans, site plans, and proof of insurance.

Ann Arbor's short term rental license has eligibility criteria that not all properties meet. Dedicated short term rentals, where the entire home is rented, are only allowed in mixed-use or commercially zoned areas. These cannot be in pure residential neighborhoods. Renting a room or portion of an owner-occupied home is allowed in residential areas if the host lives on site.

The licensing process aims to ensure short term rentals meet regulations on safety, taxes, nuisance issues, and more. Hosts should fully understand the requirements before listing units online or accepting reservations. Fines and revoked licenses can result if rules are violated. Consulting the planning department early when starting a business can clarify what's permitted.

Required Documents for Ann Arbor Short Term Rentals

Ann Arbor has a rigorous application process to get approval for a legal short term rental license. Hosts need to submit detailed paperwork that verifies they meet city requirements on zoning, safety, taxes, and neighborhood impact mitigation.The city staff thoroughly vets each license application.

They will reject applications that do not adequately prove eligibility or meet standards. Therefore, hosts should be thorough and clear when submitting the following required items:Proof of Ownership and Residency

  • Deed or title showing the applicant owns the property
  • If renting, a lease agreement plus owner's notarized approval
  • Permanent resident's driver's license or other residency verification

Site Plans and Unit Details

  • Interior floor plans with exact room dimensions
  • Parking map showing available on-site spots
  • Exterior site drawings showing entrances
  • Photos of each room, yard, parking
  • Maximum guest capacity per unit

Safety and Insurance

  • Up-to-date certificate of occupancy
  • Annual fire inspection report
  • $1 million short term rental insurance liability rider

Signed City Agreements

  • Short term rental ordinance compliance contract
  • Accommodations tax payment terms

Submitting complete, accurate documents is crucial for new and renewing license applications. This shows the willingness and ability to follow Ann Arbor's tight regulations. It helps prevent rejection and delays in operating a legal, complaint short term rental business.

Ann Arbor Short Term Rental Taxes

Operating a short term rental in Ann Arbor involves paying certain taxes that hosts must factor into their business costs and rental rates. Staying compliant on taxes is crucial to avoid penalties from the city and state government.

The main taxes for Ann Arbor short term rental hosts are:

Accommodation Tax

Ann Arbor charges a 5% accommodation tax on all short term rental revenue. This must be paid monthly by hosts based on the previous month's bookings. The tax is paid directly to the city.

Income Tax

Short term rental profits are subject to federal and Michigan state income taxes. Hosts must claim rental income on their annual tax returns. Expenses can be deducted to calculate net rental profit subject to income tax.

Sales Tax

Michigan requires hosts to register with the Department of Treasury to collect 6% Michigan sales tax from guests. This sales tax is paid on the room rate only, not other ancillary fees. Hosts must file regular sales tax returns, usually monthly or quarterly.

Platforms like Airbnb handle sales tax collection automatically. For other platforms like Vrbo, hosts must collect and remit taxes independently. This can be simplified by using tax remittance services designed specifically for short term rental hosts.

Michigan Wide Short Term Rental Rules

Unlike some states, Michigan currently does not have any statewide laws specifically regulating short term vacation rentals across the entire state. Regulation is handled at the local city and county levels.However, a bill introduced in the Michigan legislature in 2022 aims to limit local control over short term rental regulations.

House Bill 4722 would ban cities and towns from restricting short term rentals to less than 30% of total housing units in their jurisdiction.

Supporters of the bill like the group Michigan Realtors argue this will provide clarity and consistency for short term rental operators across the state.

Opponents such as State Senator Jeff Irwin counter that local municipalities need flexibility to regulate short term rentals to address concerns like parking, trash, noise, and housing availability for residents. Cities like Ann Arbor have implemented tight regulations to balance neighborhood livability with the economic benefits of short term rentals.

If passed, House Bill 4722 could force Ann Arbor to loosen some existing policies like the ban on new dedicated short term rentals in residential zones enacted in 2021. However the 30% threshold would still allow the city to regulate issues such as licensing.

