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Chicago Short Term Rental Regulation: A Guide For Airbnb Hosts

What are short term rental (Airbnb, VRBO) regulations in Chicago, Illinois?

The short term rental regulations in Chicago, Illinois are comprehensive and include various requirements for hosts operating in the city. Hosts must obtain the proper licenses and registrations before listing their properties, with the need to determine if they require a Bed and Breakfast License or a Vacation Rental License.

Chicago has specific ordinances governing short term rentals, making compliance a necessity for hosts intending to share their homes. These regulations include acquiring a business license, passing property inspections, securing minimum insurance coverage, and meeting zoning requirements1. Illinois legally defines a short-term rental as any rental of a residential dwelling unit for 31 days or less, encompassing various types of accommodations like entire home rentals, private or shared room rentals, accessory dwelling unit rentals, and vacation rental homes2.

Hosts in Chicago are required to have a business license, pass property inspections, secure minimum insurance coverage, and meet zoning requirements3.

Additionally, hosts must include and conspicuously display the registration number in all advertisements, listings, rental agreements, and bookings, install safety equipment like smoke alarms and carbon monoxide detectors, and maintain records of guest registration for three years3.

Chicago imposes specific taxes on short-term vacation rental businesses, including the Hotel Accommodations Tax, Shared Housing Surcharge, and Domestic Violence Surcharge, which Airbnb collects and remits on behalf of hosts4.

Starting a Short Term Rental Business in Chicago

Operating a short-term rental in the city of Chicago requires navigating a complex web of regulations and licensing requirements. The city has implemented a comprehensive framework to govern the short-term rental industry, with the goal of balancing the needs of hosts, guests, and the broader community.

To start a short-term rental business in Chicago, the first step is to determine the appropriate type of license you need. The city offers two main options: a Bed and Breakfast License and a Vacation Rental License. The key distinction between the two is that a Bed and Breakfast License is required if you are renting out a room or rooms in your primary residence, while a Vacation Rental License is needed if you are renting out an entire unit that is not your primary residence.

Short Term Rental Licensing Requirement in Chicago

The licensing requirements in Chicago are designed to ensure that short-term rental operators are complying with local regulations and maintaining safe, high-quality accommodations for guests. All short-term rental hosts, regardless of the type of license they hold, must register their property with the city and obtain the necessary permits.

For hosts renting out a single unit or shared housing unit in their primary residence, the registration process is relatively straightforward. However, if you plan to operate multiple short-term rental properties or units that are not your primary residence, you will need to obtain a Shared Housing Unit Operator License, which involves additional requirements and fees.

The licensing process can be complex, and hosts must carefully navigate the city's regulations to ensure they are in full compliance. Failure to obtain the proper licenses or follow the rules can result in fines and other penalties.

Required Documents for Chicago Short Term Rentals

Before submitting your short-term rental license application, you will need to gather several key documents, including:

  • Proof of ownership or a valid lease agreement for the property
  • A detailed floor plan of the rental unit
  • Proof of insurance coverage
  • Emergency contact information for the property
  • Zoning information to ensure the property is located in an area that permits short-term rentals

Providing these documents upfront can help streamline the application process and ensure your license is approved in a timely manner. The city may also require additional information or documentation depending on the specific details of your rental property and business.

Chicago Short Term Rental Taxes

In addition to the licensing requirements, short-term rental hosts in Chicago are subject to a variety of taxes and fees. These include the Chicago Hotel Accommodation Tax (4.5%), the Chicago Shared Housing Surcharge (4%), the State Hotel Operators' Occupation Tax (6%), and the Cook County Hotel Tax (1%).

Airbnb and other short-term rental platforms typically collect and remit these taxes on behalf of their hosts, simplifying the process for individual hosts. However, it's important for hosts to understand the tax implications and ensure they are complying with all applicable regulations.

Failure to pay the required taxes can result in significant penalties and fines, so it's crucial for short-term rental hosts in Chicago to stay up-to-date on their tax obligations.

Chicago wide Short Term Rental Rules

Beyond the licensing and tax requirements, Chicago has implemented a comprehensive set of rules and regulations governing short-term rentals. These include:

  • Mandatory notification to the Chicago Police Department of any suspected illegal activity or public nuisance
  • Strict cleanliness and sanitation standards for rental units
  • Requirements for the display of registration numbers and contact information
  • Safety standards, such as the installation of smoke alarms and carbon monoxide detectors
  • Record-keeping obligations for guest registration and other operational data

Hosts must familiarize themselves with these rules and ensure they are in full compliance to avoid potential fines or other penalties. The city takes enforcement of these regulations seriously, and hosts who fail to follow the rules may face significant consequences.

