ELIZABETH NELSON:
Welcome to Episode 3 of Hollow Hype. In Episode 2, I introduced a resolution to City Council, directing the study and potential regulation of short term rentals in Ann Arbor.

In 2019, the City hired consultants to study the issue of short term rentals, or Airbnb. The consultants led public meetings, asking residents to offer feedback about where and how short term rentals functioned in Ann Arbor. They also estimated how many homes were being marketed as short term rentals, though they admitted that this number was just a guess.

Heidi told City Council that she could help craft an ordinance to regulate her own business.

[2020 recorded meeting]

HEIDI:
I'll volunteer my services. I'll volunteer my staff services. We will round table this with anybody who wants to talk to us. We, as my employee Adam mentioned, we abide by all the rules. You know, we we don't get we don't have police calls, we don't have issues. We don't have complaints. We're good neighbors, as he mentioned. I think that the way we do things and the way most, short term rental owners do things are, you know, 98% of what would need to be incorporated into a set of bylaws that would really, enable everybody to, get along well and to eliminate the issues.

[MUSIC]

ELIZABETH NELSON:
My name is Elizabeth Nelson. From 2018 to 2022, I served on Ann Arbor City Council. That experience taught me a lot. Mostly, I learned: people will say just about anything if they think you’ll believe it. This is HOLLOW HYPE.

Michigan stadium is close to the center of town. On game days, cars fill every available space within walking distance. Unlikely places are suddenly for sale: the lot at the public high school, the lawns of the golf course, and every church property within fifteen blocks. Along Stadium Boulevard, residents wave signs and direct visitors into neighborhood front yards, which fill up with cars parked in tetris puzzles.

During football season, visitors will pay a premium to stay in a house near the stadium. Residents who have somewhere else to go for a night or two can make real money by listing their homes on Airbnb.

Heidi and other investors exploited a new model: dedicated, full-time Airbnbs. These homes are available year round, because no one lives in them. In residential neighborhoods, these properties were essentially unsupervised hotels.

My City Council ward included the Stadium and surrounding neighborhoods. When I first proposed regulation of short term rentals, constituents in that area reached out and I met with them. Residents explained how well it worked for them to rent their own homes out to visitors during the football season. Several people pointed out that the income helped them afford Ann Arbor’s high property taxes. One resident scoffed at this explanation and assured me that he didn’t actually need the income– he used the money to take his family to Disneyworld.

Whether or not anyone needed the money, this type of short term rental was very different from Heidi’s business. People lived in these homes, apart from a handful of weekends. There was also accountability among neighbors, if anything unexpected happened.

[Sound of meeting noises]

In October 2019, consultants led three meetings at the public libraries, inviting residents to share experiences and concerns about short term rentals.

Many residents complained about the homes that no one lived in. Investors also showed up to defend their businesses, emphasizing how hard they worked to maintain properties to a high standard.

[MUSIC]

These meetings must have alarmed Heidi. The last one was held on October 12, 2019. Two weeks later, she made her first political donation to a City Council candidate: Jen Eyer, who had recently announced her campaign to run for City Council in 2020. Once elected, Jen Eyer would be a very good friend to Heidi.

In January 2020, City staff presented recommendations to City Council, based on the work of the consultants. According to staff, regulation and restriction should start with the dedicated, full-time short term rentals: the investment properties where nobody lived.

At the City Council meeting, investors recognized that football fans were not the most sympathetic customer base. They tried to pivot.

[2020 meeting recording]

INVESTOR:
There really are a lot of people coming to the hospital and coming in for extended stays who are looking for these kind of options and who really benefit and who aren't going to get that from owner-occupied options.
ELIZABETH NELSON:
I remember thinking: are there that many people scheduling medical treatment on football weekends?

City staff explained why these non-owner occupied Short term rentals could and should be prohibited in residential neighborhoods

[2020 meeting recording]

DEREK DELACOURT:
A lot of it's been mentioned here tonight about home occupations people being able to run businesses out of their home and one of the the consistents throughout that within our city zoning ordinance and anything else one of the primary requirements of that is that the owner live in the property. You can't buy a house and run a business there if you don't live there. Nowhere in the city and in no residential district is that allowed.

ELIZABETH NELSON:
Several Council Members introduced the idea of allowing existing businesses to continue, grandfathering them in. Staff had perspective on that, as well.

[2020 meeting recording]

DEREK DELACOURT:
I mean we have information that some of our certified rentals are rented through platforms like Airbnb and other short-term platforms but we don't keep that as a category of property within the city currently. So trying to grandfather in would be would be a difficult place for us to be. So I just wanted to add that as clarification at this point.

