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Friday, February 15, 2019

Short-Term Rentals Ordinance Challenge May Host New Parties

A challenge to Chicago’s short-term rental regulations could continue after the Seventh Circuit held the plaintiffs may need new parties to establish standing.

In 2016, the City of Chicago passed a “Shared Housing Ordinance” in June 2016 to regulate short-term housing arrangements like those offered through sites such as Airbnb. The Ordinance requires interested hosts to register with the City and acquire a business license before listing units for rent online.

Six individuals and “Keep Chicago Livable,” an Illinois non-profit with the goal of educating Chicago hosts about local home-sharing laws, challenged the constitutionality of the ordinance. The case made its way to the Seventh Circuit, which vacated the rulings.

The Seventh Circuit sent the case back to the district court because there was no clear indication that any of the named plaintiffs have standing to challenge the Ordinance. In order to establish standing, a plaintiff must demonstrate (1) an injury in-fact; (2) that is fairly traceable to the defendant’s action; and (3) capable of being redressed by a favorable decision from the court.

The Seventh Circuit concluded that under this three-pronged test, it is unable to say with confidence that any of the named individual plaintiffs have standing due to changes in circumstances for each of the six individual plaintiffs. From the time of the filing of their most recent complaint to the case on appeal, each of the plaintiffs had either sold their property in Chicago or stopped using home sharing sites like Airbnb to rent out their properties. As a result, the Court found that since plaintiffs either no longer own property in the City, no longer use home-sharing sites, or allege how out-of-town renters are inhibited from visiting Chicago, none of the plaintiffs currently have standing to sue the City and challenge the Ordinance.

Similarly, the Seventh Circuit found that Keep Chicago Livable had not alleged a sufficient injury to the organization itself that could be addressed by the Court. The Court further concluded that even if Keep Chicago Livable brought suit on behalf of its members in a representative capacity, the organization had not identified an individual plaintiff with standing to bring any claim.

The Seventh Circuit indicated that the lower court has substantial discretion to move forward with the proceedings, including allowing new parties to sue that might have standing and by allowing those plaintiffs to file an amended complaint. Finally, the Seventh Circuit observed that if the district court determines a plaintiff does have standing, the court should allow the plaintiff the opportunity to move forward with the case and a request that the Court issue a preliminary injunction against the City's enforcement of the Ordinance. As a result, this challenge to Chicago’s short-term rental regulations might continue with the addition of new parties.

The Seventh Circuit’s opinion in Keep Chicago Livable v. City of Chicago is available here.

Post authored by John Reding and Daniel J. Bolin


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