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March 19, 2024

Airbnb & Short Term Rental Laws and Regulations In Chicago - 2024

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Overview of Chicago Short-Term Rental Market

The Chicago short-term rental market has emerged as a dynamic landscape for investors and hosts looking to tap into the city's bustling tourism industry. A principal player in this domain is Airbnb, which facilitates a significant portion of home sharing in the Windy City. Growth in this sector reflects an increasing demand for flexible and local lodging options, allowing visitors to experience Chicago through the unique lens of its diverse neighborhoods.

The market's expansion is guided not only by tourist inflow but also by the rise of novel investment opportunities. Local homeowners often find themselves in a position to invest in their properties' potential as short-term rentals, thus participating in the shared housing economy. This niche is not just about providing a place to sleep; it extends to offering an authentic slice of Chicago living, which can be more enticing than traditional hotel stays.

Chicago's Airbnb landscape, according to Airbnb Data, suggests varied performance metrics, with an average occupancy rate around 34% and an average daily rate of $141. This indicates a competitive yet profitable situation for those who are well-informed and strategic about their short-term rental ventures.

Compliance with local laws is essential for success. The city's regulations necessitate a clear understanding to ensure lawful operation. Prospective hosts should acquaint themselves with the latest Airbnb Chicago Laws, which encompass registration processes, and operational stipulations designed to preserve the city's housing market and neighborhood integrity.

Despite regulatory frameworks, the Chicago short-term rental space continues to thrive, presenting a valuable proposition for those looking to invest in the shared housing economy. With proper management, these properties can offer sustained revenue streams and enrich the cultural fabric of their neighborhoods.

Legislative Framework for Short-Term Rentals in Chicago

In Chicago, short-term rentals are governed by a set of regulations and ordinances to ensure they operate within the city's legal landscape. The government has established a comprehensive short-term rental ordinance that dictates permissible operations for platforms providing services like Airbnb.

One of the principal components is the registration of Shared Housing Units. These are properties rented out, in full or part, to guests through online platforms. Operators are required to secure a registration issued by the City. The ordinances explicitly state that each unit must be properly registered and licensed.

Vacation rentals, distinguished from shared housing units, are also subject to city regulations. Operators should be aware that Chicago has zoning laws affecting the location and operation of short-term rentals, making it crucial to verify if a property falls within a permissible zone.

Chicago's regulatory framework mandates operators to adhere to rules and regulations conducive to safety and community standards. For example, they must provide emergency contact information, maintain liability insurance coverage, and adhere to building and housing standards.

Key rules for operators include:

  • Registration and Licensing: All hosts must obtain a valid registration or license.
  • Insurance: A minimum of $1,000,000 in commercial general liability insurance is required.
  • Zoning Compliance: Rentals must comply with designated zoning requirements.
  • Occupancy: Limits may be placed on the number of occupants per rental.

These rules are subject to change, and it is advised for operators to consult the City of Chicago's official guidelines for the most up-to-date information on short-term rental regulations.

Registration and Licensing Process in Chicago

In Chicago, the process to legally operate a short-term rental involves distinct steps for initial registration and adherence to licensing regulations. Hosts are expected to navigate through city requirements to ensure they conform to the legal framework established for shared housing and vacation rentals.

Initial Registration Requirements

The initial registration process for a shared housing unit or vacation rental in Chicago demands that hosts obtain the proper licensing. To begin, an application must be filled out and submitted to the Chicago Department of Buildings. Here are the critical steps:

  1. Shared Housing Unit Operator License (SHUOL): For hosting in multiple units, this license is required. It imposes a cap, usually the lesser of one-quarter of the total dwelling units or six rental units. Information about this can be found on the City of Chicago's website.
  2. Vacation Rental License: Separate from SHUOL, this license applies to those providing hospitality services without the involvement of a rental intermediary.

Both licenses require specific documentation, such as proof of insurance and an agreement to comply with Chicago's short-term rental regulations.

Renewal of Licenses and Ongoing Compliance

Maintaining compliance for hosts requires attention to detail and an understanding that licensing is not just a one-time event. Licenses must be regularly renewed, and hosts must ensure they meet all operational standards set by the City. The key points include:

  • Annual Renewal: Licenses need yearly renewal accompanied by updated documentation, if applicable.
  • Ordinance Adherence: Continuous compliance with Chicago's ordinances regarding noise, occupancy, and safety is mandatory.

