Airbnb hosts: City home-sharing regulations unconstitutional, trample property rights

By Jonathan Bilyk | Nov 5, 2016

Saying the city’s new regulations on online home-sharing services subject Chicago homeowners to a “literally incomprehensible” and “dizzying” array of rules - with severe potential penalties for breaking those rules – a group claiming to represent a number of Chicago property owners who list their properties on Airbnb and similar home-sharing sites has sued Chicago City Hall, calling on a federal judge to declare the city’s new ordinance unconstitutional.

On Nov. 4, an organization calling itself Keep Chicago Livable and named plaintiff Benjamin Wolf filed suit in Chicago federal court, asking the court to strike down Chicago’s Shared Housing Ordinance.

“The Shared Housing Ordinance, which purports to attempt to regulate the phenomenon of home sharing on internet sites such as Airbnb, HomeAway, FlipKey and VRBO, in fact operates as a de facto and in some cases outright ban on the use of internet home sharing services, and violates the constitutional rights of Chicagoans to speak and communicate freely and anonymously on the internet, to use their own property, to have privacy, and to not be subject to arbitrary and discriminatory enforcement of the laws,” the lawsuit alleged.

The ordinance, which was approved earlier this summer by the Chicago City Council, is scheduled to take effect next month.

Supporters said the ordinance was needed to strengthen the ability of the city to police short-term rentals of condos, apartments and homes in the city’s neighborhoods and high rises. Supporters said the regulations arise in response to complaints from neighbors of the rented properties who said the short-term tenants disrupted their neighborhoods or their buildings, and threatened public safety.

Complaints also arose from the hotel and motel industry, which said the home-sharing platforms, like Airbnb, enabled building owners to essentially run small hotel operations using otherwise vacant homes and apartments, sidestepping city hotel regulations.

However, the Keep Chicago Livable lawsuit said the ordinance goes too far, allowing the city instead to trample the constitutional speech, association and property rights of those seeking to list their dwellings on the home-sharing platforms.

According to the complaint, the city could use the ordinance to essentially gain control of the dwellings listed by potential home-sharing hosts – or grant control over those properties to neighbors.

For instance, the lawsuit noted the ordinance gives the city the power to prohibit home-sharing rentals in certain buildings – and those buildings can be designated simply at the request of a landlord or member of the condo association board, without any formal association vote, or formal lease negotiation, or notice of any sort delivered to any tenant or owner.

Further, the lawsuit asserted the ordinance would subject potential Airbnb hosts to inspections by the city to see if any food or drinks are being provided to home-sharing guests.

And the lawsuit alleged the ordinance would deprive hosts of the ability to determine who is able to enter their homes and listed dwellings, by designating all such listings as “public accommodations,” subject to the gamut of anti-discrimination provisions within the city’s code. 

“The right to exclude the outside world from one’s property and the right to permit invited guests of one’s own choosing onto that property are two sides of the same coin,” the lawsuit said. “By purporting to ban the ability of owners to host guests of their own choosing without prior permission from the government, the Shared Housing Ordinance takes away the essential property right of being able to host guests of one’s own choosing.”

Conversely, the lawsuit alleged, the ordinance in some ways transfers those property control rights to neighbors through various “hair-trigger” provisions, “empowering neighbors to shut down hosts by manufacturing ‘excessively loud noise’ complains based solely on the allegation of an audible sound coming from a shared home” and other ordinance violations.

The lawsuit also challenged the ordinance’s attempt to cap the number of home-sharing listings allowed per building, saying it is unconstitutional for the government to prohibit condo owners to list their homes on Airbnb and similar sites simply because others in their building already do. For instance, the ordinance would prohibit more than one dwelling in a building with up to four dwellings from being listed on home-sharing sites, and would prohibit more than a quarter of units, up to a maximum of six, from being listed on the sites in a building with five units or more.

Further, the lawsuit asserted the ordinance violated the owners’ speech rights, by forcing them to register with the city – or compelling Airbnb and other home sharing platform operators to “bulk register” them along with all other hosts listing properties in the city – before they can even list their property, much less rent it to guests.

Keep Chicago Livable asserted the act of listing a home on Airbnb and similar sites is not the same as listing a hotel room, as the act is “social” compared to entirely commercial or for-profit.

“It is overly simplistic and incorrect to assume that the mere posting of a listing on the internet is the sine qua non of operating a commercial business or proposing a commercial transaction, or that such a listing is motivated solely or even primarily for economic reasons,” said the complaint.

The lawsuit said the city’s purpose in requiring the registration was not merely to protect public welfare, but rather to monitor all home-sharing activity, “in real time,” using software and inspectors specifically hired for that purpose, thus violating the would-be hosts’ free speech rights.

“The City’s purpose in enacting this registration requirement is to bring Airbnb hosts out of the shadows and make them disclose all of their personal information to the Government, as a precondition to their speech activity,” the lawsuit said.

However, while the city does not make complying with the ordinance easy and understandable, it makes attempting to comply precarious, the lawsuit alleged, as the ordinance threatens potential violators with fines of $1,500-$5,000 per day per violation.

Such fines could be levied against home-sharing hosts for a range of ordinance violations including failing to take down a listing for a dwelling in a building in which listing caps had been exceeded, for providing food to guests, or for failing to have guests sign their names and provide contact information in a physical guest log book, which the owner is required to keep and make available to the city upon request for at least three years, among other offenses.

“The Shared Housing Ordinance contains punitive fines that are grossly disproportional to the gravity of the offenses, and are therefore unconstitutional, unenforceable and void,” the lawsuit said.

The lawsuit also asked the court to strike down the city’s 4 percent surcharge applied to such home-sharing rentals, saying it exceeds the city’s authority, as it is charged in addition to the city’s regular home rule hotel tax.

Keep Chicago Livable is represented in the action by attorney Shorge K. Sato, of the firm of Shoken Legal, of Chicago, and attorney Robert Reda, of Reda & Des Jardins LLC, of Lake Forest. 

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Reda & Des Jardins LLC Shoken Legal Ltd.

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