ELIZABETH NELSON:
In January, most of my City Council colleagues were supportive of staff’s proposal. Then Council Member Grand explained:

[2020 meeting recording]

COUNCIL MEMBER GRAND:
I appreciate Mr. Delacorte's insight and other staff's insight into this. I think it speaks to the strength of the process and the amount of thought that went into this. I do appreciate the recommendation to us that we do have an ordinance that is clear, that's relatively eloquent and straightforward so that there isn't as much room for misinterpretation.

ELIZABETH NELSON:
With only two votes of dissent, a majority of City Council including the Mayor, approved this approach.

[MUSIC]

Two months later, the world stopped for COVID.

During lockdown, City Attorneys crafted an ordinance, with specific restrictions targeting non-owner occupied short term rentals. A full-time Airbnb was a commercial business. Such businesses would only be permitted in mixed use zoning districts, where housing existed alongside commercial activities like stores and hotels. These mixed use zoning districts were mostly clustered on major corridors, not in the residential neighborhoods where investors had bought homes.

In July 2020, Heidi emailed me. She wanted to talk. I did not respond immediately because it was my birthday. The next day, she texted me, asking if I was free. We connected and our conversation quickly focused on details.

Heidi directed me to pull up the City’s zoning map on my computer. Over the phone, we looked at the zoning districts around Henry Street, where Heidi had just constructed a 66 bedroom short term rental business. The location of this business was zoned for residential uses, only. Just across the street, properties were zoned to allow commercial activities, one house functioned as an office for a business. Heidi’s business of short term rentals was thirty feet away from the zoning district that would permit it. She was close. But as they say, close only counts in horseshoes and hand grenades. I could understand that from her perspective, this was very frustrating. From my perspective… well, I didn’t say a whole lot. Heidi filled the gaps in our conversation and at one point, she said

If you could help me with this, I would make it up to you. I don’t mean a bribe but… I just really need your help.

I got off the phone as quickly as i could and immediately shared the conversation with my husband.

PETER NELSON:
It was- it was memorable in that she was just amazed that she got a phone call like that. She had never gotten anything like that since she'd been elected to council. And we- we talked about it. We joked about it. For weeks or probably months, it was- it was pretty memorable.

ELIZABETH NELSON:
That was my husband, Peter. Our inside joke for a while was “I don’t mean a bribe, but…” We thought it was ridiculous. I told friends and colleagues about the conversation. It was silly. What kind of person did Heidi think I was?

At this point, the City had been discussing short term rentals for over a year. Consultants had held public meetings and collected data. City staff had weighed in. We had a recommendation that made sense and an overwhelming majority of Council supported it. I had very little sympathy for Heidi.

[2020 meeting recording]

MAYOR CHRISTOPHER TAYLOR:
We have a motion please to approve the agenda, moved by Council Member Molloy, seconded by Council Member Griswold, discussion of the agenda. All in favor? Aye. Opposed? The agenda is approved.

ELIZABETH NELSON:
A few days after my phone call with Heidi, City Council discussed a specific ordinance that would regulate short term rentals. Heidi offered a public comment and called me out by name.

[2020 meeting recording]

HEIDI:
I live in and own other property in Ward 4. The city of Ann Arbor has determined that short-term rentals should be further regulated beyond how they have been up to this point.
It explicitly bans non-resident occupied short-term rentals in some areas of the city. Under this ordinance, approximately 50 current property owners will lose their ability to legally operate their properties as they have been up until this point.
Elizabeth Nelson, you are my council representative. I'm asking you specifically to propose the formation of a working group to fix this problem.

ELIZABETH NELSON:
In discussion, I alluded to Heidi’s problem and asked staff about a potential solution.

[2020 meeting recording]

COUNCIL MEMBER ELIZABETH NELSON:
If I'm a property owner and I feel strongly that my property would do fine as an STR and maybe I have all the zoning around me would permit it but I'm in an Island, could I go to planning and request a change in zoning so to permit me to have a non-principal residence STR? Is that a process that I could go forward with?

DEREK DELACOURT:
Well, in theory, the last part you described, yes. I mean, anybody can ask for rezoning.
I imagine there are certain situations where that would be feasible for consideration. I'm guessing very, very rare in the city.

COUNCIL MEMBER ELIZABETH NELSON:
If you can request a rezoning, then there's a path. There's a path to come to the city and say, I would like a rezoning. And if I get a rezoning, then my non-principal residence STR will be permitted. I am I misunderstanding something Mr. Delacorte? Or is that how? Would that work?