The City of Chicago's Business Direct service is a resource for managing licenses and staying informed about compliance obligations, including tax collection and remittance responsibilities.

Operational Guidelines for Hosts in Chicago

In Chicago, hosts must adhere to a set of operational guidelines that regulate their ability to offer short-term rentals. These include designating a primary residence, obtaining adequate insurance, and understanding local community considerations. Compliance with these will help maintain a good standing with regulatory bodies and the community alike.

Primary Residence Restrictions

Chicago mandates that a short-term rental must be the host's primary residence. This means the residential unit rented out should be the main living abode of the host, limiting the ability to rent out numerous non-primary residences across the city. Specifically, a host is allowed to rent out their primary residence only, with some limitations on the number of rooms.

Insurance and Liability

Hosts are required to have a robust liability insurance policy with a minimum coverage of $1,000,000 in commercial general liability. This policy is intended to protect both the host and the guests in the event of any accidents or damages that may occur during the rental period. Insurance confirmation is necessary to operate legally and safeguard against potential claims.

Neighborhood and Ward Considerations

Hosts must also consider their neighborhood and ward when offering short-term rentals. There is a limit on the number of units that can be rented as short-term rentals in a single building to one-quarter of total units or six, whichever is fewer. This restriction is in place to ensure that neighborhoods do not become saturated with transient rental properties, thereby maintaining community stability and integrity. Hosts are encouraged to engage with their local community to ensure that their rental operation respects the character and norms of their neighborhood.

Tax Obligations and Additional Surcharges in Chicago

Navigating the complex landscape of local taxation on short-term rentals is crucial for hosts in Chicago. Specifically, compliance with city regulations concerning the Hotel Accommodations Tax and various surcharges, including a Shared Housing Surcharge and a Domestic Violence Surcharge, can be intricate.

Local Taxes Imposed on Short-Term Rentals

In Chicago, short-term rental operators are obliged to collect and remit the Hotel Accommodations Tax. This tax is levied by the City and Cook County, at rates that are subject to change. As of the latest regulations, short-term rental hosts should be aware of the following tax rates:

  • City of Chicago: a 4.5% Hotel Accommodations Tax
  • Cook County: a 1% tax on hotel accommodations

The above taxes are collected on rentals of less than 30 consecutive days. It is incumbent upon hosts to register with the Illinois Department of Revenue and to ensure they adhere to tax reporting and payment schedules.

Specific Surcharges for Shared Housing

In addition to the standard taxes, two specific surcharges are levied on shared housing platforms, which include:

  1. Shared Housing Surcharge: This is a fixed amount added to each booking and remitted by the hosting platform. It helps fund city services and enforcement activities related to the shared housing system.
  2. Domestic Violence Surcharge: A relatively smaller extra charge per booking, this surcharge contributes to services for victims of domestic violence.

Hosts must verify periodically to ensure these surcharges are properly handled by the rental platform they are using. For instance, Airbnb collects these surcharges and is responsible for their remittance to the appropriate municipal authorities.

In summary, short-term rental hosts in Chicago should be meticulous in their approach to managing tax obligations and additional surcharges to avoid penalties and ensure compliance with local laws.

Understanding Zoning and Eligibility in Chicago

The success of a short-term rental in Chicago hinges significantly on understanding and complying with zoning regulations and determining the correct eligibility for hosting. It is imperative for potential hosts to navigate the intricate local laws that govern where and how properties can be rented on a short-term basis.

Impact of Zoning Regulations on Rentals

Chicago's zoning regulations are designed to maintain the character of neighborhoods while also considering the needs of tourists seeking vacation rentals. The city is divided into zones, and each zoning requirement specifies whether a property can be used as a short-term rental. Properties located in a zone that permits short-term rentals can legally operate as Airbnb listings, subject to meeting other regulatory requirements.

  • Zones Allowing Short-Term Rentals: Typically, these are areas zoned for commercial or mixed-use.
  • Zones with Restrictions or Prohibitions: Residential areas may have more stringent rules or outright bans.

Determining Eligibility for Hosting

Eligibility for hosting a short-term rental in Chicago involves a few key steps to ensure compliance with local laws:

  1. Confirm Zoning Status: Hosts must verify their property is in an area zoned for short-term rental usage.
  2. Obtain Necessary Permits/Licenses: Depending on the number of units being rented, a Shared Housing Unit Operator License may be required.

