Chicago Airbnb May Undergo Strict Regulations

Mayor Rahm Emanuel is endorsing a proposed ordinance that would require any unit that is rented out on Airbnb or a similar online service for more than 90 days a year to be regulated as a commercial property.

John Byrne and Becky Yerak, Chicago Tribune / May 11, 2016 0

(TNS) — Sam Lichtenfeld says he really started noticing the changes on his Gold Coast block within the past year or so: more beer cans and other trash strewn about, even people passed out drunk in the street.

On the tightknit stretch of three- and four-flats, Lichtenfeld said it wasn't hard to pinpoint which addresses were the Animal Houses. Several buildings on the block are operating solely as rental properties through online services like Airbnb, he said, drawing large groups of revelers to stay for the weekend while hitting the nearby Rush Street corridor of bars and clubs.

Lichtenfeld wants Mayor Rahm Emanuel to crack down on the online booking industry by enacting tougher rules to help protect residents.

"On any given night, we can have 50 strangers staying here easily, parking, barfing, partying on a street that isn't at all equipped for it," he said. "These are people who aren't invested in the neighborhood, obviously."

The mayor is endorsing a proposed ordinance, set for a City Council vote next week, that would require any unit that is rented out on Airbnb or a similar online service for more than 90 days a year to be regulated as a commercial property.

Lichtenfeld and others say that number gives too much leeway to investors who are running homes like hotels in residential neighborhoods. "I don't know about you, but 90 days seems like an awful lot of party days," he said.

The legislation to regulate Airbnb and similar rental platforms is Emanuel's latest attempt to try to deal with emerging online services that are competing with more traditional businesses. For example, he has been pilloried by Chicago taxi drivers and their supporters for what they say are his moves favoring online ride-share services like Uber and Lyft.

Supporters and opponents of the Airbnb plan are applying intense pressure to city officials, seeing this as a key moment for establishing how the nascent industry will be handled in Chicago.

The mayor-backed ordinance would add a 4 percent surcharge to online rentals, with the money raised from the new tax going to pay for homeless services in the city. He would thereby be able to claim a win on homelessness at a time his administration has drawn fire for a controversial plan to remove about 75 homeless people living under Lake Shore Drive viaducts on the North Side.

A group of aldermen is hoping to stop Emanuel from going ahead with the Airbnb ordinance this month so they have time to try to persuade the administration to rework it to include tighter controls.

Ald. Brendan Reilly, of the downtown 42nd Ward, has been complaining for years that his constituents in the many residential high-rises near the lake are dealing with buildings that seem like ghost towns when Chicago's tourist traffic is low and then turn into fraternity parties when the city's weather is nice. He expressed frustration with the Emanuel administration's decision to press ahead with the legislation, saying the city doesn't have the statistics to fully understand Airbnb's impact.

"I think the average age of a policy person in the Emanuel administration is about 30," he said. "So if it's cool and it's gee-whiz and it's connected to an app, let's make that good. And it's the same mentality that's connected to ride-share, any sharing economy."

Citywide, just 131 units have gone through the process to legally register with the city as licensed Airbnb rentals, according to Mika Stambaugh, spokeswoman for the city Department of Business Affairs and Consumer Protection. The city has shut down just two such rental units because of complaints from neighbors, according to Stambaugh.

Yet in the Lincoln Park neighborhood alone, Airbnb's website now says it has more than 300 rental units available. According to a 2015 report by Airbnb, 4,550 Airbnb hosts in Chicago had people stay with them from July 2014 to June 2015.

One Airbnb hostess is Valerie Landis. The 33-year-old resident of the Fulton River District neighborhood listed her condo for rent through Airbnb last June and quickly realized she had hit upon a lucrative source of income. "I booked July in an hour, and then was booked every single day in the whole year, with only one or two days in a month when I didn't actually have a guest," Landis said.

Though she travels a lot for her job with a health care startup and rents out the entire two-bedroom unit when she's not around, Landis said she also has people stay in her spare bedroom when she's home.

"When guests stay with me, I tell them where to shop, I give them restaurant locations and key places that are hot and trending," she said. "Otherwise they would never know about those things."

Landis said she made about $15,000 in the final six months of 2015, charging $125 to $200 per night. "I probably priced it too cheap because I'm right downtown, but I just was getting started and I was trying to feel out the ropes," she said.

