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Monday, November 21, 2016

Chicago's Shared Housing Ordinance is Challenged in Court

Airbnb, Home Away, and other home sharing services have been under scrutiny by a number of municipalities across the country, some of which have enacted ordinances and other regulations restricting, and in some cases, even prohibiting homeowners from renting out their homes through the websites offered by these services. Recently, a group of Chicago homeowners (represented by the Liberty Justice Center) challenged the City of Chicago's "Shared Housing Ordinance," alleging that the ordinance is an unconstitutional intrusion into their privacy, due process, and equal protection rights. Mendez v. City of Chicago, No. 2016 CH 14897. The complaint was just filed last week, so we don't have any indication how successful the challenge will be, but the claims made in the complaint may be of interest to municipalities that have adopted, or may be considering adopting, similar regulations.

In June of this year, the Chicago City Council adopted Ordinance O2016-5011 to regulate "shared housing units." The ordinance requires shared housing unit operators (hosts) to register with the City and pay a 4% surcharge on the gross rental or leasing charge of all rentals. The ordinance also requires "intermediaries" or "advertising platforms" (e.g., Airbnb) to pay a minimum license fee of $10,000 and obtain a license from the City. The ordinance also includes various insurance requirements and other regulations on short-term rentals and the rental of shared housing units. 

The lawsuit claims that the following provisions of the ordinance are unlawful, among others:

  1. The required inspections are allegedly warrantless searches in violation of the 4th Amendment to the U.S. Constitution and Article I, section 6 of the Illinois constitution.
  2. The record-keeping obligations are allegedly warrantless inspections of guests' personal inspections.
  3. The ban on using homes that are not primary residences as vacation rentals or housing units is allegedly discriminatory.
  4. The noise restrictions are allegedly unreasonable.
  5. The 4% surcharge is allegedly a discriminatory tax.
Plaintiffs ask the court to declare the ordinance unconstitutional as a violation of their right to be free of warrantless searches, their due process rights, and their equal protection rights. Plaintiffs also claim the the ordinance violates the Commerce Clause because it discriminates against residents of other states because it prohibits non-residents who own property in Chicago from using their home for short term and shared housing rentals. 

We will certainly keep a close eye on this case to see how the court views Chicago's shared housing regulations.

Post Authored by Julie Tappendorf


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