The legislative debate over state versus local control of short term rental rules seems likely to continue into 2023. As of late 2022, House Bill 4722 was referred to the Committee of the Whole in the Michigan Senate for further consideration.

Does Ann Arbor Strictly Enforce STR Rules?

Ann Arbor takes a stringent approach when it comes to enforcing regulations around short term rentals within city limits. The city is known for having some of the most restrictive policies in comparison to other college towns.

Rules cover aspects like licensing, taxes, zoning, occupancy limits and more.Enforcement comes largely through audits and fines for those found to be in violation. Frequent violations can also lead to revocation of a short term rental license, essentially shutting down operations.

The city took direct action in 2021 by banning dedicated short term rentals (entire home rentals) in residential zones not occupied by the owner. This ban took effect March 1, 2021 and eliminated a significant number of short term rental properties.

The strict oversight results in hosts describing fines for infractions in online forums. Many ask for guidance on qualifying for licenses given the narrow eligibility criteria. Some even admit to renting unlawfully despite understanding the repercussions.In summary, Ann Arbor's stringent enforcement aims to limit the spread of short term rentals, especially those operated solely as a business venture.

The city utilizes fines, license removal and zoning bans as deterrents. Still, compliant short term rental operators manage to conduct business by closely adhering to the numerous regulations. Careful review of all licensing, tax and operational rules is a must for hosts.

How to Start a Short Term Rental Business in Ann Arbor?

Launching a successful and compliant short term rental business in Ann Arbor requires careful planning and preparation. As an experienced host, I'm going to walk you through the key steps to get your rental up and running smoothly.

Choose the Right Property

The first crucial decision is selecting the right property to rent out. Review Ann Arbor's zoning code to understand which areas permit short term rentals. Certain zones only allow shared space or owner-occupied rentals, while others permit whole home rentals. Consider proximity to downtown/campus, parking availability, and your renovation budget.

Apply for Your Rental License

All short term rentals in Ann Arbor need an annual $500 rental license per unit. This application process ensures your property meets safety codes and regulations. Be prepared to submit documents like floor plans, site maps, and insurance information. I can help guide you to make sure your application is complete.

Set Up Your Rental Listings

Now the fun part - setting up your online listings! Professional photography, detailed descriptions, and competitive pricing will help your listing stand out. I'll optimize your listings so they rank highly in search results. Consider cross-listing on multiple platforms like Airbnb, VRBO, and Booking.com to maximize bookings.

Welcome Your First Guests!

Once licensed and listed online, you'll start to receive booking inquiries. I'll personally help you confirm reservations, prepare for check-ins, and provide 5-star hosting. My co-hosting services make hosting smooth, allowing you to simply sit back and collect rental income checks!

Who to Contact About Short Term Rental Regulations and Zoning

Contact the Planning and Development Services team:

planning@a2gov.org or 734-794-6265 regarding short-term rental zoning and license questions.

Contact the Treasury Office:

treasury@a2gov.org or 734-794-6140 for information on accommodation taxes.

What Airbnb Hosts Think About Ann Arbor Regulations

Ann Arbor hosts have mixed opinions on the city's extensive short term rental regulations. While some view the strict oversight as necessary to maintain neighborhood character, others see it as overly burdensome.

On discussion forums like Reddit and BiggerPockets, Ann Arbor investors describe frustrations navigating the tight eligibility restrictions, special licensing, and taxes. Getting a short term rental business off the ground here requires patience and meticulous attention to detail.

"The $500 licensing fee isn't bad, but providing all the required documents like custom floor plans is a pain," one host vented after having their first license application rejected.Hosts also trade stories of enforcement crackdowns and rental suspensions for minor violations.

Fines can be steep. One host described getting "slapped with a $750 fine just because my trash cans were left out too long."However, properly licensed hosts report strong local travel demand, especially during University of Michigan events. As one wrote: "Football weekends are an absolute goldmine."

Reveal your property’s rental profitability

Buy this property and list it on Airbnb.