A 90-day limit on how often she could rent a bed in her place to out-of-towners would seriously cut into her profits, Landis said.

While Landis is a resident in the unit she rents, Ald. Michele Smith said her 43rd Ward in the Lincoln Park area is being hurt by the many units used solely as investments by people who list them on Airbnb.

Nonresidents should be required to list the units with the city as commercial properties and meet various licensing and zoning standards, Smith said. And condominium boards should be allowed to opt out of having Airbnb units in their buildings, she said, adding that Airbnb should be required to turn over to the city the names and addresses of everyone listing a property for rent on the site.

Smith said Chicago officials' hands-off attitude toward online rentals was "the rampant enabling of a shadow economy for the sake of some short-term cash" to bolster the city's economy.

Emanuel spokeswoman Shannon Breymaier said the administration plans to go ahead with a committee vote next Tuesday and consideration by the full City Council on Wednesday.

As with many contentious proposals, there's a good chance the Airbnb ordinance will get amended between now and then.

Will Burns, who stepped down as 4th Ward alderman this year to take a job with Airbnb, said the company hopes to persuade the Emanuel administration to loosen the regulations before council members consider the ordinance next week. At the top of Burns' wish list is that Airbnb hosts be able to rent out their homes for more than 90 days per year without a commercial designation.

Burns said Airbnb is giving homeowners across Chicago a chance to make some extra money, particularly in neighborhoods that aren't close to many hotels. "There's certainly a mismatch between where hotels are located in the city of Chicago and neighborhoods," he said.

"People want to go to the South Side," he said while speaking at the city's 1871 technology center. "They have family members. They have graduations at the University of Chicago or other universities on the South Side, Comiskey Park ballgames. So there's lots of reasons to be in those neighborhoods, and so Airbnb helps us solve that equation."

Along with criticism from residents, Airbnb is the target of complaints by the hotel industry, which is losing profits to online booking companies.

The American Hotel & Lodging Association on Tuesday called for stricter regulation, disputing the notion that the typical Airbnb host is someone occasionally renting out their primary residence to earn some extra cash. The hotel trade group released an industry-funded report showing that 58 percent of Airbnb's Chicago-area revenues come from what are essentially professional hosts who list their properties for rent for at least 180 days a year.

Airbnb called the study "factually inaccurate," drawing a distinction between properties that are listed and those that are rented out.

Company spokesman Christopher Nulty said the reality is that 6 percent of full residences available in the Chicago area through Airbnb are rented for more than 180 days. And just 3 percent of all Chicago Airbnb listings, including spare bedrooms or living room couches people can pay to sleep on while the residents are home, get rented out for more than that long, he said.

Also, about four out of five Airbnb hosts in Chicago are sharing their primary residences, he said.

Some traditional lodging businesses say that Airbnb and other home-sharing operators are hurting their bottom line and aren't subject to the same strict regulations, putting them at a disadvantage.

"Commercial landlords using short-term rental platforms such as Airbnb are operating on an uneven playing field from small businesses like my own, as they skirt rules put in place to protect our guests and the communities we operate in," Kapra Fleming, owner of House of Two Urns bed & breakfast in Chicago, said in a statement.

Many of what are essentially commercial Airbnb operators aren't licensed and are also escaping the taxes that other lodging companies pay, said Marc Gordon, chief executive of the Illinois Hotel & Lodging Association.

Although Airbnb has begun collecting hotel taxes from its hosts, others in the short-term rental industry "don't collect any," Gordon said on a conference call Tuesday.

The study was done by a real estate center at Penn State University, and was mostly funded by the American Hotel & Lodging Educational Foundation. The data used in the report came from Airdna, which tracks Airbnb revenues and operations and provides pricing and revenue data to Airbnb operators.

The report also found that almost all of Airbnb's revenue in the Chicago area — 96 percent, or more than $47 million — comes from operators who list units for rent more than 30 days a year.

Landis, the West Loop Airbnb host, fits that definition. But she said she's far from the corporate-type operator depicted by opponents of online booking. "We're not here to create disruption. We want to create a peaceful environment," she said. "I'm a normal, everyday citizen, homeowner for the past nine years. I'm no one special. I'm just trying to make it and be that hardworking, middle-class citizen that is paying my bills."

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