“Let me be very clear: I’m anti-short-term rental,” said John Humphrey, who in November 2020 was elected mayor of New Buffalo, a town of 1,800 permanent residents 70 miles from downtown Chicago on the Lake Michigan shoreline. Short-term rentals are generally understood to be anything shorter than a month, and most often are for a few days.
Humphrey, a former Chicagoan who has lived full-time in New Buffalo since 2014, said short-term rentals for a fee amount to commercial use of a property, and if that property is in a residential zone, “you’re doing it illegally. No residential zoning in New Buffalo allows commercial use.”
Current zoning does not single out short-term rentals as a commercial use. The proposal before the planning board would change that, specifying that “like a restaurant or bookstore,” Humphrey said, a short term rental is not allowed in a residential district.
Existing permits would likely be allowed to continue, but they would not transfer to a new owner if the property is sold. Humphrey said there are about 100 existing permits in those zones and another 40 in commercial zones. He estimates there may be about the same number of short-term rentals operating without a permit.
Eliminating short-term rentals “is absolutely crazy and not in the best interest of anyone in New Buffalo,” said Laura Murray, a Downers Grove CPA who’s had a second home in New Buffalo for about 14 years. She has not used it as a short term rental but applied for a permit in 2019. It was denied under a then-new moratorium on new permits, which has since been extended into November.
Murray and other second homeowners, including Edan Gelt of Skokie, estimate that short-term renters pump more than $4.5 million a year into New Buffalo’s economy through restaurants, grocery stores and other spending.
“When these houses sit empty, nobody’s going to Barney’s [grocery store] or the Stray Dog [bar and grill,]” said Gelt, who’s in marketing. “Tourists spend a ton of money in New Buffalo. Do you really want to stop them from coming?”
Gelt’s primary residence is in Palatine, and with her husband, Gene Khalminsky, she’s owned a three-bedroom house in New Buffalo since 2013. When their kids were younger, they didn’t put the house out as a short-term rental, but in recent years as the children got busier in Palatine, they’ve put it up for rent. With rental income, she said, “the house pays for itself, but we’re not making a big profit.”
One of Humphrey’s arguments against short-term rentals is that their proliferation has helped drive up home prices in town, to a point where full-time residents are being priced out. Thanks to that, as well as to low interest rates and the COVID-driven demand for out-of-town homes, “our real estate is overvalued,” Humphrey said.
The average price of homes sold in the New Buffalo area, a 15-mile stretch of Lake Michigan from New Buffalo to Bridgman, the median sale price of homes increased 25% since the same period in 2020, and 37% since 2019, according to data from the Southwest Michigan Association of Realtors. It’s bigger than the increases in other areas of Southwest Michigan, though several of them are inland, not on the shoreline.
The median sale price in the New Buffalo area so far this year, a little over $549,000, is well above the other lakefront stretches that the Southwest Michigan real estate group tracks. In St. Joseph, the median price was $352,000, and in South Haven about $344,000. The inland locations are generally below $200,000.
New Buffalo, like many traditional second home locations, has been awash in “second first-home” sales to people who are untethered from work and school locations in Chicago.
A house with the possibility of an income stream will clearly sell for more than one without.
Jessica Lee and her husband, whom she asked not to identify, bought a New Buffalo home for about $300,000 in 2020 and moved full-time from Chicago. Lee said her real estate agent said the house would got for $100,000 more if it had a short-term rental permit.
“The reality is that people who have lived here in New Buffalo, if they were to leave, they couldn’t afford to come back,” said Darwin Watson, New Buffalo’s city manager.
Kimberlee Wendt, executive director of the Harbor Country Chamber of Commerce, emailed Crain’s a statement that said, “While we recognize tourism as the major economic driver here, the chamber also supports a balanced effort between business and residents to build a thriving community with year-round living and one that can sustain workforce levels.”
The chamber’s new economic committee is examining the affordable housing issue “and other vital needs such as childcare in this tourism-based economy,” the statement said.
The effort to shut off short-term rentals is “pushing the divide between quote-unquote locals and second-home owners, which they call Fips,” Murray said. Fips is a longtime Michiganders’ reference to “fucking Illinois people.”
In March, a group of Chicago-area people with New Buffalo homes sued the city in federal court over its moratorium on short-term rentals. Another suit was filed in a Michigan state court. Neither suit has been decided yet.
The lawsuits claim, in part, that New Buffalo officials are infringing on property rights with their prolonged moratorium, which has chilled the short term rental market and home values.
“It’s an overreach on personal property rights,” Murray said. “If I want to be able to rent out my property for a few days, I should be allowed to.”
Over the past few years, New Buffalo officials have taken steps to reduce the nuisance effect of short term-rentals on the town. In May 2019 they instituted a permitting requirement for the first time, and they later tightened parking and garbage regulations.
Nevertheless, short-term rentals and the traffic, noise and partying they bring “are destructive to the quality of life in our residential neighborhoods,” Humphrey said.
Murray, who has owned her New Buffalo home for about 14 years, said that in that time she cannot recall more than a few problems with short-term renters in the complex. City officials, she said, “are trying to deal with the one to five percent who break the rules by penalizing the other 95% to 99% of the people. Don’t throw the baby out with the bathwater.”