“We Might Have to Consider Selling the House”: How Airbnb Short-Term Restrictions Affect Ann Arbor
With the number of vaccines steadily increasing in Michigan, Sporting Director Wade Manuel announced on March 9 that he was confident that University of Michigan fans will be admitted to the Big House again this fall. And with all the soccer games, hatchbacks, a sense of camaraderie, and an influx of people come to Ann Arbor.
Last season’s Notre Dame-Michigan game drew a record 2,390 Airbnb guests for Ann Arbor hosts and earned Airbnb hosts a whopping $ 735,000 in additional income. Airbnb data also suggests that Airbnb guests gave the city an economic boost, with guests spending an average of $ 110 per day in local restaurants and shops.
However, as this upcoming football season begins, these short-term Airbnbs could be a thing of the past.
To improve the accessibility and affordability of Ann Arbor homes, Ann Arbor City Council passed an ordinance on September 8, 2020 banning short-term rentals in the Ann Arbor neighborhoods, which included many of the Airbnbs. However, the ordinance, which passed 7-4 in favor, still allowed Airbnbs and other short-term rentals in mixed-use – that is, both commercial and residential – zoned areas, as well as residential areas, as long as the property was condominium during the rental.
In 2018, the University of Michigan Eviction Poverty Report reported that one in nine Washtenaw Counties had been evicted, with only 2% being able to afford a lawyer to represent them in court. In 2015, urban planning firm CZB reported that Ann Arbor would need to create around 140 new affordable housing units per year by 2035 to prevent permanent economic division and stratification.
Councilor Elizabeth Nelson, D-Ward 4, voted for the ordinance, saying the restrictions should improve access to housing for university students and Ann Arbor residents. Nelson said that short-term rents tend to fall near downtown and the ban will allow permanent Ann Arbor residents to live closer to those locations.
“Airbnbs have a profit opportunity for locations near the city center,” said Nelson. “We want (residents) to be able to walk and cycle to the places where they work or go to school.”
The Sept. Ordinance, which came into effect on March 1st, had no impact on long-term rentals. This was fortunate for LSA newcomer Aishani Agrawal, who switched to a long-term Airbnb after the university announced in November that it would reduce the occupancy of student dormitories for the winter semester of 2021. Agrawal said the Airbnb was cheaper than the dorms or an off-campus apartment and her experience with the host was incredibly positive.
“It wasn’t a stressful experience, the host was very nice and accommodating,” said Agrawal. “We don’t have to pay for utilities and the prices are cheaper if you live in an Airbnb. There were no downsides.”
Carol Skala owns and operates an Airbnb property in a residential area of Ann Arbor in addition to her personal residence. As the pandemic progressed, Skala said the number of medical patients staying on their property has increased as many of them had to be quarantined for 14 days before being admitted to Michigan Medicine. With the short-term rental ban, Skala said she wasn’t sure these people would have that option in the future.
“We are an accommodation option for visitors to Ann Arbor City, and those visitors deserve to have those options,” said Skala. “As a medical community, we had several families over the past year who went to university (hospital) and had to be quarantined before being admitted, and you can’t do that in a hotel.”
Similarly, short-term rentals offered some students the opportunity to quarantine themselves outside of university facilities while COVID-19 cases occurred on campus.
LSA freshman Grace Martin stayed at an Ann Arbor Airbnb with her parents after being exposed to COVID-19 in UM dorms. Martin said the Airbnb experience had a positive impact on her sanity and productivity as she got through the end of her 14-day isolation.
“It’s pretty important to have an entire house versus just a single room, especially when you’re doing everything remotely,” Martin said. “Everyone has their own space.”
Martin, who is originally from Maryland, said she would stay at an Airbnb again because of the relatively cheap space it provided. Martin’s parents have already been looking for accommodation for the parents’ weekend next fall and have found that many hotels are charging high prices.
“My parents have already looked at hotel rooms and they were (very expensive),” said Martin. “Airbnb was the cheaper option for more space.”
