Silver Bay approves first short-term rental code, with tight limits

Silver Bay’s narrow 3-2 vote on a special council meeting has turned a long-running land-use fight into a tightly controlled short-term rental program, opening the city to vacation-rental income for the first time while setting hard limits meant to protect neighborhood character and housing stability. Under the new code approved May 25, short-term rentals in Silver Bay will be capped at six permits, restricted to Forest Reserve-zoned areas, and required to sit at least 300 feet from another residence.

That framework gives a small number of property owners a new path to earn revenue in a North Shore community that sits on a major travel corridor, but it also leaves most residents outside the market and gives nearby homeowners a strong buffer against clusters of rental units. The city will now have to administer permits, check spacing, and respond to complaints as the program moves from policy debate to daily enforcement.

The decision did not come out of nowhere. Silver Bay council members tabled an earlier proposal on March 20, 2023 that also would have allowed up to six short-term rentals only in Forest Reserve areas. A later public-hearing discussion said the city would not allow any rentals in the R1 or R2 residential zones. Then, in September 2024, the council revised Chapter 12 so short-term rental permits were limited to the Golf Course Residential, Forest Reserve, and Bayview Park/Boathouse Bay districts, showing the city had already begun narrowing where such uses could fit.

By December 3, 2025, the Silver Bay Planning & Zoning Commission was still discussing the Golf Course Housing-Short Term Rental Code and the feasibility of residential versus short-term rental uses. That record shows a city that has spent years trying to sort out whether tourism demand should be welcomed, steered or constrained in a community with a limited housing stock.

The local vote also fits a broader Lake County pattern. The county approved a one-year moratorium on new short-term rentals in May 2022 in unincorporated areas outside Two Harbors, Beaver Bay and Silver Bay, then adopted a 3 percent cap on short-term rentals in May 2023 and announced amended vacation-rental-home requirements the same month. Silver Bay’s action now places the city alongside other North Shore governments that have chosen regulation over a free market approach.

As a statutory plan A city with an elected mayor and four council members, Silver Bay made a consequential decision by a slim margin. The special meeting itself underscores how seriously the council treated the issue, and the new code now sets the terms for who may operate, where they may operate, and how close those rentals can come to neighboring homes.