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Chicago Passes Short-Term Rental Ordinance

The City of Chicago enacted an ordinance that regulates Chicago’s shared housing and vacation rental industry (shared housing ordinance). The shared housing ordinance imposes regulations, registration and licensing requirements, booking surcharges, and reporting requirements on short-term residential rental intermediaries and advertising platforms. Hosts that operate more than one short-term rental in Chicago are also subject to additional regulations under the shared housing ordinance. This Update highlights the main points of the shared housing ordinance.

For a detailed discussion on Chicago’s shared housing ordinance, see Practice Note, Chicago’s Shared Housing Ordinance (IL).

Internet Providers

There are generally two types of internet providers for short-term rentals:

  • A short-term residential rental intermediary (rental intermediary).
  • A short-term residential rental advertising platform (advertising platform).

(Chicago Municipal Code § 4-13-100.)

 Rental Intermediary

A rental intermediary under the shared housing ordinance is any person or entity that for compensation or for a fee:

  • Uses a platform to connect guests with hosts for a short-term rental. A platform is:
    • an internet-enabled application;
    • a mobile application; or
    • any other digital platform used by a rental intermediary to connect guests with hosts.
  • Primarily lists shared housing units on its platform.

 

A shared housing unit is a dwelling unit that:

  • Contains six or fewer sleeping rooms.
  • Is rented in whole or in part for transient occupancy by guests.
  • A rental intermediary generally requires the guest to make a payment to the host for the rental through its website.

(Chicago Municipal Code §§ 4-6-300, 4-13-100, 4-14-010, and 17-17-0104-S.)

 Advertising Platform

An advertising platform is any person or entity that for compensation or for a fee:

  • Uses a platform to connect a guest with a host for a short-term rental.
  • Primarily lists on its platform:
    • licensed bed-and-breakfast establishments;
    • licensed vacation rentals;
    • hotels; and
    • dwelling units that require a license under the shared housing ordinance to engage in a short-term rental.

(Chicago Municipal Code § 4-13-100.)

An advertising platform typically:

  • Is a website:
    • where a host pays to advertise its rental property on the website; and
    • that allows a guest to contact a host.
  • Has the host coordinate directly with the guest for receipt of the rental payment instead of the guest making the payment through the website.

(Chicago Municipal Code § 4-13-100.)

Shared Housing Surcharge and Hotel Accommodations Tax

The shared housing ordinance imposes a tax of 4% of the gross rental or leasing charge for a short-term rental (shared housing surcharge). The purpose of shared housing surcharge is to fund supportive services for:

  • The permanent housing of homeless families.
  • The provision of services and housing for the chronically homeless.

Up to 8% of the shared housing surcharge is used to enforce the shared housing ordinance with the remaining revenue for supportive services.

The shared housing surcharge is in addition to an existing hotel accommodations tax of 4.5% of the gross rental or leasing charge that is imposed on short-term rentals for a total tax of 8.5%.

(Chicago Municipal Code § 3-24-030.)

License Fees

The shared housing ordinance requires that certain entities and individuals pay a license fee to operate within Chicago.

A rental intermediary must pay a license fee of:

  • $10,000.
  • Plus an additional $60 per unit for each short-term rental listed on its platform.

An advertising platform must pay a license fee of:

  • $10,000 if the advertising platform has 1,000 or more short-term rentals listed on its platform.
  • $5,000 if the advertising platform has 999 or fewer short-term rentals listed on its platform.

A shared housing unit operator must pay a license fee of $250.

(Chicago Municipal Code § 4-5-010.)

Obligations and Responsibilities

The shared housing ordinance also:

  • Limits the type of building and number of units within a building that are allowed to be rented (Chicago Municipal Code § 4-6-300(h)).
  • Imposes obligations on rental intermediaries and advertising platforms including:
    • advertising requirements;
    • insurance requirements;
    • creating a quality of life plan; and
    • reporting requirements (Chicago Municipal Code §§ 4-13-240 and 4-13-340).
  • Imposes duties on shared housing hosts including requiring the hosts to:
    • install smoke and carbon monoxide detectors;
    • comply with advertising restrictions;
    • maintain guest registration records (Chicago Municipal Code § 4-14-040);
    • comply with any condominium or cooperative restrictions (Chicago Municipal Code § 4-14-060); and
    • assume responsibility for their guests’ actions.

The shared housing ordinance imposes financial penalties on hosts for noncompliance with the ordinance.

For more information about the ordinance, see City of Chicago: Shared Housing Surcharge. For a copy of the shared housing ordinance, see the Chicago of Chicago’s website.

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