Airbnb and other home-sharing services would have to register their units with the city, and units rented for more than 90 nights per year would have to be licensed as either a vacation rental or bed-and-breakfast under a proposed mayoral crackdown that hotel operators have been demanding.
Mayor Rahm Emanuel’s 2015 budget included a $1 million plan to try to collect Chicago’s a 4.5 percent hotel tax on vacation rentals.
It put the onus on online firms like Airbnb to collect the tax on anything arranged through those booking services.
Hotel operators and downtown Ald. Brendan Reilly (42nd) have complained for months that booking services that allow homeowners to rent out their houses and condominiums as if they were hotel rooms have been allowed to escape the tax.
Their anger intensified after Cook County Board President Toni Preckwinkle imposed a 1 percent county tax that raised the total tax on a Chicago hotel room to a whopping 17.4 percent. That’s compared to 12 percent for Las Vegas and 12.5 percent for Orlando, Chicago’s two biggest rivals for convention business.
At Wednesday’s City Council meeting, Emanuel plans to introduce an ordinance that attempts to regulate the burgeoning home-sharing industry that has become a thorn in the side of the hotel industry.
To generate $1 million to support affordable housing and city programs aimed at reducing homelessness among families with children, Emanuel wants to slap a 2 percent surcharge on the booking of any shared housing unit, bed-and-breakfast or vacation rental.
The surcharge would be in addition to the hotel tax that companies are required to collect but seldom do.
The plan would also require Airbnb, VRBO and other companies that serve as a vehicle for home rentals to receive a “short-term residential rental intermediary license” issued by the city.
The newly-created license would be issued only after companies provide the city with the information it needs to “effectively monitor and regulate” the fast-growing industry that has emerged as a popular alternative to hotel rooms.
Units rented for more than 90 nights per year would be licensed as bed-and-breakfasts or vacation rentals.
To protect guests and hosts alike from injuries and property damage suffered during a Chicago stay, the ordinance would require all units used as hotel rooms to be covered by liability insurance that covers a minimum of $1 million per occurrence.
The city also plans to maintain an “ineligible list” of units prohibited from being used as rentals. It would include properties owned by “problem landlords and building code scofflaws” as well as units deemed a public nuisance or covered by orders to vacate the premises.
Violators would face up to six months in jail. Fines would range from $1,500 to $3,000 a day for each offense.
Emanuel argued that the long-awaited crackdown strikes the appropriate balance.
“I am confident that we can support this emerging industry while protecting consumers and preserving the quality of life in our neighborhoods. This new framework takes an important step toward achieving those goals,” the mayor was quoted as saying in a news release.
“These common-sense reforms represent a balanced approach that will allow the industry to innovate and provide economic opportunities for residents while promoting affordable housing in our neighborhoods at the same time.”
Reilly could not reached for comment. Nor could Marc Gordon, president and CEO of the Illinois Hotel and Lodging Association. Both men have long demanded a city crackdown.