However, Amir Fleischmann, Rackham student and secretary of the Graduate Employees’ Organization, said the short-term rental and Airbnb bans are necessary to resolve the current housing problems Ann Arbor is facing. Fleischmann said graduate students sometimes spend up to 50% of their paychecks on rent, and banning short-term rentals so they can be sold in affordable housing could help lower that percentage and reduce overall homelessness in Ann Arbor.
“It is a fiction that the market is able to provide housing for the amount of people living in this city, so the government really has to intervene,” said Fleischmann. “Right now the situation is so bad that we need every possible rental unit and it is totally unacceptable that hundreds of … units may be taken off the (permanent housing) market to make money for Airbnb owners.”
However, Skala said she doesn’t think selling her property or converting it to a long-term rental would add to the accessibility of homes. Skala said she has invested nearly $ 100,000 since buying her property two years ago, and the price she would have to sell or rent to break even was not considered affordable.
“You have not been able to come up with a visionary development plan for affordable housing in Ann Arbor, and that is exactly what the council has to do,” said Skala. “If they think they’re forcing us to sell our house or rent it out long term (which will create affordable housing), it won’t be an affordable rent because we spent so much money repairing these houses.”
Nelson, on the other hand, said the ability to rent your home increases property values in the Ann Arbor residential areas, making it more expensive for a potential Ann Arbor resident to purchase. Nelson said while the homes sold and rented out due to the ban were unlikely to create affordable housing, the ban would lower overall residential property prices in residential areas, thereby improving accessibility.
“I’ve heard Airbnb investors say …” Well, my house is so valuable anyway, “but that’s not the point,” Nelson said. “The point is, house prices are escalating and (short-term rents) are part of the reason they are escalating.”
John Cameron, associate professor of real estate, construction and business law at the university, said restrictions similar to those imposed by the city council are being implemented in states like Texas and California. Cameron also said that bylaws in some homeowners associations make short-term rentals and Airbnbs difficult to operate, regardless of zoning and ordinances.
“This is not something that is unique to Ann Arbor or Michigan,” said Cameron. “The problem is further complicated by restrictive agreements that various homeowners associations have in their declarations and in their statutes that prohibit short-term rents regardless of what the zoning might look like.”
Although some calls have been made to Airbnb investors to legally challenge these new restrictions, Cameron said he was not confident that these claims would succeed.
“A person’s property cannot be taken without due process. It could be argued that this … eliminates one type of use that a person could use their property for,” said Cameron. “It’s not impossible for a claim to be made … (but) I wouldn’t be wildly optimistic if that claim is successful.”
Changes to the ordinance, pending review by the city council, would allow Airbnbs that were in place prior to the restrictions to continue to act as short-term rentals.
“There is a potential challenge to the Grandfather prospect and I wouldn’t just turn it down right away,” said Cameron. “It may not work, but I think there is a claim that has to be made there.”
For homeowners like Skala, these changes may be their last chance to keep their Airbnbs running as short-term rentals.
“The mayor has come back and requested a language change that will allow those of us who have fallen into this zone restriction status to continue doing what we do,” said Skala. “If the amending language doesn’t go through, we’ll either just have to rent by the month … or we may have to consider selling the house.”
In an email to The Daily, Airbnb representative Sam Randall wrote that Airbnb was grateful that the city council was considering changes to accommodate hosts like Skala who invested in Ann Arbor real estate. Randall wrote that Airbnbs was a major contributor to Ann Arbor tourism and was a positive contributor to Ann Arbor’s economy.
“Airbnb has been a major driver of tourism for Ann Arbor,” said Randall. “Providing expanded travel opportunities for families visiting college students, graduation and home game weekends, while putting valuable extra income in the pockets of Ann Arborites.”
Ann Arbor has postponed enforcement of the new short-term rental restrictions, which were submitted before March 1, pending the city council’s final decision on the proposed changes. Current short-term Airbnb owners and other short-term landlords have until March 31st to apply for temporary legal status to continue rentals.