If you’re thinking about renting your Ann Arbor home on Airbnb or another short-term rental platform, you’ll need to do your homework before listing it online. The city has some of the strictest short-term rental (STR) laws in Michigan, and operating without following the rules can lead to steep fines, loss of your license, and even a ban on hosting altogether.
Ann Arbor’s Strict Short-Term Rental Laws
Under Ann Arbor’s ordinance, a short-term rental is defined as any dwelling rented for thirty consecutive days or less to someone who isn’t the principal resident. The city allows three types of STRs. Non-principal residence rentals, entire homes where the owner does not live, are permitted only in mixed-use or commercial zoning districts. Owner-occupied whole-home rentals, where you rent your primary home while you’re away, are allowed in both residential and mixed-use zones. The third category, homestays, allows you to rent out part of your primary home while you remain on-site, and is also permitted in residential and mixed-use zones. Accessory Dwelling Units (ADUs) are not eligible for STR licenses, and since March 1, 2021, non-owner-occupied whole-home rentals in residential neighborhoods have been banned.
Anyone operating an STR in Ann Arbor must obtain a city-issued license for each unit they rent. The annual cost is $500, and the fee is non-refundable even if your application is denied. The application process is documentation-heavy, requiring proof of principal residence, floor and site plans, parking information, a certificate of occupancy, a recent fire inspection, proof of at least $1 million in liability insurance, and a signed compliance agreement. Processing can take up to three weeks, so it’s best to plan ahead if you want to host during a specific season or event.
How to Get Licensed
Once licensed, hosts are required to display their license number and maximum occupancy in every listing, whether on Airbnb, Vrbo, or another platform. Hosts are also held accountable for guest behavior, which means noise complaints, improper trash disposal, and parking issues can quickly become problems for you. The city takes enforcement seriously, and violations can jeopardize your ability to continue operating.
Don’t Forget About the Taxes
Taxes are another key part of STR compliance. In addition to reporting rental income on your state and federal tax returns, Ann Arbor hosts must pay a 5 percent city accommodations tax each month. Michigan also imposes a 6 percent use tax on stays of fewer than 30 days. Airbnb automatically collects and remits this state tax, but if you use other platforms or book guests directly, you may be responsible for collecting it yourself.
Understanding the Rules
For buyers and sellers, understanding these rules is essential. Investors purchasing property with the intention of running a short-term rental must confirm that the home’s zoning and location allow for it. Sellers should also be aware that a property’s eligibility, or ineligibility, for STR use can significantly influence its appeal to potential buyers.
In short, Ann Arbor’s short-term rental market is tightly regulated, but for those who meet the requirements, it can still be a profitable venture. The key is doing the legwork up front to make sure your property qualifies, your paperwork is in order, and your hosting practices remain compliant year after year. Learn more about Ann Arbor’s rapidly changing laws around STRs.
How We Can Help
At Piper Partners, we guide buyers, sellers, and investors through the details of Ann Arbor’s real estate market, including navigating the complexities of STR regulations. We encourage you to do your own research, as the laws and regulations around STRs change quickly. There are many helpful guides, like this one from BNB Calc to help with your decision. This article from Arbor Advising also holds a lot of helpful information.
To learn more about investing in real estate, check out our blogs here.
If you’re considering buying a property for short-term rental use or selling one that already operates as an STR, we can help you understand your options and connect you with the right local resources.
