Chicago's Airbnb Rules Are Unconstitutional Many Times Over, Lawsuit Argues

Regulations are "draconian and unintelligible," lawsuit says. Other have described them as "literally incomprehensible" and "dizzyingly complex."


Ian Crysler/Newscom

The city of Chicago is violating constitutional rights, hurting communities, and punishing responsible home owners with its new rules for Airbnb and other short term rental services.

Those are just a few of the arguments made in a sweeping lawsuit filed Tuesday in Illinois Circuit Court by four Chicago homeowners who say the city's new rules would subject them to warrantless searches and discrimination while also violating their rights to equal protection under law.

The short term rental ordinance passed in July by the city council would require all homes listed on short-term rental sites like Airbnb or VRBO to be registered with the city and subject to inspections by city officials "at any time and in any manner." Homeowners are also responsible for collecting personal information about their guests, which must be turned over to the city upon request—there's nothing in the ordinance requiring city officials or law enforcement to provide probable cause or a warrant before demanding that information or conducting a search.

"Through these provisions, the ordinance delegates unlimited and unbounded discretion to city officials to seize personal information for any reason and at any time," the lawsuit argues. The Arizona-based Goldwater Institute and the Illinois-based Liberty Justice Center provided the attorneys representing the four plaintiffs.

Chicago's Department of Business Affairs and Consumer Protection, which is responsible for enforcing the Airbnb rules, did not immediately return requests for comment on the lawsuit. The ordinance passed the city council in June with a 43-7 vote.

The lawsuit also challenges a part of the ordinance allowing homeowners to rent-out only their primary residence. That's supposed to prevent businesses from acquiring Chicago apartments for the sole purpose of using them for short-term rentals.

One of the plantiffs in the case, Sheila Sasso, lives in Maricopa County, Arizona, but also owns a condo in Chicago. The lawsuit argues that preventing her from renting her Chicago condo is a violation of the constitutional right to equal protection under the law and a violation of the U.S. Constitution's Commerce Clause by discriminating against out-of-state residents.

The regulations also contain an arbitrary cap on the number of units that can be rented within a single building. Some apartment buildings will be allowed to have only one unit listed on Airbnb at a time, while larger buildings have a cap of five short-term rentals at once. So if your neighbors are already listing their apartment on Airbnb, you're out of luck even if you comply with all the city's rules. Plaintiffs say that's another violation of due process.

"It imposes restrictions on home-sharing that are so confusing that few attorneys – much less ordinary homeowners – will be able to understand them," said attorneys for the Goldwater Institute and the Liberty Justice Center in a joint statement. "Yet homeowners who fail to comply with these unfair and confusing regulations can be shut down, fined, or even imprisoned."

Homeowners in Chicago are the big losers under the new rules, but the city stands to lose too. Airbnb rentals in Chicago accounted for more than $200 million in economic activity as 320,000 guests traveled to Chicago with Airbnb between July 2014 and June 2015. Those visitors provided $152 million in direct spending for the city, enough to support 2,100 jobs and pay $2.5 million in tax revenue, according to Airbnb's data.

This is the second lawsuit to challenge Chicago's homesharing rules. The first lawsuit, filed in U.S. District Court last week by Benjamin Wolfe, a resident of Chicago, argued that "ordinary citizens would never read or fully understand" the 58 pages of rules for short term rentals apporved by city council.

Whether you read and understand them or not, Airbnb hosts found to be in violation of the city's regulations could face fines of up to $5,000 per violation, per day.

That first lawsuit called Chicago's Airbnb rules "literally incomprehensible." Now you can add "draconian and unintelligible" to the list of colorful descriptors—that's how the regulations are termed in the new lawsuit filed Tuesday—for the city's 58-page rulebook. The Chicago Tribune has gotten into the game too—the newspaper described the ordinance as "dizzyingly complex" when it was approved by the city council in June.

NEXT: Five More U.S. Jurisdictions Imposed Soda Taxes Last Week

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “The ordinance passed the city council in June with a 43-7 vote.”


    1. Well of course, these are the recipients of Rahm’s donation cup overflow…. and you can imagine how much they, who reap the benefits of Chicago’s hotel industry, tossed into that gigantic cup.

  2. So they’re trying to push the temporary rental market underground?

    1. Grave rentals? Mausoleums? Catacombs?

      1. Bunkers, luxury bunkers, and reconditioned missile silos.

  3. OT: Intelligence Expert Mike Rogers Leaves Trump Transition Team Amid Shake-up

    Former House Intelligence Committee Chairman seen as Chris Christie ally; Ben Carson turns down cabinet post

    Well this is good news. Chris Christie’s fellow travelers getting booted from the administration can’t be a bad thing.

    1. Yeah, that’s what it’s apparently about.

      It means a couple of things.

      For one, it means Giuliani is likely Secretary of State rather than Attorney General.

      Because Giuliani gets the consolation prize rather than what he wanted, that probably means Sessions is our next Attorney General.

