The allure of the Windy City, with its unbeatable skyline and diverse neighborhoods, is undeniable. It’s no wonder why Chicago has become not just a tourist hotspot but also a flourishing market for short-term rentals. Yet, with great opportunity comes great responsibility — especially with the strict regulatory framework in place for short-term rental operators in Chicago. This comprehensive guide is crafted to help short-term rental hosts and vacation rental owners understand the legal landscape they must navigate to succeed in this competitive market, comply with Airbnb Chicago laws, and maintain a positive reputation.

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The Booming Short-Term Rental Market in the City of Chicago

Short-term rental services like Airbnb have experienced a meteoric rise in Chicago, transforming how travelers experience the city and how part-time business owners generate income. However, this rapid growth has led to some challenges, prompting local authorities to establish clear and strict regulations to govern this industry. For any Airbnb host or short-term rental owner, compliance with local laws is not just a matter of avoiding fines or legal ramifications; it’s also about ensuring the safety and well-being of guests and neighbors.

Unpacking the Legal Landscape of Airbnb Chicago Laws & Shared Housing Units

The short-term rental regulations in the city of Chicago can feel complicated at first glance. From licensing to taxation, hosts and rental owners must familiarize themselves with the demands of the local ordinance. The ordinance categorizes housing units as either shared housing units or vacation rentals.

Each category has its own set of rules and obligations that must be met. Understanding these laws is only the first step. The true challenge for hosts is incorporating these rules into their operations in a manner that’s both efficient and sustainable.

Shared Housing Ordinance:

The Shared Housing Ordinance is an important law for individuals who rent out their residential properties for short stays via platforms like Airbnb. It mainly applies to properties that are rented out for less than 30 days. Some of the essential elements of this ordinance include:

• Registration and Licensing: Owners of shared housing units are necessitated to register their properties with the city authorities and secure an official license. This step demands the submission of comprehensive property details, a review to ensure the property complies with health and safety standards, and the payment of an associated licensing fee.
• Adherence to Operating Standards: The ordinance mandates strict adherence to a set of operating standards. These standards encompass maintaining adequate liability insurance, conforming to all relevant safety and health guidelines, and appointing a local contact person. This individual is responsible for resolving any issues promptly, ensuring a smooth operation and a satisfactory guest experience.
• Mandatory Data Sharing: To facilitate regulation and tax compliance, platforms offering shared housing options are obligated to share pertinent data with municipal authorities. This provision aids in the effective monitoring and enforcement of the ordinance requirements, ensuring a fair and regulated short-term rental ecosystem.

Vacation Rental Ordinance

The Vacation Rental Ordinance specifically addresses the rental of entire properties for brief periods, akin to traditional holiday homes, distinguishing itself from shared housing by not necessitating the presence of the homeowner during the renter’s stay. Key elements consist of:

• Licensing and Inspection: Consistent with the protocols established by the Shared Housing Ordinance, properties designated for vacation rentals must obtain a proper license. This process includes a thorough inspection to verify that the rental meets all local building standards and a review to ensure adherence to zoning regulations.
• Compliance with Regulations: Property owners are required to adhere to several regulations, such as maintaining accurate guest records, observing limitations on the number of occupants, and ensuring that the rental property does not disrupt the peace of the surrounding community.
• Preservation of Community Character: The ordinance is designed to maintain the traditional charm and livability of residential areas by limiting the transformation of numerous properties into short-term vacation rentals, thus addressing concerns over the scarcity of long-term housing options and potential shifts in the community fabric.

The Licensing and Registration Process

To operate a short-term rental in the city of Chicago, you must obtain the proper licenses and registrations before listing your property. You’ll need to determine if you need a Bed and Breakfast License or a Vacation Rental License.

Bed and Breakfast License

A Bed and Breakfast license is required for shared housing units or housing units where the host might share the space with guests. This type of license is especially suited for homeowners who wish to rent out their property on a temporary basis, offering a portion of their home, such as a single room or a suite, to guests.

Vacation Rental License

A Vacation Rental License is necessary for those operating their property as a full-time vacation rental, where the host is not present on the property during the guest’s stay. This license is ideal for property owners who aim to utilize their homes exclusively for short-term accommodations without the presence of the owner during the rental period.

What Documents Do You Need to Apply?

To apply for a Vacation Rental License in the city of Chicago, applicants must prepare a comprehensive set of documents. These documents include, but are not limited to:

• Proof of Ownership: A valid deed, mortgage statement, or other legal documents verifying the applicant’s ownership of the property.
• Government-Issued ID: A copy of a driver’s license, passport, or other forms of government-issued identification to confirm the identity of the applicant.
• Property Insurance: Evidence of property insurance that covers short-term rental activity, demonstrating that the property is insured against potential damage or liability issues.
• Floor Plan: A detailed and accurate floor plan of the property, indicating the specific areas that will be available for guest use.
• Safety Certifications: Documentation certifying that the property meets all necessary safety standards, including working smoke and carbon monoxide detectors, fire extinguishers, and safe exit routes in case of emergency.

These documents ensure that all short-term rental properties in the city of Chicago meet the city’s standards for safety. The application process is designed to protect both hosts and guests, maintaining the integrity of residential neighborhoods while accommodating the growing demand for short-term rentals in the city of Chicago.

Apply Online & Pay Applicable Fees

Once all the necessary documents are gathered, applicants can submit their application online through the City of Chicago’s Business Affairs and Consumer Protection (BACP) website. A non-refundable application fee is required to be paid at this stage.

These are the rates for operating short-term rentals at the time of publishing; please note that they may change:

• 1-9 rentals: $250 per year, plus a $60.00 per unit fee
• 10-24 rentals: $350 per year, plus a $60.00 per unit fee
• 25-49 rentals: $500 per year, plus a $60.00 per unit fee
• 50-99 rentals: $1,000 per year, plus a $60.00 per unit fee
• 100-499 rentals: $5,000 per year, plus a $60.00 per unit fee
• 500-999 rentals: $7,500 per year, plus a $60.00 per unit fee
• 1,000 or more rentals: $10,000 per year, plus a $60.00 per unit fee

Undergo an Official Inspection

Once the online application is submitted and fees are paid, a BACP inspector will schedule an official inspection of the short-term rental property. This inspection ensures that all necessary safety standards are met and that the property complies with zoning and licensing regulations.

If any issues are found during the inspection, applicants will be given a period of time to address them before another inspection. Failure to meet all requirements may result in the denial of the license.

If you are granted a license, you will be required to renew it annually. This involves submitting a renewal application, paying the associated renewal fees, and informing the city of any significant changes.

Final Thoughts

Navigating the licensing process for operating short-term rentals in the city of Chicago involves understanding regulations, completing applications, paying fees, and undergoing inspections. Successfully managing these steps ensures compliance with local laws, promoting safety and fairness within the community.

Remember, the landscape of regulations can shift, requiring ongoing vigilance and adaptation from operators. By following these guidelines, you contribute to the responsible growth of the sharing economy and ensure a positive experience for both guests and neighbors.

Host Tools provides an automated, unified calendar for short-term rental hosts, allowing you to seamlessly list on all major channels. Start your free trial today!