A buyer tours a cottage on The Hill in Saugatuck, sees a trailing twelve months of Airbnb income printed on the listing sheet, and starts running the math on how fast that income offsets the mortgage. The math assumes something that isn't always true: that the income comes with the house. It doesn't. Crain's Grand Rapids Business reported that, in Saugatuck, the license stays with its current owner and does not transfer with the deed.
That distinction is the piece of this market that catches people off guard, and it's worth understanding before you write an offer on a property advertised as a rental income producer, or before you list one and price it as though the income is guaranteed to transfer.
How The Cap Actually Works
In August 2024, the Saugatuck City Council voted 4-2 to cap short-term rentals at 20 percent of dwelling units in each of the city's six R1 residential districts. The idea, as city officials framed it at the time, was to protect what year-round housing stock remained in a small city where tourism drives much of the local economy.
Here's the part that makes the cap more than a paperwork detail: the city's own data, gathered as of June 29, 2024, showed short-term rentals already comprising 32 percent of housing supply across those six districts combined, well above the new 20 percent ceiling. In the district known locally as The Hill, the concentration ran even higher, at 37 percent.
| Area | STR Share (as of June 2024) | Ordinance Cap |
|---|---|---|
| Citywide, six R1 districts combined | 32% | 20% |
| The Hill (community residential zone) | 37% | 20% |
Those numbers mean the districts with the most established rental history, the ones where a buyer is most likely to find a cottage with a real rental track record, are also the ones furthest over the new limit.
What Happens To The License When The House Sells
Existing STR owners keep their license only while they own the property. Selling or transferring the home ends that license. If licenses drop below the cap, the city fills openings from a waiting list by lottery.
In practical terms, a buyer purchasing a Hill cottage today with the intention of continuing the previous owner's Airbnb business is not buying that business. They're buying a house that used to run one. The rental income on the listing sheet describes what the seller did with the house. It doesn't describe what the buyer is permitted to do with it.
This is the mechanism sellers need to be honest about in their marketing, and the one buyers need to verify before they let trailing revenue shape their offer.
The Rule Itself Is Still Moving
Saugatuck's short-term rental ordinance hasn't sat still since it passed. WHTC reported that in February 2026, the council took up adjustments to the fixed license renewal date, the application window, and a one-time amnesty period for license holders who had fallen out of compliance, all while overseeing more than 250 active short-term rental licenses citywide.
A report in Short-Term Rentals Daily Notes said that at a city council workshop on August 19, 2026, council members reviewed a proposal to replace the current five-day grace period for late license renewals with a 60-day window extending 30 days past expiration, applied retroactively. The proposal reportedly grew out of a request from a property owner who had missed a renewal deadline.
These renewal changes say something useful about the state of the rule: this is not settled policy that a buyer can look up once and rely on for the life of their ownership. It's an ordinance still being tuned in real time, sometimes in response to the exact kind of situation a new owner might find themselves in.
The Lawsuit Over The Cap
Underneath the renewal-date tweaks sits a separate legal challenge. In September 2024, a nonprofit called Saugatuck Neighbors filed suit against the city in Allegan County's 48th Circuit Court. Attorney Kyle Konwinski of Grand Rapids firm Varnum LLP, representing the plaintiffs, told Crain's Grand Rapids Business that his clients wanted the process redone. According to Fox 17, the city denied any wrongdoing and stood by the ordinance as lawfully passed.
Anyone buying or selling a Saugatuck rental property should check the cap's status directly with the city before making a decision that depends on it.
Checking Local Rules Across The River
One more wrinkle worth knowing if you're looking at "Saugatuck/Douglas" as a single market: If short-term rental income matters to your decision, confirm the rules with the specific municipality the property sits in.
What This Means At The Table
For sellers, the honest move is to market trailing rental income as historical performance under the current owner's license, not as a feature of the property itself. A buyer's lender may ask about this directly, and a listing that overstates transferability creates problems well before closing.
For buyers, the homework is straightforward even if it takes a few phone calls: confirm which residential district the property sits in, ask the city whether that district is currently under, at, or over its 20 percent threshold, and ask what the current queue or lottery situation looks like there. If continuing short-term rental income is central to your offer, that answer should come before your offer, not after it.
None of this is a reason to avoid Saugatuck. The market held a median list price of $799,000 in May 2026, with homes spending a median of 58 days on the market, numbers that reflect steady demand for a small, walkable lakeshore town with real year-round appeal beyond its rental economy. It's a reason to separate the price of the house from the value of a license that may or may not come with it.
A Few Quick Questions
Does a Saugatuck short-term rental license transfer automatically when the property sells? No. Under the current ordinance, the license stays with the owner who holds it and ends when the property is sold or transferred.
How are open short-term rental licenses awarded? If licenses drop below the cap, the city fills openings from a waiting list by lottery.
How can I confirm short-term rental rules for a Douglas or Laketown Township property? Confirm short-term rental rules directly with the municipality where the property is located.
If you're weighing a Saugatuck or Douglas property with rental history attached, or getting ready to list one and want the listing to describe what actually transfers at closing, I'd rather walk you through it before you're under contract than after. Contact Capt'n Sue for a private consultation.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