Does Chicago Strictly Enforce STR Rules? Is Chicago Airbnb Friendly?

Chicago has taken a relatively strict approach to regulating the short-term rental industry, with the city implementing a comprehensive licensing system, occupancy limits, and a ban on single-night stays. This suggests that Chicago is not as Airbnb-friendly as some other major cities, where the regulatory environment may be more permissive.

However, despite the strict regulations, many Airbnb hosts continue to operate in Chicago, taking advantage of the city's thriving tourism market. According to data from the city, there are approximately 6,900 licensed shared housing units in Chicago, indicating that the short-term rental industry remains active, albeit within the confines of the city's regulatory framework.

Hosts on forums like Bigger Pockets and Reddit have expressed frustration with the licensing requirements and taxes, but also acknowledge the potential for profitability in Chicago. While the regulatory environment may be more challenging than in some other cities, many hosts have found ways to successfully navigate the system and operate their short-term rental businesses in the city.

It's important to note that the enforcement of short-term rental regulations in Chicago can vary, and some hosts may be able to operate with less scrutiny than others. However, the city has demonstrated a willingness to crack down on non-compliant hosts, and the potential for fines and other penalties means that hosts must take the regulations seriously.

How to Start a Short Term Rental Business in Chicago

If you're interested in starting a short-term rental business in Chicago, here are the key steps to follow:

  • Determine if your property is eligible for a short-term rental license, based on factors such as the number of units and whether it is your primary residence.
  • Gather the required documentation, including proof of ownership, a floor plan, insurance information, and emergency contact details.
  • Apply for the appropriate license (Bed and Breakfast or Vacation Rental) and register your shared housing unit with the city.

Ensure you comply with all applicable rules and regulations, including tax requirements, safety standards, and guest limitations.

List your property on platforms like Airbnb or VRBO, making sure to include the required registration number in all listings and advertisements.

Maintain accurate records of guest registration and other operational data, as required by the city.

The process can be complex and time-consuming, so it's important to familiarize yourself with the regulations and seek guidance from the city or other resources if needed.

Who to Contact in Chicago about Short Term Rental Regulations and Zoning?

For questions or concerns regarding short-term rental regulations and zoning in Chicago, you can contact the City of Chicago's Department of Business Affairs and Consumer Protection:

Phone: (312) 744-6060
Email: [email protected]
Website: https://www.chicago.gov/city/en/depts/bacp.html

The department can provide guidance on the licensing process, answer questions about specific regulations, and help you navigate the complexities of operating a short-term rental business in the city.

They can also assist with zoning inquiries and help you determine if your property is located in an area that permits short-term rentals.

What do Airbnb Hosts in Chicago on Reddit and Bigger Pockets Think about Local Regulations?

Airbnb hosts in Chicago have expressed a range of opinions about the city's short-term rental regulations on forums like Reddit and Bigger Pockets.

On the Bigger Pockets forum, Chicago-based hosts have described the licensing requirements and taxes as "burdensome" and "expensive," highlighting the challenges of operating a short-term rental business in the city. However, they also acknowledge the potential for profitability, especially in Chicago's thriving tourism market.

Similarly, on the Chicago subreddit, hosts have discussed the difficulties of navigating the regulatory landscape, but some have also shared strategies for successfully operating short-term rentals in the city. Some hosts have found ways to work within the rules, while others have expressed frustration with the perceived overregulation of the industry.

One Bigger Pockets user, who operates multiple short-term rentals in Chicago, noted that the city's regulations are "not the most host-friendly," but that it's still possible to run a profitable business if you're willing to put in the effort to comply with the rules. Another host on the Chicago subreddit shared that they've been able to successfully operate their Airbnb by carefully following the city's guidelines and maintaining open communication with the authorities.

Overall, the sentiment among Airbnb hosts in Chicago seems to be that the regulations are strict, but with the right approach and a willingness to comply with the city's requirements, short-term rental hosting can still be a viable business opportunity in the city. However, the challenges posed by the regulatory environment may deter some potential hosts from entering the market.

Reveal your property’s rental profitability

Buy this property and list it on Airbnb.