Hosts are accountable for adhering to these stipulations to avoid penalties and ensure their operations are legitimate and sustainable. Understanding these elements before listing a property is crucial for legitimate operation.

Safety and Inspection Requirements in Chicago

In Chicago, safety and inspection regulations are stringent for those operating a short-term rental property. Licensing is a critical first step as it verifies the host’s compliance with local laws. A short-term rental property must pass an inspection to ensure it meets the city’s safety standards. This usually encompasses checks for functioning smoke and carbon monoxide detectors, safe and accessible exits, and the overall livability of the space.

For the safety of guests, the City of Chicago mandates that hosts display their license number in all listings and maintain a guest accommodation that adheres to building codes. Here's a concise overview of what hosts must be prepared to comply with:

  • Smoke and carbon monoxide detectors installed and operational
  • Means of egress clearly marked and unobstructed
  • Fire extinguishers readily available and serviced
  • Property insurance coverage, including a minimum of $1,000,000 in commercial general liability

The city may require additional fire safety inspections for buildings that contain a certain number of units. Importantly, these regulations are designed to protect guests and ensure that the short-term rental property provides a safe environment. Failure to meet these regulations can result in fines and revocation of the license to operate a short-term rental. It is the responsibility of the host to stay informed and ensure their property is compliant at all times. Details on these requirements can be further explored through the insights offered by Steadily and the City of Chicago’s guidelines for shared housing and accommodation licensing.

Legal Considerations for Short-Term Rentals in Chicago

Short-term rental regulations in Chicago are multifaceted, addressing issues from tenant rights to community housing needs. Understanding these legalities is essential for anyone looking to list or stay at a short-term rental.

Tenant and Homeowner Association Rules

Leases may contain specific clauses that prohibit or restrict the ability to operate a short-term rental. Tenants interested in listing their rented property on platforms like Airbnb must review their lease agreements closely to ensure they are not violating any terms. Typically, explicit consent from the landlord is required before proceeding.

Homeowner Association (HOA) rules can similarly impose restrictions or complete bans on short-term rentals within their communities. These rules are put in place by the HOA's board, and adherence is non-negotiable for homeowners. As regulations may vary significantly between associations, one must review their HOA's bylaws carefully.

Addressing Housing Shortage and Community Impact

Regulations often seek to mitigate the impact of short-term rentals on the local housing market. To address potential housing shortages, the City of Chicago may enforce limits on the number of days a property can be rented out annually. These measures are in place to ensure a sufficient supply of long-term rental options for residents.

The role of the commissioner includes overseeing compliance with these rules, which can involve the use of licenses or permits for operation. Every short-term rental host is required to register with the city, helping to maintain community stability and prevent excessive turnover that can affect neighborhood cohesion.

In summary, staying informed about these legal considerations is imperative for maintaining the delicate balance between the rights of tenants, the policies of homeowner associations, the directives of city commissioners, and the overall housing ecosystem in Chicago.

Navigating Penalties and Violations in Chicago

In Chicago, hosts operating short-term rentals through platforms like Airbnb must adhere to specific ordinances to avoid penalties. The City of Chicago enforces strict regulations to ensure rentals meet safety and zoning standards. Non-compliance can result in significant fines.

Hosts should familiarize themselves with the necessary compliance requirements, including registration and acquiring the proper licensing. Failure to obtain and display a valid registration number may lead to a fine, which, as stipulated by local regulations, could be substantial.

Here is a breakdown of potential penalties:

  • Lack of Registration: Failure to register can lead to fines starting from $1,500.
  • Insurance Requirements: Operating without the minimum $1,000,000 in commercial general liability insurance may result in fines and legal consequences.
  • Zoning Violations: Offering short-term rentals in unauthorized zones can incur penalties.

To navigate these regulations, hosts should:

  1. Register their property as a short-term rental with the city.
  2. Ensure their rental space meets all safety codes and zoning laws.
  3. Secure sufficient insurance coverage to meet local requirements.

By carefully understanding and following these ordinances, hosts can minimize the risk of violations and create a compliant and successful short-term rental business in Chicago. For a detailed guide on insurance requirements for short-term rentals, one may refer to the in-depth article on securing the right insurance policy for Airbnb hosts in Chicago.

Resources for Hosts and Investors in Chicago

Investing in short-term rentals in Chicago requires a solid understanding of the legal landscape and market trends. Hosts and investors must refer to official guides and stay up-to-date with market data to make informed decisions.