DEREK DELACOURT:
No, I mean, no, no, by all, by all reasonable, you can, you can ask, like I said, I think the scenarios where most of these are located would make that very difficult. But I do think the point you hit on is absolutely truth.

ELIZABETH NELSON
Investors had more than one path.

[2020 meeting recording]

DEREK DELACOURT:
If folks have bought these properties with the sole intention of short-term rental, that would be prohibited, but there's no prohibition against long-term rental, which last time I checked is not a real money loser in the city of Ann Arbor either. They may not be able to make, as I think someone pointed out, the highest and best revenue with the property by doing the long-term rentals, but they're not prohibited from renting these properties.

ELIZABETH NELSON:
City ordinances are voted on twice. They must be approved at first reading and second reading. Some of my colleagues supported the ordinance reluctantly, at first reading.

[2020 meeting recording]

MAYOR CHRISTOPHER TAYLOR:
Public hearing number two, an ordinance to amend Title VII, business and trades of the code of the city of Ann Arbor by adding a new chapter, which shall be designated as Chapter 97, short-term rentals.

ELIZABETH NELSON:
In August 2020, City Council considered second reading and final approval of the ordinance. As she had at other meetings, Heidi spoke as a representative of other business owners.

[2020 meeting recording]

HEIDI:
Hi, this is Heidi Poscher, 1204 Brooklyn. I'm with a group of about 50 short-term rental property owners that would seriously be damaged if the city enacts the ordinance before you tonight. There are over 50,000 dwelling units in Ann Arbor. there's about 100 to 120 non-resident short-term rentals. Granting an exemption for these properties will make no difference in the success or failure of this ordinance for the city, and it will protect us from financial devastation.

ELIZABETH NELSON:
Her comment is interesting. If there were only 100 to 120 nonresident short term rentals in Ann Arbor, Heidi herself had many of them. In addition to the 66 bedrooms on Henry Street, she also had nine apartments with 18 bedrooms on Golden Avenue. Years earlier, she had described her portfolio as 12 to 13 properties. How many more did she have now? An exemption for existing businesses would likely benefit Heidi more than anyone else.

City Council discussed the idea of crafting exemptions for Heidi and others.

Then Council Member Smith

[2020 meeting recording]

COUNCIL MEMBER CHIP SMITH:
So I'm going to propose that we postpone this until the first meeting in September to give
staff an opportunity to craft some language about what that exception would be. And for us to consider that. So I’m going to throw that out there.

ELIZABETH NELSON:
Then Council Member Ramlawi

[2020 meeting recording]

COUNCIL MEMBER ALI RAMLAWI:
I don't necessarily support a postponement. I think the intent of that would only be to carve out winners in this short-term rental game based on those who were opportunistic enough to get in early to take advantage of the loopholes in local ordinances.

ELIZABETH NELSON:
A majority of Council wanted to postpone a decision, in order to consult with attorneys. However, a majority did not support exemptions.
Then Council Member Ramlawi

[2020 meeting recording]

COUNCIL MEMBER ALI RAMLAWI:
I would rather not postpone it because again, the intent is to pick winners and losers.

ELIZABETH NELSON:
Then Council Member Eaton

[2020 meeting recording]

COUNCIL MEMBER JACK EATON:
I am going to support this postponement to get a clear idea from our lawyers as to whether or not this was a legal use of those properties.

ELIZABETH NELSON:
Then Council Member Lumm

[2020 meeting recording]

COUNCIL MEMBER JANE LUMM:
I do not support postponing to further explore allowing existing non-owner-occupied units to be grandfathered as now not proposed. But I do think we would benefit from giving the attorney's office a bit more time to provide the necessary legal advice.

[2020 meeting recording]

MAYOR CHRISTOPHER TAYLOR:
ordinance number ORD 2024. Moved by Council Member Ramlawi, seconded by. Council Member Lumm, discussion please of B1.

ELIZABETH NELSON:
In September 2020, City Council revisited the ordinance at second reading, for final approval. Public commenters pointed out the inequity of allowing existing businesses to continue.

[2020 meeting recording]

PUBLIC COMMENTER:
Let's assume they are grandfathered in. They have a monopoly, no new competition ever.

PUBLIC COMMENTER:
I don't particularly like the idea of giving a monopoly to a large number of existing short-term rentals. That seems like a recipe for strange price inflation and all sorts of other unintended consequences.

