Illinois Short Term Rental Laws

As we all know, short-term rentals have exploded in popularity in recent years, with websites such as Airbnb and Vrbo becoming commonplace options for stays away from home. These websites offer homeowners an opportunity to earn a bit of extra cash by renting out their properties for a short period. This is potentially pretty lucrative for the average owner advertising on these sites but also an appealing option for people looking to spend a few nights or weeks in a more homey, authentic, and unique accommodation that reflects the local community.

Key Takeaways

Traditional Platforms Enter the Short-Term Rental Market

Some longer-established companies such as Expedia, TripAdvisor, and Booking.com have also begun to offer short-term rental options that are not traditional hotels or motels. You can find a place to stay for one night or a full month if needed, for a price lower than the typical hotel or motel can offer, and with added conveniences typically found in a residential home (like a fully stocked kitchen and bathroom, or a backyard with your own swimming pool, for example).

Municipal Responses to the Short-Term Rental Boom

Municipalities have started to amend their local ordinances around the topic of short-term rentals. In some places, local regulations have expanded in recent years to include broad permissions for owners of short-term rentals, but they have not changed them since then. In contrast, other places have recently tightened their local regulations or have communities demanding a restructuring of the current short-term rental model. Increased demand for short-term rentals has gradually led to a quantifiably decreased supply of long-term rentals, with investors snapping up properties to use as investments through the short-term rental market. This, in turn, has created an unfavorable housing market for local residents, who are being squeezed out of their neighborhoods when their former homes are converted into short-term rentals. Alternatively, they are being squeezed out by significant rental and mortgage increases that are being implemented so property owners can compete economically with the short-term rental property owners sprouting up around them.

Chicago's Regulations on Short-Term Rentals

However, in some places like Chicago, there are specific rules and regulations surrounding the ability to rent out places for short periods of time. Taking Chicago as an example, the city provides that a person or company who pays to use an internet platform to advertise their properties for the purpose of connecting with guests for short-term residential rental options is included as one of the types of hosts contemplated by the definition of a short-term residential rental intermediary. It also explains that short-term rental intermediaries often feature hosts who primarily list their shared housing units on such platforms with the keyword "shared."

Steps for Obtaining a Short-Term Rental License in Chicago

Chicago further explains that "a short-term residential rental intermediary must electronically register its shared housing hosts with the City, remove unapproved hosts, and apply and collect hotel accommodation tax and submit it to the City as part of each rental transaction facilitated through the platform."

The application process includes the following steps:

1. Submit a License Application
2. The license application requirements include relevant documents such as property ownership information and business licenses, a "quality of life plan" meant to show what types of uses this is intended for, a written plan that typically includes a description and business forecast, and other applicable information that a local municipality may ask for.
3. Document Review
4. This is when the city employees tasked with this role will review the application and make the necessary inquiries.
5. License Issuance
6. This is when the authorities will decide to permit an owner's short-term rental plan to go forward, provided all requirements are met.

The government website for the City of Chicago's Business Affairs and Consumer Protection section asks property owners to "please refer to the Municipal Code of Chicago (MCC) for additional information." Once these tasks are completed, a property owner will receive their license, listed as a license for a "Short-Term Residential Rental Intermediary." The specifics will depend on the term for which they intend to rent their property.

Fees and Requirements for Short-Term Rental Licensing

For example, a 1-year term will carry a fee of:

• $10,000.00 license fee, plus a $60.00 per unit fee for 1,000 or more rentals
• $7,500.00 license fee, plus a $60.00 per unit fee for 500 to 999 rentals
• $5,000.00 license fee, plus a $60.00 per unit fee for 100 to 499 rentals
• $1,000.00 license fee, plus a $60.00 per unit fee for 50 to 99 rentals
• $500.00 license fee, plus a $60.00 per unit fee for 25 to 49 rentals
• $350.00 license fee, plus a $60.00 per unit fee for 10 to 24 rentals
• $250.00 license fee, plus a $60.00 per unit fee for 1 to 9 rentals

The documents needed will include the name of a local contact person, the property owner's contact info, and an affidavit attesting to the information provided. There is also a requirement to maintain necessary insurance.

Local Regulations and Their Impact on Short-Term Rentals

Not every municipality has the same rules, and it is important to familiarize yourself with the specific rules that exist in the town or county of your choosing.

Tinley Park's Specific Rules for Short-Term Rentals

Another example of a municipality with specific rules is the Village of Tinley Park in the southwest suburbs of Chicago.

Tinley Park has created a Short-Term Rental License requirement for all property owners who want to rent out space within their property through sites like Airbnb. To obtain this license, all such property owners must be registered with the Village, and in order to be eligible, they have to meet several requirements, some of which include:

• The short-term rental must be the owner's primary residence. This differs from situations where the owner lives elsewhere but maintains a second property like a lake house. They only sometimes use it or an investment property specifically purchased for use as a short-term rental to earn a primary or secondary stream of income.
• The property must be inspected to ensure minimum life safety issues are addressed.
• The owner must maintain a general liability insurance policy of $1 million.
• There must not be more than one rental at a specific location for a year, beginning when the license is issued.
• Short-term rentals are only permitted when separated by 500 feet from another short-term rental.
• Short-term rentals in a multi-family property cannot exceed 25% of the total number of units.
• There is a license fee of $50.

Navigating the Legal Landscape of Short-Term Rentals in Illinois

Whether you are a prospective tenant of a short-term rental somewhere in the state of Illinois or you hope to be a landlord of short-term rentals, it is absolutely necessary to understand what a short-term rental entails and how to participate in the short-term rental economy legally, ethically, and productively.