Official Guides and Resources

For hosts looking for comprehensive guidance on local legislation, the Airbnb short-term rental regulation toolkit for policymakers is an invaluable resource, offering best practices on registration, taxes, safety, and data sharing. Additionally, investors should meticulously examine the Airbnb's resource page, which delineates tax obligations, licensing, permits, and insurance requirements.

Understanding the Short-Term Rental Market

Any investor or host aiming to succeed in the short-term rental market should recognize the significance of market analytics and trends. Host Tools' article on navigating Airbnb Chicago Laws provides guidance on legal compliance and maintaining a positive reputation, while HostScouts offers insights into the tax implications for short-term rentals in Illinois at the state level. These resources play a pivotal role in identifying opportunities and assessing risks within the short-term rental investment space.

Bed and Breakfast Establishments in Chicago

In Chicago, bed and breakfast establishments are distinct entities that are subject to specific zoning laws and regulations. They differ from other short-term rental options by providing a unique accommodation experience, often including a meal for guests.

Licensing and Zoning

To operate legally, a bed and breakfast must secure the proper license from the city. Chicago's zoning ordinance stipulates which areas bed and breakfasts can be located and outlines the process for obtaining a special use permit, if needed.

  • Permitted Zoning Districts: B&Bs are allowed in various zoning districts, but operators should confirm their property aligns with current zoning requirements.
  • License Application: Operators must apply to the city, providing detailed information about their establishment.
  • Inspections: Compliance with building and safety codes is mandatory, and inspections will be conducted to ensure adherence.

Guest Accommodations

Chicago places an importance on the overall guest experience in bed and breakfast establishments.

  • Capacity: There's a limitation on the number of guest rooms, which is usually determined by the size of the property and zoning district.
  • Amenities: Operators often provide rooms with private baths and common areas for dining and relaxation.
  • Meals: Breakfast is included in the stay, with many offering homemade, local cuisine.

Operators are advised to consult the Shared Housing Registration and Accommodations Licensing - City of Chicago for detailed information about licensing and regulations. It's crucial that proprietors of bed and breakfast establishments in Chicago remain compliant with all regulations to ensure their business can operate smoothly and legally.

Frequently Asked Questions

Understanding the complexities of local regulations is critical for Airbnb hosts in Chicago to operate legally and efficiently. Below are some frequently asked questions regarding the city's short-term rental laws.

What is the summary of Chicago's short-term rental ordinance?

Chicago's short-term rental ordinance establishes a framework for regulating and taxing shared housing and vacation rentals. Hosts are required to obtain a license, adhere to zoning regulations, and ensure their property meets safety and insurance standards.

How can I look up whether a property has a Chicago Airbnb license?

To confirm if a property has a valid Chicago Airbnb license, individuals can use the city's online database where registered and licensed units are listed. This platform allows users to search by address or license number.

Are there specific restrictions that apply to Airbnb rentals in Chicago?

Yes, there are specific restrictions in place for Airbnb rentals in Chicago, including the type of property that can be rented out, caps on the number of units per building that can be rented, and restrictions on the number of nights a property can be rented if the host is not present.

What requirements must be met to legally operate a short-term rental in Chicago?

Legally operating a short-term rental in Chicago involves obtaining a registration or license number, undergoing potential property inspections, and meeting insurance obligations. The unit must comply with building codes and safety standards.

Can you list the buildings where Airbnb is prohibited in Chicago?

A comprehensive list of buildings where Airbnb is prohibited can be found on the City of Chicago's website. Property owners may also choose to forbid short-term rentals within their buildings, and these addresses are included in the city's list of prohibited properties.

What does the Chicago shared housing ordinance entail for Airbnb hosts?

The Chicago shared housing ordinance requires hosts to register their listing with the city, maintain records for inspections, and collect lodging taxes. It's crafted to promote the safety and well-being of guests and neighbors while balancing the interests of local residents.

This post is for informational purposes only and does not serve as legal, financial, or tax advice. Consult your own legal, financial, or tax advisor for matters mentioned here. The information on this site is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any of our policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts, deductibles and other features are subject to individuals meeting our underwriting criteria and state availability. Not all features available in all states. Discounts may not apply to all coverages. Steadily is not liable for any actions taken based on this information. If you believe any of this information may be inaccurate please contact us.

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