Chicago Short Term Rental Ordinance: No New News in 2023
The Illinois Appellate Court upheld Chicago’s Short-Term Rental (STR) ordinance in Mendez v. City of Chicago. The ordinance governs short-term rentals like the ones listed on Airbnb and VRBO. In 2016, two residents sued to challenge the original STR ordinance.
Mendez-v.-City-of-ChicagoThe City amended the ordinance while that lawsuit was pending. The plaintiffs added claims against the amended version too. By the time the Appellate Court ruled, it was deciding the ordinance Chicago enforces today. It was not ruling on the 2016 version that started the fight.
Here is what the court ruled on each claim. I start with the ones that cost a host paperwork and end with the ones that could end the business outright.
Inspection Requirement for Chicago Rentals
Under the STR ordinance, hosts with more than one rental unit are subject to an inspection every two years. The plaintiffs challenged this inspection requirement, arguing that it authorized searches without their consent, which violated the Illinois Constitution. However, the Appellate Court found that this claim was not “ripe.” The building commissioner had not yet adopted rules governing these inspections, so it can’t be a search. Therefore, no host was actually subject to a search that might “offend” their constitutional rights.
I read this as a loss that costs no host anything today. The inspection rule stands. Nobody faces an actual inspection fight until the City writes the rules, and it still has not.
Primary Residence Requirement for Short Term Leases
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 had too much discretion to determine whether a home was exempt. However, the Appellate Court rejected this argument. Neither plaintiff had applied for an exemption. They did not try to test this issue before the lawsuit, so they cannot use this as their first try.
Noise Restrictions in Chicago Short Term Rentals
The STR ordinance prohibits “excessive loud noise” on Short Term Rental properties between 8:00 PM and 8:00 AM each night. This is 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. Similar regulations do not exist for hotels, bed-and-breakfasts, or other renting businesses. However, the Appellate Court dismissed this challenge. It found that the noise restrictions provided sufficient notice and clear standards to comply with due process. Also, it found these standards not discriminatory since most hotels are located in commercial rather than residential districts.
I read this as the easiest claim to lose. A distance-and-time standard like this one gives a host a clear line to stay on the right side of.
Ban on Single Night Rentals in Chicago
The first three claims cost a host paperwork and compliance work. These last two could have ended single-night hosting in Chicago outright.
Under the STR ordinance, hosts are prohibited 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 on single-night Airbnb and VRBO stays to be a fair and reasonable exercise of the City Council’s legislative power.
Taxpayer Standing to Challenge Short Term Rental
Finally, the plaintiff-hosts claimed they had “taxpayer standing.” This argues that the enforcement of the Short Term Rental regulations was a misuse of taxpayer dollars. However, the Appellate Court rejected their argument, finding that the hosts presented no evidence to prove that. The Court found that they would not be required to pay increased sales or property taxes to account for the enforcement of the STR regulations. Therefore, they could not establish taxpayer standing to challenge the ordinance. Taxpayer standing is a narrow doctrine in Illinois, and the Appellate Court decided this point on Illinois law.
The decision rule
If you rent out more than one unit short term, expect an inspection every two years. If you rent only your primary residence, you likely qualify for the exemption.
Don’t wait on a reversal
Hosts assume a court will eventually strike this ordinance because Chicago enforces it inconsistently. It won’t. The Appellate Court already rejected every version of that argument.
| Requirement | Detail |
|---|---|
| Primary residence | Required, with an exemption you must apply for |
| Minimum stay | Two consecutive nights |
| Inspection | Every two years if you run more than one unit |
| Noise limit | Average conversational level at 100 feet, 8pm to 8am |
So, you should know these Chicago Short Term Rental Ordinance laws aren’t going anywhere. If you run an Airbnb as a business, it usually belongs in an LLC for your rental property, both for the liability shield and the tax treatment. If you run a short-term rental and aren’t sure your setup survives an inspection, call me at (630) 839-9195.