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Wednesday, February 22, 2023

Appellate Court Rejects Challenge to Chicago’s Short-Term Rental Ordinance

Earlier this month, an Illinois Appellate Court upheld the dismissal of a challenge to Chicago’s short-term rental (STR) ordinance. Mendez v. City of Chicago.

The City’s STR ordinance regulates short-term housing arrangements, like those offered on Airbnb and VRBO. In 2016, two residents filed a lawsuit to challenge the original STR ordinance and later added several claims to address the City's amended ordinance. The lawsuit included a variety of claims, including the following:

1. Inspection Requirement

Under the STR ordinance, hosts with more than one rental unit are subject to an inspection every two years. The plaintiff-hosts challenged the inspection requirement, arguing it authorized searches without their consent in violation of the Illinois Constitution. The Appellate Court upheld the dismissal of this claim, finding that the claim was not “ripe” because the building commissioner had not yet adopted rules governing these inspections, so no host was actually subject to a search that might "offend" their constitutional rights.

2. Primary Residence Requirement

Another provision of the STR ordinance requires short term rentals to be the host’s primary residence, with certain exceptions. The plaintiffs argued that the building commissioner was given too much discretion to determine whether a home is exempt from the primary residence rule, in violation of their due process rights. The Appellate Court rejected that argument, finding, among other things, that because neither plaintiff-host had applied for an exemption, they failed to exhaust necessary administrative remedies before filing a lawsuit.

3. Noise Restrictions

The STR ordinance prohibits “excessive loud noise” on STR properties between 8:00 PM and 8:00 AM each night, defined as noise “louder than average conversational level at a distance of 100 feet or more, measured from the property line of the . . . unit.” Plaintiffs challenged the noise standard as vague, and pointed out that similar regulations do not exist for hotels, bed-and-breakfasts, or other renting businesses. The Appellate Court dismissed this challenge, finding that the noise restrictions provided sufficient notice and clear standards to comply with due process and were not discriminatory since most hotels are located in commercial rather than residential districts.

4. Ban on Single Night Rentals

Under the STR ordinance, hosts are forbidden from renting their properties “for any period less than two consecutive nights” until City officials adopt future regulations ensuring that single-night rentals can be effectively and safely conducted. The Appellate Court found the ban to be a fair and reasonable exercise of the City Council’s legislative power.

5. Taxpayer Standing

Finally, the plaintiff-hosts claimed they had “taxpayer standing” to argue that enforcement of the STR regulations was a misuse of taxpayer dollars. The Appellate Court rejected their argument, finding that the hosts presented no evidence they will be required to pay increased sales or property taxes to account for the enforcement of the STR regulations so they could not establish taxpayer standing to challenge the ordinance.

In upholding the ordinance, the Appellate Court noted that municipal ordinances are entitled to a presumption of constitutionality that can only be overcome by clear and convincing evidence, which plaintiff-hosts failed to overcome.

Post Authored by Erin Monforti & Julie Tappendorf, Ancel Glink


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