Goldwater Institute sues Chicago over Airbnb, home-sharing rules

The Phoenix-based Goldwater Institute and Chicago-based Liberty Justice Center have sued the city of Chicago over its new home-sharing rules aimed at Airbnb and similar companies.

An ordinance approved by Chicago Mayor Rahm Emanuel and the Chicago City Council in June and slated to go into effect before Christmas imposes some licensing rules on home-sharing companies and those renting out their properties to short-term tenants.

It also puts in place a city home-sharing booking tax which is expected to generate $2 million per year.

Attorneys from Goldwater and Liberty Justice — both libertarian groups — are representing Chicago property owners Leila Mendez, Alonso Zaragoza, and Michael Lucci, and Sheila Sasso, who lives in Arizona and owns rental property in Chicago in the case.

Another nonprofit group has also separately sued Chicago over the home-sharing rules.

“More than 4,800 people in Chicago rent out their homes on Airbnb, earning an average of $5,300 per year. Many of them count on that money to pay their mortgages and their property-tax bills,” said Jacob Huebert, senior attorney at the Liberty Justice Center.

The lawsuit also looks to undue restrictions on out-of-state property owners offering homes and condos to short-term renters in Chicago as well as noise rules.

Goldwater attorneys also worry the ordinance could give Chicago officials the ability to bypass traditional search warrant avenues to inspect homes.

“The search-warrant rule is one of oldest and most cherished of our constitutional traditions,” said Christina Sandefur, executive vice president of the Goldwater Institute, and one of the attorneys filing the case. “It’s astonishing that city bureaucrats think they can search people’s homes without a warrant, and without even any suspicion, simply because they allow visitors to stay in their homes.”

City officials argue the ordinance sets up licensing and inspection rules and the ability to blacklist properties and property owners if there are noise disturbances or poor conditions. Condo and homeowner associations would also have some ability to regulate the number of home-sharing rentals in their communities.

“While other cities struggle to regulate the new sharing economy, Chicago worked with stakeholders to create a consensus around how to reasonably regulate these emerging industries in a way that protects consumers and neighborhoods,” said Emanuel after the ordinance’s approval “Further, this productive dialogue has resulted in an ordinance that provides a dedicated funding stream to address homelessness.”

We haven’t heard back yet from Chicago officials on the new lawsuit.

A number of cities including New York and Austin are looking at whether and how to regulate the home-sharing, short-term rental marketplace.

The Arizona Legislature passed a law earlier this year that restricts localities from restricting the industry.

Mike Sunnucks writes about residential and commercial real estate, government, law, sports business and workplace issues.