"We are probably one of few communities that doesn't have a cap in a lot of our districts."

Traverse City planning commissioner Anna Dituri said that in the fall of 2024, describing a city where short-term rental rules were, by her own account, looser than almost anywhere comparable. Two years later, that gap between districts with rules and districts without them has become the single biggest thing separating one Grand Traverse County home's rental future from another's. Not the shoreline. Not the square footage. The zoning line.

Here's the contradiction that started this: ask two major data platforms what home prices are doing in the county right now and you get two different answers. Zillow's home value index put the county's average at $397,658 as of May 31, 2026, up 2.1% over the year. Redfin, which measures closed sales rather than automated estimates, put the median sale price at $402,000 for the three months ending May 2026, down 10.2% compared to the same stretch a year earlier. One measure says the market gained ground. The other says it lost ground. Both can be technically correct, and neither tells you what a specific address is worth to a buyer who wants rental income out of it.

That's because the number that actually determines a property's earning potential here doesn't come from a listing portal. It comes from a zoning map, a township ordinance, and in some cases a waitlist.

Two Licenses, One Widening Gap

Traverse City's code splits short-term rentals into two categories. A Vacation Home Rental, defined under Chapter 870 of the city's ordinances, is a whole-home rental where the owner doesn't need to be present, but it's only allowed in a specific set of districts: Hotel Resort, the four Center commercial districts (C-1 through C-4), and the city's Development districts (D-1 through D-3). A Tourist Home works the opposite way. It's allowed in residential districts, but only if the owner stays on site while guests are there.

That distinction sounds like paperwork until you picture two houses. Same year built, same lot size, same distance to the bay, sitting on opposite sides of a district boundary that isn't marked by anything you'd notice while touring the property. One qualifies for a Vacation Home Rental license and can be rented unhosted, at full market rate, all season. The other only qualifies as a Tourist Home, which means the owner has to be there every time it's occupied. Same house. Different business.

The Rules Are Still Moving

If that gap feels unstable, it is. In 2025, Traverse City's planning commission recommended changing how much of a building's units in each district could be licensed. City commissioners are still deciding whether to adopt it. As of a June 2026 update, the proposal on the table would hold licensing steady at 25 percent of a building's units in the C-1, C-2, and D-2 districts, keep the Hotel Resort district at its current 100 percent, and cut the Industrial district's allowance from 100 percent down to zero while trimming three Development districts to 25 percent as well. None of this has been finalized. A property that pencils out as a rental today under current rules could be sitting in a district where that math changes before you've owned it a full year.

What the Regimes Actually Look Like

What a Cap Actually Feels Like

East Bay Township, just north of the city along the eastern shore of the bay, capped its total short-term rental licenses at 145 in July 2023, a number that was already lower than what the township had licensed at the time. The ordinance added a second constraint: no new license within 1,000 feet of an existing one, specifically to prevent clustering. Nearly three years later, the cap is still full. The township's own site confirms that a new round of applications closed on March 17, 2026, and that further openings depend entirely on current license holders choosing not to renew.

That means a property in East Bay that already carries a valid license has something the house next door, built by the same contractor in the same year, cannot get through a better offer or better financing. The license is tied to that address until the owner lets it lapse, and even then only if the location clears the buffer rule for whoever applies next.

A Few Hundred Feet, A Completely Different Business

Cross into Peninsula Township, which covers Old Mission Peninsula, and the conversation ends before it starts. The township does not permit short-term rentals. Head the other direction into Acme Township and the posture flips: Acme issues up to 50 owner-occupied tourist home permits a year and asks for compliance with Grand Traverse Metro Fire Department safety standards rather than fighting over a cap. None of these approaches is inherently better for a buyer. They're just different enough, across a few miles of shoreline, that the same budget can land you in three entirely different rental-income realities depending on which side of an unmarked line you end up on.

What the License Is Worth in Dollars

This is where it stops being theoretical. A compliant Traverse City vacation home rental carries median gross revenue of roughly $34,726 a year at an average daily rate near $237 and 21 percent occupancy, before an 11 percent combined state and local lodging tax comes off the top. That's what a valid license makes possible. A house one district over that only qualifies as a Tourist Home, or doesn't qualify at all, isn't earning a discounted version of that number. It's earning none of it, regardless of how similar it looks from the curb.

Before You Assume a Listing's Rental Potential

• Confirm the zoning district before you factor rental income into your offer, not after you've closed. A district line can sit in the middle of a block.
• Ask directly whether an existing license transfers at sale. Inside Traverse City, a license in good standing can transfer if the transfer is completed within 90 days of closing, but confirm current status with the City Clerk's office before you count on it.
• If you're outside city limits, call the township. East Bay, Peninsula, and Acme each set their own rules, and a rule that applies half a mile away may not apply to your parcel at all.
• Treat every cap as something that can change. Traverse City's own rules are under active revision right now.

Frequently Asked Questions

Does a short-term rental license automatically transfer when a Traverse City property sells? Not automatically. A Vacation Home Rental license can transfer to a new owner if it's in good standing and the transfer is completed within 90 days of closing, but this needs to be confirmed with the City Clerk's office before you rely on it in an offer.

Which Grand Traverse County municipalities currently ban or cap short-term rentals? Peninsula Township does not permit them at all. East Bay Township capped its licenses at 145 in July 2023, and that cap has remained full into 2026. Acme Township allows up to 50 owner-occupied tourist home permits a year. Traverse City limits vacation home rentals to specific zoning districts and is weighing further reductions to some of them.

Does proximity to the water guarantee strong rental income? Not by itself. Water proximity affects nightly rates and guest demand, but the ability to operate a rental at all is set first by zoning and licensing. A property with excellent water access in a district that doesn't allow whole-home rentals, or in a township with no licenses left to issue, cannot generate short-term rental income no matter how good the view is.

If you're comparing properties across Grand Traverse County with rental income in mind, the physical house is the easy part to evaluate. The zoning district, the license status, and the township's current posture are the parts that actually decide what you can do with it, and they change more often than most buyers expect. The Trillium Partners tracks these shifts as they happen across Traverse City and the surrounding townships. Get Your Instant Valuation and let's talk through what a specific address can actually earn before you write an offer on what it looks like.