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Property owners in Chicago have found short-term rentals to be a lucrative opportunity, with Airbnb and Vrbo making it easier than ever to rent their homes to travelers. But with that opportunity comes responsibility. In Chicago, that means following some of the strictest short-term rental regulations in the country.
Whether you’re a property owner, a property manager, or a real estate investor, knowing the city’s short-term rental rules can prevent you from receiving fines, suspensions of licenses, or even legal action. In this guide, we’ll break down everything you need to know about how to operate a short-term rental in Chicago legally and how to stay compliant and maximize the income you can pull in.
Chicago, like many other major U.S. cities, has seen a boom in short-term rental activity. This has been beneficial to tourism and provided further revenue streams for property owners but has also raised questions about housing shortages, disruptive neighborhoods, and tax avoidance.
These concerns were addressed by the city passing ordinances that dictate who can rent, how often, and under what circumstances. These regulations guarantee that rentals are tax-compliant and safe and do not contribute to long-term resident displacement.
A short-term rental in Chicago is any rental of a dwelling unit or a portion of a unit for fewer than 32 consecutive days. It encompasses single-family homes, condos, and apartments.
If you are renting your property for a weekend, a few days, or maybe even just one night, it’s a short-term rental, and you need to follow the city’s rules.
Chicago’s distinction between registration and licensing is one of the most important ones in the short-term rental regulations.
The city then receives data from the platform (e.g., Airbnb, Vrbo), and the platform requires the shared housing hosts to register. Vacation rental operators (the people who list individually or on a non-affiliated platform) must obtain a vacation rental license through the Department of Business Affairs and Consumer Protection (BACP).
The second scenario is you’re listing your entire property and you don’t live in it, in which case, you are likely considered a vacation rental operator, and you will need to go through the licensing process. But if you’re renting out part of your home while you live there, you may just have to register as a shared housing host if your building allows it.
Not all properties in Chicago are permitted to be used as short-term rental investments.
Here’s what you need to consider:
Condo associations and landlords have the authority to prohibit or restrict short-term rentals in their buildings.
Buildings must be on the city's Shared Housing Registration List to be eligible.
If your building is not listed, you may need approval from your association or landlord before applying.
Failing to secure building approval can lead to your listing being flagged or removed, even if you've met all other requirements.
Chicago’s regulations also vary by ward and zoning district. Certain areas of the city are more lenient, while others are restricted or banned altogether.
Each alderman has discretion over short-term rental allowances in their ward. Some wards have banned short-term rentals in specific precincts, while others may have relaxed rules or additional requirements. It's important to check the zoning code for your address using the City of Chicago's interactive zoning map.
Always verify your local ward’s stance before proceeding; it can be the deciding factor in whether your rental business is viable.
Chicago places specific limits on occupancy and guest behavior to maintain public safety and neighborhood peace.
These include:
A maximum of one rental contract at a time per unit
No more than six unrelated guests in a unit
Compliance with quiet hours, typically from 10 p.m. to 8 a.m.
Display of the license or registration number on all listings
Additionally, you’re required to keep records of each guest’s name, address, and rental dates, which must be available upon city request.
To operate legally, your short-term rental must meet specific safety and insurance requirements. You must:
Maintain at least $1 million in liability insurance
Install working smoke detectors and carbon monoxide detectors
Provide a fire extinguisher
Ensure all egress paths are clear
If you’re a shared housing host using a platform like Airbnb, insurance may be partially provided by the platform, but it’s wise to secure additional coverage to protect your investment.
Short-term rental operators in Chicago must collect and remit several types of taxes, including
The 4.5% Chicago Hotel Accommodations Tax
The statewide Hotel Operators’ Occupation Tax
Any applicable platform service fees
If you're using a platform like Airbnb, these taxes are often collected automatically and remitted on your behalf. However, if you're listing independently or directly, you’re responsible for collecting and reporting the taxes yourself to the Illinois Department of Revenue and the City of Chicago.
Be sure to maintain clear financial records for tax season and track gross receipts accurately.
Chicago takes enforcement seriously. Violations of the short-term rental ordinance can result in:
Fines starting at $1,500 per day
Removal from approved rental lists
Suspension or revocation of licenses and permits
Legal action in cases of repeated or severe violations
The city conducts random inspections and actively investigates complaints from neighbors, especially regarding unauthorized rentals, noise, and overcrowding.
To protect yourself, always operate transparently, post your registration or license number publicly, and respond quickly to guest or neighborhood issues.
f short-term rentals aren't feasible for your Chicago property due to regulations or building restrictions, consider the stability of long-term leasing. A dedicated property management company specializing in LTR, such as Landmark Property Management, can effectively manage your property and secure reliable tenants.
Chicago is a high-demand city where short-term rentals can bring strong returns, but it all depends on your ability to follow local regulations. Take the time to fully understand your obligations before launching or moving forward with your listing, from building approval and licensing to insurance, taxes, and guest limits.
