Picture a buyer running the numbers on a lakefront cottage near downtown Elk Rapids. They pull up a rental data platform, see a healthy average daily rate, and pencil in twelve months of bookings against the mortgage. What that spreadsheet won't show is which side of a village boundary the parcel sits on, or that the number they just used to justify the purchase is shrinking in supply for a reason that has nothing to do with tourists losing interest in Elk Rapids.
That gap between what the aggregate data shows and what actually governs a specific address is the real story here. And it starts with a pattern in the numbers that looks, at first glance, like a market cooling off.
The Number That Looks Like a Slowdown
As of July 2026, AirDNA counted 148 active short-term rental listings in Elk Rapids, down 14.9% from July 2025. On its own, a nearly 15% drop in active listings over twelve months reads like fading demand. But look at what happened to price in that same window: average daily rate rose 7.8% to $454 a night, and RevPAR, the truest measure of what a listing actually earns per available night, rose 7.1% to $227. Occupancy dipped only 2.6%, to 50% of available nights. Average annual revenue per listing barely moved, up 0.9% to about $22,500.
That combination, fewer listings and higher prices, is not what a cooling market looks like. If travelers were simply choosing Elk Rapids less often, occupancy and rates would fall together. Instead, supply is contracting while the units still operating command more per night. That is the fingerprint of a cap, not a slowdown. Somebody is being kept out of the market, and the ones already in it are pricing accordingly.
What's Actually Capping Supply
The Village of Elk Rapids has run a licensed short-term rental program since 2020, when the village council first voted 6-0 to require annual registration, with one trustee recusing over a conflict of interest. That original vote arrived after months of public debate, including STR owners who argued the new fees and rules were an overreach on a business that had operated without incident for years.
The current version of that framework, updated under Ordinance 2025-05, sets a hard cap of roughly 61 licensed short-term rental units in the village, about 7.7% of the housing stock. Units that were operating since at least 2018 are grandfathered in. New licenses go first to owners whose principal residence is inside the village, and the village maintains a formal waitlist application for anyone else hoping to get in once a spot opens.
The village isn't done adjusting the rules either. A public notice posted this spring set a second reading and public hearing on Ordinance 2026-17, another update to the short-term rental licensing chapter, for June 2, 2026, at the Governmental Center on Bridge Street. Whatever changes came out of that hearing, the direction of travel across the last five years has been the same: tighter licensing, not looser.
That is the mechanism behind the AirDNA numbers. A capped, grandfathered license pool means the number of legal short-term rentals in the village can only shrink as owners exit and don't get replaced one-for-one, since new entrants need an open slot and residency priority ahead of them. Fewer units chasing the same seasonal demand pushes the rate up for whoever is still operating. The math in the spreadsheet isn't wrong. It's just describing a shrinking, not a growing, opportunity.
The Village Line You Can't See From the Road
Here is the part that catches buyers off guard, and it has nothing to do with the cap number itself. "Elk Rapids" as a market label on a data platform or a home search doesn't distinguish between two separate governments with two entirely different sets of rules for the same kind of rental.
| Village of Elk Rapids | Elk Rapids Township | |
|---|---|---|
| Rental type | Licensed short-term rental | Bed & Breakfast / Tourist Home |
| Approval path | Annual license, capped at ~61 units | Special use permit, case by case |
| Numeric cap | Yes, hard cap | No cap, but spacing rule limits density |
| Spacing rule | Not applicable | No new B&B within 2,500 feet of an existing one |
| Occupancy limit | Up to 10 guests, no more than 2 per bedroom | Up to 4 rented rooms, stays under 7 consecutive days |
| License priority | Village residents first | N/A, reviewed individually |
A parcel a few hundred yards outside the village line isn't subject to the 61-unit cap at all. It falls under the township's zoning ordinance, which permits Bed & Breakfast or Tourist Home use only through a special use permit in certain residential districts, and only if no other such use already exists within 2,500 feet. That is a different kind of scarcity, driven by spacing rather than a numeric ceiling, but it is scarcity all the same.
A buyer relying on a town-level average has no way to know, from that number alone, whether the specific parcel they're underwriting sits inside the capped village program with an active waitlist, or inside the township's permit-by-permit process with its own density limit. Two addresses a short walk apart can have completely different rental futures.
What This Means If You're Underwriting Rental Income
If a short-term rental income projection is part of why a property in or around Elk Rapids appeals to you, the AirDNA average is a starting point, not an answer. Before that number does any work in your financing plan:
- Confirm which jurisdiction the parcel sits in, village or township, using the parcel's actual address and zoning designation rather than assuming based on the mailing address.
- If it's in the village, check the current short-term rental license list against the parcel or ask whether the seller's license, if one exists, transfers with the sale or whether you'd be starting on the waitlist.
- If it's in the township, confirm the property qualifies for a special use permit and that no existing Bed & Breakfast or Tourist Home already sits within 2,500 feet.
- Ask whether any rental history being cited to you predates the 2018 grandfather cutoff, since operating history alone doesn't guarantee a transferable license.
- Watch for further changes coming out of Ordinance 2026-17, since the village has amended this program repeatedly since 2020 and shows no sign of stopping.
None of this makes Elk Rapids a bad place to buy. It makes it a place where the zoning line matters as much as the lake frontage, and where a good local search should start with the parcel's jurisdiction, not the town's average nightly rate.
FAQ
Does an existing short-term rental license transfer automatically when a licensed property sells in the village? The village's licensing program is tied to the property and its compliance history, but availability and terms can change with each ordinance update, including the one heard on June 2, 2026. Verify directly with village staff before assuming a license carries over unchanged.
Is the township's Bed & Breakfast process easier than the village's cap? Not necessarily easier, just different. There is no numeric cap in the township, but the 2,500-foot spacing rule between existing Bed & Breakfast or Tourist Home uses can functionally block a new approval in a cluster of homes that already has one nearby.
Why do market data platforms show one number for "Elk Rapids" if the rules are split across two governments? Most rental data platforms aggregate by zip code or place name, not by municipal boundary. Elk Rapids village and Elk Rapids Township can share an address format while operating under entirely separate zoning and licensing authorities, which is exactly the kind of detail that only shows up when you check the parcel itself.
If you're weighing a purchase in Elk Rapids with rental income in mind, or you just want a clear read on what a specific parcel is actually zoned to allow, Ryan & Jenni Craig can walk the jurisdiction question with you before you write an offer, not after. Schedule your free consultation and bring the address. We'll help you find out which rules actually apply to it.
