If you’re wondering whether a new law is the product of politicians caving to special interest groups or intended to help the average citizen, it often helps to ask one simple question: how complicated is it?
This is the big red flag flying over Chicago’s new home-sharing ordinance, a set of rules governing home-sharing companies like Airbnb and VRBO. It weighs in at a whopping 58 pages or about 25,000 words. (For perspective, that’s twenty-five times longer than the ordinance governing Chicago’s hotels.)
For many would-be hosts looking to supplement their income with Airbnb, this fact alone could be a non-starter, as the ordinance requires all home-sharers to sign a document saying they have fully read and comprehended the ordinance. This is a problem for a law that the pro-home-sharing group Keep Chicago Livable describes as “literally incomprehensible.” It’s even confusing for lawyers to fully understand. Shorge Sato, a Chicago attorney considered one of the city’s top business litigators, says the law is “impossible to comply with.”
It’s not hard to guess why the law turned out as long and convoluted as it did. When crafting the new regulations, the city council reportedly did not ask for input from hosts – the people who would be most directly affected. Instead, it told them they could reach out to their local alderman, effectively removing them from the lawmaking process.
Interest groups with considerably deeper pockets, however, did have the ear of the city council. The hotel industry has poured hundreds of thousands of dollars into the campaigns of Chicago aldermen in recent years, including $135,000 for Brendan Reilly (42nd Ward), $30,000 for Debra Silverstein (50th Ward), and Emma Mitts (37th Ward). Not surprisingly, each voted in favor of the ordinance.
An in-depth look into the ordinance reveals many more rules that should be troubling for any average resident or small-time entrepreneur looking to make some supplemental income. For example, it gives local aldermen the power to freeze the current list of permissible shared housing units. Conversely, it also allows them to exempt hosts from abiding by the ordinance’s requirements – a loophole ripe for cronyism.
Furthermore, hosts who manage to navigate all the ordinance’s requirements and avoid the hand of their local alderman face multiple fees (on top of the 17.4 percent hotel tax customers already pay). Namely, this includes a 4 percent surcharge on booking a short-term rental, as well as a $60 per-listing fee. Mayor Rahm Emanuel says the surcharge, which is expected to generate $2 million annually, will fund more housing for Chicago’s homeless… but the revenue isn’t earmarked, so it could legally be spent elsewhere.
On top of these onerous costs, home-sharing platforms themselves will have to fork over $10,000 for a license to operate in the city. Like the hotel industry that advocated for the law, home-sharing giants like Airbnb have the resources to adapt to these new regulations and cover the $10,000 pay-to-play fee. The real losers will be smaller would-be competitors, for which the fee will present a substantial barrier to entry.
Who’s going to be hurt by the new ordinance? The thousands of Chicagoans who are currently home-share hosts, and who, according to Airbnb, typically earn $7,500 in extra income every year thanks to the service. As the Wall Street Journal notes, that kind of income is a huge boon to minorities, young people, and lower-income families struggling to afford housing in a still-sluggish economy.
At its root, Chicago’s home-sharing ordinance is the latest example of big government progressivism’s resistance to innovative new industries. It tells entrepreneurs to shut up and get out of the way, because the planners in Washington, Springfield, or even city hall know what’s best.
Sadly, there’s good reason to doubt that the top-down regulations from these bureaucrats on high will benefit the people they’re elected to serve. Chicago is on the verge of being a city in decline. Residents are heavily taxed, the city is technically bankrupt, and last year the region’s population declined by an estimated 6,000 residents – more than any other metropolitan area in the U.S. The last thing Chicagoans need is the government obfuscating another source of income.
Nicole Neily is a native Chicagoan and the President of the Franklin Center for Government and Public Integrity, a nonprofit that publishes public-interest journalism at Watchdog.org.