Airbnb rentals at issue in New Buffalo, Lake Geneva and other Chicago-area vacation destinations
The conflict is heightened, says Binzer, by the fact that the gains are mostly in dollars, a tangible thing, while some of the losses “are hard to quantify but are very real: the loss of the kind of community in which people enjoy live, where you know the people who are in the houses around you. They are not passers-by who will be replaced next weekend by someone else. Short term rentals are usually less than a month, but usually a few days to a week.
Granicus has worked with at least 300 municipalities struggling for short-term rentals, Binzer says, and in recent years the states around Chicago (Wisconsin, Michigan and Indiana) have made up a growing share of the portfolio, as “many places within driving distance of Chicago,” he says, have signed on to help put a cap on short-term rentals.
From a handful several years ago, it has grown to about 38 governments in those three states, Binzer says, though he declines to say which cities are his clients. The spread of short-term rentals has also sparked crackdowns in places like Cape Cod in Massachusetts and Barcelona, Spain, which banned short-term rentals of single rooms this summer.
Three years ago, when Lake Geneva officials approved a $2,000 fee for an annual short-term rental, a city administrator said the amount would cover program administration costs, including new hires needed. The operators said it was an excessive charge.
The Milwaukee-based Wisconsin Institute for Law and Liberty, or WILL, has sued for the fees, which Luke Berg, WILL’s assistant attorney, says is 20 times higher than those charged by any other municipality. The rules also included a provision for warrantless searches and a requirement for each short-term rental landlord to install a safe that city staff could access at any time.
“They violated the Fourth Amendment,” which protects against unreasonable search and seizure, Berg says. The rules were dropped and the fee reduced to $750.
That’s not low enough for WILL, who is now representing a trio of short-term rental landlords in a case challenging the charges. “Most cities in the state charge between $100 and $200 for a license,” Berg said. “Some charge more. We want Lake Geneva to provide evidence that can justify charging $750.
License fees are $25 in Egg Harbor, Wis., 225 miles northwest of Lake Geneva. Next year it goes up to $50. In this Door County village, the owner of a short-term rental must either live within 75 miles of the property or have a registered manager within 25 miles.
“We are a small village. We don’t have a police force,” says Megan Swayer, administrator for Village of Egg Harbor, population 252. “We need to know that if there’s a problem, someone can be there in about an hour. .
Like all towns in the Door County tourist area, Egg Harbor charges a 5.5% tourist tax on short-term rentals, such as hotels and other accommodations. Thus, the owners of short-term rentals cannot be said to be embezzling money from the city without helping to support it, an accusation that surfaced repeatedly at New Buffalo meetings.
Putting owners of short-term rentals on a level playing field when it comes to taxation echoes a problem New Buffalo Mayor John Humphrey has with short-term rentals. In New Buffalo now, a few dozen licensed short-term rentals are in areas of the city set aside exclusively for residential use. It’s essentially illegal commercial use of residential property, Humphrey told Crain’s in September. It proposes zoning changes that would prohibit new permits in residential areas. In commercial areas, permits would reopen with the end of a moratorium on new permits due to expire in December.
Humphrey declined to comment for this article.
When Heather Gradowski was growing up in northwest Indiana in the 1970s and 1980s, her family often spent time in New Buffalo and other crescent towns along the southeastern edge of Lake Michigan that stretches now called Harbor Country.
New Buffalo, says Gradowski, “has always been this beautiful little town that has become a tourist town in the summer.”
A big difference now is that short-term rentals are apparently all over the city of 1,800 permanent residents 70 miles from downtown Chicago, and in the pandemic era, when people can work remotely and have need to get away, it’s not just in the summer when the population swells.
Within New Buffalo’s 3 square miles are 148 short-term rentals, City Manager Darwin Watson said at a town meeting in October. He said it’s equal to 1 for 20 lots. In a Chicago single-family neighborhood, that would be about a two-block short-term rental.
Watson said 85 additional permit applications are awaiting the end of New Buffalo’s moratorium, first declared in May 2020 and recently extended through December 2021, while city officials consider passing new ordinances that would limit the number of permits. If everything were allowed, Watson told the meeting, 1 in 13 homes in New Buffalo would have a short-term rental permit.
“When those numbers go up, it means there are fewer opportunities for people to live here,” Watson said at the meeting.
Gradowski, now a Coldwell Banker real estate agent, and her husband, Chad, own a short-term rental property in New Buffalo, about 10 miles south of their home in Saywer, Michigan.
“I have skin in the game,” says Gradowski. She says the city needs “common sense bylaws that keep everyone safe,” including enforceable limits on occupancy, parking and noise.
At the same time, says Gradowski, “I feel like there’s a message going out that if we don’t get this under control, the whole city of New Buffalo will turn into short-term rentals.” I think it’s not very likely. There’s a lot of hyperbole in there.