Violation of the city’s Airbnb registration requirements can lead to fines of up to $3,000 per day. Here’s how to stay compliant.
The Chicago City Council enacted the Shared Housing Ordinance in June 2016, tightening controls on the city’s short-term residential rental activity and leaving many Airbnb hosts bewildered about their apparent violations.
From July 2017 to May 2018, Chicago generated $100,000 in revenue from fines over registration violationsThe Chicago Tribune
Many hosts were informed via email from the city that their applications to register under the Shared Housing Ordinance were rejected. However, facing potential fines, they struggled to find out what went wrong and how to correct the information on their registrations. From July 2017 to May 2018, Chicago generated $100,000 in revenue from these fines, according to the Chicago Tribune.
The licensing requirements are still unclear to many Chicago hosts. Here is an overview of the city’s property registration landscape, how to properly register Airbnb listings and how to appeal if the application is rejected.
Why was the Shared Housing Ordinance created?
The Shared Housing Ordinance requires intermediaries like Airbnb to provide unit registration data to the city twice a month along with a summary report every two months. It also sets clear limits on the number of units allowed per building: one-quarter of the total number of dwelling units in the building or six rental units, whichever is less.
For hosts, the ordinance creates disclosure requirements regarding short-term rental activity and expands the city’s enforcement toolkit to regulate the house sharing marketplace.
To ensure compliance, the city establishes a penalty structure for short-term residential rentals. Violators of the Shared Housing Ordinance may be fined $1,500 to $3,000 per offense, while each day is treated as a distinct offense if a previous offense remains unresolved.
“Airbnb worked with the city a lot on the ordinance,” said Matthew Kellen, a Chicago Airbnb host. “The city was frustrated because short-term rental by and large was a gray zone – it was kind of legal if you got the license. Still, about 80% of short-term rentals in Chicago were booked through Airbnb, and that might be why the city decided to work with Airbnb.”
Kellen says residents did get frustrated if Airbnb properties snapped up available rentals in the city and drove up rent prices.
Protocols, approvals and appeals
Neither Airbnb nor the city provides public data on the number of registration rejected and fines associated with ordinance violations. But Airdna data show 7,594 Airbnb hosts are properly registered in Chicago as of Feb. 9.
To register, hosts submit their registration information to Airbnb, an intermediary platform licensed by the city. Airbnb sends the information to the city, which then reviews individual registration material for eligibility. After the city sends an approval notification and assigned registration number either by email or U.S. mail, hosts must update their Airbnb listings with the number, which is valid for one year.
Hosts who own or operate more than one shared housing unit must obtain a shared housing unit operator license directly through the city.
If the registration is rejected, hosts can file an appeal with the city within 10 days upon notification of denial. The city will notify the host of a scheduled hearing date at City Hall. But if the host fails to appeal the denial within 10 days, the unit becomes no longer lawfully available for listing on Airbnb.
Airbnb streamlines the registration process by making it part of setting up a listing in the city, says Kellen. Still, the process may require persistence, patience and possibly several visits to City Hall.
“It’s not always clear to hosts if they will get approved and that process should be more transparent,” Kellen said. “I have seen an incident where a host forgot to put the ‘north’ part of his address and the entire application got denied because of this minor typo. You can appeal and try to get it fixed, but it’s not an easy process.”
Despite the controversy and complaints over the process, Kellen says Airbnb is generally helpful.
The buck stops with hosts
Airbnb is in constant communication with Chicago’s Department of Business Affairs and Consumer Protection (BACP) to help improve the city’s registration process while taking hosts’ feedback into account, says Airbnb spokesman Ben Breit.
Airbnb should give a disclaimer and a warning to hosts that answers they give have legal consequences and cannot be easily changedShorge Sato
Nonetheless, the burden of the ordinance falls on Airbnb hosts. Nothing in the law requires Airbnb to do more than provide data, and no fine can be imposed on the company, according to attorney Shorge K. Sato of Shoken Legal, Ltd.
“The ordinance allows a single person without any verification to put an entire building on lockup,” Sato said. “Buildings were taken off the market just because they are in high-rises downtown. The city certainly took a lot of supplies off the market.”
According to city data, 2,006 buildings in Chicago are prohibited from short-term rental activity under the Shared Housing Ordinance as of May 5.
Sato says the ordinance significantly restricts a host’s ability to operate freely and makes it difficult for a host to understand what is allowed. While the city should write the ordinance in terms of what is allowed and how as well and where it is allowed, he adds, hosts must recognize they are answering questions under oath when filing a registration.
“Hosts may need to talk to attorneys even when they sign up,” Sato said. “Airbnb should give a disclaimer and a warning to hosts that answers they give have legal consequences and cannot be easily changed.”
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