Saugatuck Short-Term Rental Rules & Airbnb Laws (2026)
STRs are legal citywide (~250 licensed), but a 2024 zoning cap limits STRs to 20% of housing stock in six R-1 residential districts — most of which are already over cap. Licenses are non-transferable and VOID on sale.
Status: Capped / waitlist. County: Allegan County. Whole-home STRs: Yes. Caps: 20% cap in six R-1 districts (most over cap); other districts open. Annual cost: $540/yr license + $175 reinspection if failed. Lodging taxes: 6% (state use tax only).
Investor takeaway: Established STR market with real demand, but buy in an uncapped district or underwrite the license-voids-on-sale risk explicitly. Douglas next door is the low-friction alternative.
Last verified July 2026. This page is general information, not legal advice — confirm current requirements directly with the municipality before purchasing.
Saugatuck at a glance
- Status
- Capped / waitlist
- County
- Allegan County
- Whole-home STRs
- Yes
- Cap / waitlist status
- 20% cap in six R-1 districts (most over cap); other districts open
- Annual cost
- $540/yr license + $175 reinspection if failed
- Lodging taxes
- 6% (state use tax only)
- STRs legal citywide?
- Yes — annual license required (~250 licensed)
- Annual license
- $540/yr
- R-1 cap (six districts)
- 20% of housing stock — Community Residential 67, Peninsula West 10, Peninsula South 11, Duneside 3, Riverside 2, Maple Street 7
- Most R-1 districts
- Over cap — new licenses only by attrition
- Non-R-1 districts
- No caps
- License transfer on sale?
- No — VOIDS AT CLOSING (limited inheritance/ownership-form exceptions)
- Occupancy
- 2/bedroom + 2/finished floor, max 12
- Fire inspection
- Annual required; $175 reinspection on failure
- Ads must show
- License number in every listing
- Complaint response
- 24/7 hotline, 2-hour response requirement
- Enforcement escalation
- 3-month suspension → 6-month → permanent revocation
- Pending litigation
- Nov 2024 lawsuit challenging R-1 caps still pending — outcome could change rules
- Lodging taxes
- 6% Michigan state use tax only
Where you can and can't get a license
Saugatuck has roughly 250 licensed STRs and continues to issue annual licenses at $540/year — but the summer 2024 zoning caps changed the math in the six R-1 residential districts. Each is capped at 20% of housing stock: Community Residential (67), Peninsula West (10), Peninsula South (11), Duneside (3), Riverside (2), and Maple Street (7). Most are already over cap, so new licenses in R-1 open only through attrition.
Districts outside R-1 do not have caps. If you want to enter the Saugatuck market as an investor, that's where the entry point still exists.
The license-voids-on-sale trap
This is the single most important number in any Saugatuck STR underwriting: licenses are non-transferable and void at closing. Limited exceptions exist for inheritance and certain form-of-ownership changes, but a normal arms-length sale kills the license.
Practically, this means an existing R-1 STR that looks like a turnkey acquisition may become unlicensable the moment you take title if that district is over cap. Don't pay a premium for 'operating STR' status without confirming re-issuance is possible.
Operating requirements
Occupancy is capped at two per bedroom plus two per finished floor, with an absolute maximum of 12. An annual fire inspection is required (with a $175 fee on any needed reinspection), rental insurance is mandatory, and the license number must appear in every ad. Complaints go to a 24/7 hotline with a 2-hour response requirement.
Enforcement escalates from a 3-month suspension to a 6-month suspension to permanent revocation. Lodging tax is the 6% Michigan state use tax — no county STR tax applies.
The lawsuit to watch
A November 2024 lawsuit challenging the R-1 caps is still pending as of July 2026. A ruling either direction could reshape the market — verify current status before underwriting a purchase that depends on the cap holding or falling.
Frequently asked questions
Can I buy in an R-1 district and start an Airbnb?
Only if that specific R-1 district is under its 20% cap — most are not. Districts outside R-1 remain open. Check current cap counts with the city before making an offer.
Does the license transfer when I buy an operating STR?
No. Licenses void at closing (limited inheritance/ownership-form exceptions). Price this risk in — in a capped R-1 district, the new owner may not be able to re-license at all.
What are the annual operating costs?
$540/yr license, annual fire inspection (with $175 reinspection fee if you fail), required rental insurance, and the 6% state use tax on stays. No county STR tax applies.
What are the occupancy limits?
Two guests per bedroom plus two per finished floor, with an absolute maximum of 12 guests.
Investor takeaway
Established STR market with real demand, but buy in an uncapped district or underwrite the license-voids-on-sale risk explicitly. Douglas next door is the low-friction alternative.
Sources
Last verified July 2026. General information, not legal advice — confirm current requirements with the municipality before purchasing.
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