HB 5438: A Summary
In April 2024, State Rep. Andrews (D-St. Joseph) presented HouseBill (HB) 5438 along with co-sponsor Jenn Hill (D-Marquette), which is currently being considered. MiSTRA has been following this issue closely as a key priority for our newly forming organization. The proposed legislation could significantly impact homeowners, businesses, and communities involved in the short-term rental market. Here’s what you need to know:
Key Components of the Proposed Legislation:
- Licensing and Registration System:
- A statewide licensing and registration system is proposed for all short-term rentals. This system aims to gather data on the number and location of STRs and provide the infrastructure for maintaining a registry of STR across the state.
- Taxation and Revenue:
- The legislation introduces a new taxation framework for STRs through a new 6% tax, which would be in addition to the existing general use tax. It suggests implementing a tax structure similar to that of hotels and resorts, potentially leading to a triple tax scenario for STR owners who already have an additional assessment or tax on top of the general use tax. The goal is to use these funds to support local infrastructure and tourism marketing.
- Use of Funds:
- A portion of the revenue generated from STRs could be redirected to address broader community issues such as housing and childcare, aligning tourism’s economic benefits with community development needs.
- Regulatory Framework:
- The bills propose to provide a standard definition of and create a centralized registry for STRs to standardize the record-keeping process. This is intended to replace various current local systems and aim for a more uniform regulatory approach across the state. The bill includes booking platforms’ responsibilities to aid in achieving this aim.
- Safety:
- Establishing standards to protect the safety and welfare of guests through mandating the use of Bed & Breakfast Building code and includes specific postings and notices to be provided to guests are included provisions in the bill.
- Zoning and Land Use:
- While the bill prohibits the banning of short-term rentals, conspicuously absent is any attempt to answer the question that is being answered in the courts across the state at great cost to municipalities and STR owners, codifying the nature of STR in terms of the impact on land and resource utilization. Courts have found STR to be commercial as well as residential, depending on various factors across multiple legal suits; without a state-level definition, this will continue at a great cost to local municipalities and STR owners.
Concerns and Considerations:
- Tax Burden: There is concern that the proposed tax structure may disproportionately impact STR owners, placing a significant financial burden on them compared to other tourism-related businesses.
- Operational Details: Details regarding the operation and management of the proposed registry remain unclear. Critics argue this could lead to less flexibility for local governments and potential confusion regarding oversight responsibilities.
- Impact on Local Control: While this bill generally appears to favor local control, the taxation details in the proposed slate of bills appear to continue to fund the convention and visitor bureaus who can opt to use those funds for infrastructure – or not. Those funds are not granted to the local government. The absence of clarity on the land use question – the subject of failed HB4722– means that local municipalities and owners will continue to require legal means to try to answer this question where consensus cannot be reached.
MiSTRA’s Position:
The Michigan Short-Term Rental Association (MiSTRA) is actively involved in discussions regarding these bills. MiSTRA seeks to promote responsible and safe renting practices, operational ease for owners, operators, and regulators, and preservation of the benefits of short-term renting while supporting sustainable community development. We do not believe the bill, as proposed, achieves these aims.