ELIZABETH NELSON:
My colleagues on City Council also recognized this problem

Then Council Member Smith

[2020 meeting recording]

COUNCIL MEMBER CHIP SMITH:

even if we get to a point where we grandfather these in, that is awarding a great reward to the folks that are here now. It is, you know, giving them quite a bit of a monopoly,

ELIZABETH NELSON:
Then Council Member Eaton

[2020 meeting recording]

COUNCIL MEMBER JACK EATON:
If we delay this to grandfather, what we're doing is we're selecting a small group of a hundred homes who get a benefit in kind of a monopoly to operate a full-time, short-term rental in a residential neighborhood.

ELIZABETH NELSON:
Then Council Member Grand

[2020 meeting recording]

COUNCIL MEMBER JULIE GRAND:
I don't want to reward those who necessarily got in first with monopoly.

ELIZABETH NELSON:
Then Council Member Ackerman

[2020 meeting recording]

COUNCIL MEMBER ZACH ACKERMAN:
When we say that short-term rentals account for only 0.2% of housing units, we're talking about well over 100 units of housing today. That's 300 bedrooms that are no longer available to community members and potential community members.

ELIZABETH NELSON:
City Council was well aware of the threats from Heidi and a handful of other investors, threats that they would sue the city.

Then Council Member Ramlawi

[2020 meeting recording]

COUNCIL MEMBER ALI RAMLAWI:
I think this is something that if the owners of these investments wanted to challenge in court, then I think that's why those systems exist. Let's have those arguments laid out and understood in court. I think that would be, for me, a better end result than trying to configure grandfathering this in with some arbitrary numbers that we're going to pull out of the air based on who knows what, not based on science.

ELIZABETH NELSON:
That was one of my closest friends on City Council, Ali, who owns a restaurant. As a small business owner himself, he understood what this ordinance meant for other small business owners. As presented, the ordinance would take effect in 45 days.

[2020 meeting recording]

COUNCIL MEMBER ALI RAMLAWI:
I just have a question on the 45 days and whether that can be pushed back a little bit and allow the current operators more time to get their house in order. I'd rather set a date certain in 2021.

ELIZABETH NELSON
Mayor Christopher Taylor was particularly pleased by the suggestion of delaying enforcement

[2020 meeting recording]

MAYOR CHRISTOPHER TAYLOR:
I pick a date of March 1, 2021.

COUNCIL MEMBER ALI RAMLAWI:
That was close, in my head I had February 28th. So March 1st.

[LAUGH]

MAYOR CHRISTOPHER TAYLOR:
You and I are always so simpatico.

ELIZABETH NELSON:
Ali was clear about why the city should delay enforcement of the ordinance. He explained his reasons to then Council Member Grand

[2020 meeting recording]

COUNCIL MEMBER JULIE GRAND:
Is the intent to then… to just to grandfather in? Is that your intent?

COUNCIL MEMBER ALI RAMLAWI:
My intent is so that the current investors have time to get their house in order if they wish to do so or proceed with other avenues, but to allow those who are affected by this more time to again get their house in order.

COUNCIL MEMBER JULIE GRAND:
You mean to transition to a long-term rental or to be grandfathered in…?

COUNCIL MEMBER ALI RAMLAWI:
Either transition to a rental 30 days or more or perhaps sell the asset.

ELIZABETH NELSON:
The ordinance was approved, but both Council Member Grand and the Mayor voted against it.
Ali’s idea to give these businesses time to transition, turned out to be a mistake.

[MUSIC]

ALI RAMLAWI:
They supported the postponement of the adoption of the ordinance for six months for different reasons. And they did so because they felt good about the election, that they'd have a different council come in, you know, by the time that six months had expired and then that new council would take up the matter in a different way. And they were right. In 2020 they flipped some seats. The mayor had control of the council again and they took a different route with short term rentals. They pretty much just looked the other way. They ignored the ordinance. The enforcement wasn't there. They just kind of let it die in a vine. Quite honestly, I don't even know where it continues to exist today.

ELIZABETH NELSON:
In June 2026, the Ann Arbor News published a story about short term rentals. Nearly 300 units are currently listed in the City. In that article, Heidi is quoted. She explained that one of her Airbnbs charged nearly $10,000 per night during a football weekend.

“It’s a very nice property — it’s a house that has six beds, six baths,” she said.

Thanks for listening. Visit HollowHype.com to find more information about this episode.

Coming up in episode 4: New Council Members take office and immediately direct a pivot in policy: the businesses of Heidi and other investors would be protected. When I published my concerns, that we were caving to profit interests, the FBI knocked on my door.

If you know something about Heidi’s activities in Michigan, Ohio, West Virginia, or California. Please email hollowhypepodcast@gmail.com