Chicago Airbnb Bans & Short-Term Rental Regulations

Chicago has become a hotspot for short-term rentals, with platforms like Airbnb and Vrbo transforming the city’s rental landscape. However, in recent years, the city has tightened its regulations, creating challenges for homeowners and hosts looking to capitalize on the short-term rental market.

From zoning restrictions to neighborhood bans, Chicago's evolving policies are reshaping the opportunities for those interested in Airbnb. Here we will share the latest rules and explain how they affect both hosts and travelers looking to experience the Windy City.

Is Airbnb Banned in Chicago?

Airbnb is not entirely banned in Chicago. But, the city has implemented strict regulations to control Airbnb and other short-term rentals. Chicago's Shared Housing Ordinance, passed in 2016, established a framework for managing and regulating Airbnb and similar platforms. This includes requiring hosts to register their properties with the city, limiting the number of short-term rentals in specific buildings, and placing restrictions on properties located in certain residential zones.

What’s the Best Alternative to Airbnb, Vrbo, and Similar Platforms?

In cities like Chicago, where short-term rental regulations can limit options on Airbnb and Vrbo, Furnished Finder has emerged as one of the best alternatives. It offers a legal and practical solution for those seeking comfortable, temporary housing without the hassle and high costs associated with traditional short-term rental platforms.

Furnished Finder caters to traveling professionals, such as healthcare workers, digital nomads, and corporate employees, and has several distinct advantages over Airbnb and Vrbo:

1. No Guest Service Fees: Unlike Airbnb and Vrbo, which charge significant service fees to guests, Furnished Finder operates with a more transparent pricing model. This can make it more appealing to budget-conscious renters looking for longer stays without the added fees.
2. Focus on Longer-Term Rentals: Furnished Finder targets travelers needing stays of 30 days or more, which aligns well with Chicago's regulations that limit short-term rentals in certain areas. This makes the platform a great option for professionals who need a temporary place to live while working in Chicago for extended periods.
3. Direct Communication with Landlords: The platform allows renters to communicate directly with property owners or landlords, offering a more streamlined and personal experience. This can lead to better terms, clear expectations, and more control over the rental process compared to Airbnb or Vrbo’s standardized processes.
4. Trusted by Traveling Healthcare Workers: Furnished Finder has carved a niche by being a go-to platform for traveling nurses and healthcare professionals. With Chicago being a major healthcare hub, this focus on a specialized clientele ensures that landlords and renters both benefit from reliable, professional tenants and landlords experienced in providing for longer-term stays.
5. More Affordable for Extended Stays: Airbnb and Vrbo are typically designed for short-term vacation rentals, often with higher nightly rates and additional fees. Furnished Finder’s properties tend to be more cost-effective for month-long or longer stays, making it an appealing option for professionals and students in need of furnished, affordable housing.

Current Short-Term Rental Regulations in Chicago

Registration Requirements

Hosts must register their property with the city and obtain a short-term rental registration number. This registration number is required for rentals of less than 31 days and must be included in all listings​. (Source Chicago.gov)​

For hosts managing more than one short-term rental, a Shared Housing Unit Operator License is required. This license is separate from the basic registration, and it involves submitting more detailed documentation.​ (Source SHUOL FAQs)

The process for obtaining a registration number may take several weeks. The registration and licensing process for short-term rentals in Chicago is detailed and requires hosts to comply with strict local regulations. Hosts must ensure that all required documentation is correctly submitted to avoid delays​.

Registration Costs

There is a $125 fee for registering a shared housing unit. If a host has more than one unit, they are considered a "Shared Housing Unit Operator" and must obtain an additional license, which costs $250. ​(Source Airbnb)

Zoning Restrictions

Certain zoning laws apply to short-term rentals. Properties must be located in areas zoned for short-term rental use, which generally includes commercial or mixed-use zones. Residential areas often have stricter rules, and many homeowners’ associations may prohibit short-term rentals altogether.

Insurance and Safety Compliance

Hosts must ensure their property complies with safety regulations, including maintaining $1,000,000 in liability insurance. Additionally, new rules mandate that properties undergo proper inspections and licensing before being listed​. Ensuring compliance with safety regulations (e.g., functioning smoke detectors and carbon monoxide detectors) is also required for obtaining and maintaining the license ​(BNB Calc).

Additional Considerations for Owners and Hosts

Here are some other guidelines to keep in mind when hosting or renting in Chicago. By knowing these rules, hosts can ensure their rentals remain compliant and avoid potential fines or penalties.

Tax Requirements

Chicago imposes a 4.5% Hotel Accommodations Tax on short-term rentals, and Cook County adds a 1% tax. There are also additional surcharges, such as a Shared Housing Surcharge and a Domestic Violence Surcharge, which are applied to all bookings. For hosts, it is incumbent upon them to “register with the Illinois Department of Revenue and to ensure they adhere to tax reporting and payment schedules.”

One-Strike and Three-Strikes Penalties

Chicago has implemented stricter penalties for short-term rental violations. Egregious violations (such as criminal activity or public nuisance) can lead to a $2,500 to $5,000 fine per offense. Lesser violations may be subject to fines between $1,500 and $3,000, with each day counted as a separate offense. The ordinance also includes a "one-strike" rule for severe cases and a "three-strikes" rule for repeated disturbances​. ​(CAI Illinois)

Association Opt-Out

Buildings and communities (e.g., condos, townhomes) can now explicitly opt out of short-term rentals. Homeowners' associations and boards can prohibit short-term rentals by passing relevant bylaws or covenants. This makes it crucial for property owners to confirm their building’s stance on rentals before listing. (CAI Illinois)

Increased Platform Responsibility

Although these restrictions may seem difficult to follow, renters should have some assistance in keeping track of legal listings. Short-term rental platforms are now required to ensure compliance with local regulations. If a property is listed from a building that has opted out of short-term rentals, the platform must remove the listing. (CAI Illinois)

How to Keep Up with STR Changes

With zoning restrictions, registration requirements, and neighborhood-specific rules, it’s important to monitor the latest developments to ensure compliance.

It’s worth regularly visiting the City of Chicago’s Business Affairs and Consumer Protection website, and specifically their Shared Housing Registration and Accommodations Licensing page. 

Additionally, the Illinois Chapter of the Community Associations Institute is a helpful resource. They publish regular blog posts with details of ordinances.