New Chicago Ordinance on Vacation Rentals and How it Impacts Condominiums, Housing Cooperatives, and Townhomes

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The Chicago City Council passed a vacation rental ordinance on June 22 that will further regulate the house-sharing industry and provide protections to consumers like those living in the city’s community associations. Mayor Emanuel’s ordinance amends Chapter 3-24 of the Municipal Code of Chicago.

Here are specific changes that impact and/or protect condominiums, housing cooperatives, and townhomes (community associations) in the city:

  1. Explicitly defines single-family homes, condominiums, housing cooperatives, and townhomes as establishments impacted by the ordinance.
  2. Recognizes homeowner’s association, condominium association and housing cooperative boards may prohibit short-term rental activity through written bylaw and/over covenant restriction.
  3. Requires an owner interested in listing their home/unit as a vacation rental or short-term rental to register with the City of Chicago and become a licensee.
  4. Requires an owner to disclose whether the home/unit/building is compliant with the American with Disabilities Act (ADA). Note: The ordinance does not require ADA compliance.  The ordinance requires disclosure only.
  5. Prevents an owner from listing their home/unit as a vacation rental or short-term rental if their community association governing documents prohibit short-term rentals.
  6. Allows entire buildings to opt out of short-term rentals. The ordinance provides for creation of a list of ineligible units that will not be allowed to operate and a list of prohibited buildings.
  7. Provides clear limits on the number of allowable rental units within buildings. In single-family homes, only primary residences can be rented; in homes with two to four units, only primary residences can be rented and only one unit per building can be rented; Buildings with more than 5 units will be limited to the lesser of one quarter of the total number of dwelling units or six rental units.
  8. Requires on-line platform companies (Airbnb, Home Away, VRBO, etc.) to take responsibility for compliance of the regulation.  In other words, if there is a unit owner posting their unit in a building that has opted-out,  the on-line platform companies have responsibility for compliance.
  9. Creates a one-strike-and-you’re-out rule for certain egregious conditions and a three-strikes-and-you’re-out rule for units that cause a disturbance. To ensure compliance, the ordinance establishes a clear penalty structure, as violators may be fined $1,500 to $3,000 per offense, with each day that a violation exists treated as a separate and distinct offense. Egregious conditions, criminal activity or public nuisance will be subject to a heightened $2,500 to $5,000 per offense penalty.

This is not the first vacation rental ordinance to be passed in Chicago; in fact, a vacation rental ordinance has been law in the City for more than five years, but the majority of the market continues to operate illegally, without a license. In addition to the protections above, the ordinance provides funding for the Mayor’s office to regulate and enforce the law; the ordinance includes fines, suspension and revocation of license to scofflaws. Rigorous enforcement is critical to the success of this ordinance.

CAI Illinois supports aggressive regulation as the only solution to remedy the serious issues that have arisen from the rapid growth of the short-term rental market and the intermediaries such as Airbnb, Homeaway, VRBO that market these rental units.

Please refer to the latest legislation for updates on dates and deadlines.

 

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