Short-Term Rental Laws in Traverse City, Michigan

Traverse City operates a citywide cap on non-owner-occupied Vacation Home Rental (VHR) licenses — set at a fixed number (historically ~180 VHR-NOO licenses citywide). The cap has been at-cap continuously since the late 2010s; new VHR-NOO entry is via attrition + waitlist. Owner-occupied VHRs (operator's primary residence) are uncapped. Tourist Home (B&B-style with on-site host) is a separate uncapped license type. The cap is the dominant economic feature of Traverse City's STR investor market.

Traverse City Zoning Ordinance permits VHR in most residential zones (R-1a, R-1b, R-2, R-9, RM-1, RM-2) and mixed-use districts (C-1, C-2, C-3, D-1, D-2, D-3) subject to the appropriate license class and the citywide cap (for VHR-NOO). The "Old Town" historic district overlay adds heritage review. Existing VHR-NOO licenses are tied to the parcel — they convey with the property on sale, creating a robust secondary market where buyers pay a premium for licensed properties. Confirm license type + current cap status via TC Clerk's office before any offer.

Operators must hold a short-term rental permit before listing. See the official permit portal.

Traverse City Clerk + Building Inspection administer. $250 annual VHR-NOO license fee. Annual renewal. Operating without a VHR license: administrative fines starting at $500 + stop-rental orders + ineligibility for future application. The waitlist for new VHR-NOO licenses can stretch multiple years. Existing license-holders are the dominant supply — investors typically acquire property + license together as a packaged transaction. The neighboring townships (Garfield, East Bay, Peninsula) have their own separate STR ordinances under Grand Traverse County jurisdiction.

Combined short-term lodging tax in Traverse City is approximately 14.000% of gross nightly revenue (state sales + state TRT + local TRT + applicable resort/city options).

Michigan Use Tax 6% + Grand Traverse County Hotel Tax 5% + tourism assessments 3% — combined ~14.0% on transient lodging

Verify the current combined rate via the Utah State Tax Commission before remitting — rates drift quarterly.