Saugatuck capped its short-term rentals at one in five homes

If you’re eyeing a cottage in Saugatuck to run as a vacation rental, the math changed in August 2024. The city council voted 4-2 to cap short-term rentals at 20 percent of the housing in its R1 single-family residential zones — a real limit on how many of those Lake Michigan resort-town homes can be Airbnbs at once.

That 20 percent already pinches. When the city of Saugatuck ran the count, rentals made up about 32 percent of the housing in those R1 districts, with the thickest cluster on the old hillside neighborhood that locals call The Hill. So the cap doesn’t just slow new rentals; the city is already well past the line it drew. The fight behind the vote is the familiar one along this stretch of the Allegan County shore: so many houses go to weekend renters that the year-round neighborhood thins out.

The ordinance doesn’t kick anyone out. An owner who already holds a Saugatuck rental license keeps it — grandfathered — but the grandfathering ends when the property sells or transfers. Over time, as rental cottages change hands, the share is meant to drift back toward 20 percent. Until an R1 district drops under the cap, no new licenses open up.

Not everyone went along. A group called Saugatuck Neighbors sued the city in September 2024 to overturn the cap, arguing it reaches too far. If you’re buying here with rental income in your plans, that’s the lay of the land: the rule is real, the queue may be closed, and the whole thing is still being fought in court. Pull the city’s current ordinance and license count before you bank on a single night of rental revenue.