      That’s not a good thing for legal cannabis.

      I’m lobbying Sullum to explain to us what protections there are for recreational marijuana retailers from a Sessions’ DEA. I think the protections medical marijuana retailers enjoy now were mostly about Obama’s executive orders.

      1. Guiliani reportedly refused the AG post.

        1. Which hopefully means that he was upset that he wouldn’t be allowed to renew the war on pot.

      2. I’m lobbying Sullum to explain to us what protections there are for recreational marijuana retailers from a Sessions’ DEA. I think the protections medical marijuana retailers enjoy now were mostly about Obama’s executive orders.

        Yeah, the only thing stopping federal boots from kicking the doors of dispensaries and dragging owners and employees off to decades in prison is presidential discretion. That’s scary stuff, it would certainly give me pause about jumping into that industry no matter how legal it is in any state.

        That said, Trump has shown himself to be relatively amenable to the concept of medical pot. Though recreational pot may not fare as well. I’m a cautious Trump supporter for now, but the moment he ramps up the war on pot, that might be a deal breaker for me.

        Keeping my fingers crossed.

  4. In regards to Airbnb and Chicago, . . .

    I think there are only a couple of justifications for Chicago to do this, and they mostly boil down to the old question of whether equal protection of the laws means that everyone’s rights should be violated equally.

    1) Tax

    Chicago just raised its tax on hotel stays to 17.4%.

    Whether Airbnb people should be free to do this and whether they should be free to escape the tax are two different questions.

    2) Occupancy Permits and (Parking example).

    You can’t open a business to the public without going through a myriad of rules and regulations–why should Airbnb people be exempt from that process?

    Some of that occupancy permit stuff is there to protect the rights of other people around the business, too.

    One of the reasons retail space costs more than office and residential space PSF is because retail space typically requires 8 parking spaces per thousand square feet to accommodate parking, office space typically requires 4 spaces per thousand, and residential may only require two spaces per apartment. In other words, it takes more land to create a thousand square feet of retail space than it does to create a thousand square feet of office space, etc.

    If you open a retail space in an apartment building, the customers will definitely, absolutely, without question displace the ability of other residents to park there–residents who own other apartments.

  5. Open a BnB in a residence on a street with inadequate parking, and your customers will displace your neighbors. In an old city, especially, where street parking is prevalent, the city has a legitimate interest in preventing businesses from being deprived of adequate access to their own homes–and so they do things like require that adequate parking be provided for your intended use before they’ll give you an occupancy permit that allows that use.

    We might do things the same way in Libertopia.

    1. Tell me, how would the customers displace any more parking than a resident? Do AirBnB renters typically cohabitate with the owner?

      1. Five bedroom houses typically have two cars.

        Now you’ve got the same five bedroom house with three guests and five cars.

        And that happens all the way down the street near the touristy area around the Chicago Art Institute–down the side streets crossing Michigan Avenue?

        What do they call that, The Miracle Mile?

      2. In touristy places it’s especially bad.

        In the Beach Cities (LA) lots of local never drive anywhere on the weekends during the summer because it’s so hard to find a parking space in your own neighborhood.

        So you get a bicycle and use the Strand. It runs all the way from PV to Malibu.

        I’m sure you could charge up the yingyang for those places. At some points, say during Beach Volleyball, I bet you can get thousands of dollars a night for your couch.

      3. I should add, I know of a school district that decided to buy a small industrial warehouse and convert it into office space–because industrial warehouse costs less!

        Why doesn’t everybody do that?

        Yeah, well, the school district doesn’t have to ask the city for an occupancy permit, and the industrial space is only parked 2 per thousand square feet.

        The parking for their workers completely obliterated the other business owners’ in the industrial park ability to park. As the school district expanded, their parking situation got worse and worse. Every time they expanded, they found themselves with even worse parking.

        I offered to trade them an office building that was parked adequately, but they couldn’t get past the fact that I was charging them more for office space than I was willing to give them for the old industrial. I explained to them that no one but them could use that space for office–because they’d never get an occupancy permit.

        They explained that politically they couldn’t justify selling their present accommodations for that much less than what they buying.

        Dumbest situation ever.

        If they’d been anybody but the school district, their neighbors would have sued the hell out of them.

        I switched tracks, introduced myself to their neighbors, and built and sold them buildings somewhere else. I knew they all wanted to leave–they didn’t have any parking!


    2. We might do things the same way in Libertopia.

      In Libertopia, as with other similar urban and quasi-urban centers, you would own the two (or more) spots allotted/designated to the property. Privately owned and leased garages can/do cover the gaps. The morass where the city sells .5M parking permits for an actual number of public/on-street parking spaces unknown while juggling public/private contracts on the meters and for-fee parking on an additional .5M spaces would be avoided.

  6. Slightly OT, but did anyone else in the Chicagoland area find Rahm’s Radio Town Hall creepy as fuck? Like, halfway through, you expected John Galt to hijack the signal?

Please to post comments

Comments are closed.