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Keep Chicago Livable v. City of Chicago

United States District Court, N.D. Illinois, Eastern Division

March 13, 2017

THE CITY OF CHICAGO, a Municipal corporation, Defendant.


          SARA L. ELLIS United States District Judge

         Proponents of home sharing-both hosts and guests-Plaintiffs Keep Chicago Livable, Benjamin Thomas Wolf, Susan Maller, Danielle McCarron, Antoinette Wonsey, Monica Wolf, and John Doe bring suit against the City of Chicago (the “City”), seeking to prevent the implementation of the Shared Housing Ordinance (“SHO”), which the City passed in June 2016 to regulate the home sharing industry in the City. Only Keep Chicago Livable and Wolf were plaintiffs when they first filed suit in November 2016, alleging that the SHO violates the First Amendment right to freedom of speech, the Fourth Amendment right to be free from unreasonable searches and seizures, the Stored Communications Act (“SCA”), 18 U.S.C. § 2701 et seq., the Fifth Amendment takings clause, the Eighth Amendment excessive fines clause, the Fourteenth Amendment due process clause, the Illinois Constitution, and the Illinois Trade Secrets Act, 765 Ill. Comp. Stat. 1065/1 et seq. On December 1, 2016, they sought a preliminary injunction with respect to their First Amendment, due process, and SCA claims [11]. The Court held oral argument on the motion on February 1, 2017. Thereafter, the City amended portions of the SHO on February 22, 2017, prompting an amended complaint [29] and amended preliminary injunction motion [30]. The amended complaint adds additional parties and changes the claims alleged. The First Amendment and due process challenges remain, but Plaintiffs dropped the remaining original claims in exchange for asserting violations of the Fourteenth Amendment's rights to intimate and expressive association and equal protection. Plaintiffs maintain that their filing of the amended complaint and amended motion for preliminary injunction did not moot their initial preliminary injunction motion but instead expanded upon the reasons for why an injunction should issue. Because the issues raised in the first injunction motion are ripe for decision, the Court addresses those here.[1] The Court finds that Plaintiffs have failed to meet the threshold requirements for issuance of a preliminary injunction with respect to the First Amendment and due process claims and so denies Plaintiffs' motion for a preliminary injunction [11] and the amended motion for a preliminary injunction [30] with respect to those claims.


         In recent years, home sharing has become a popular alternative to the typical short-term rental options-hotels, inns, and bed-and-breakfast establishments. Home sharing usually involves individuals renting out their homes or apartments to guests in exchange for compensation. Although the concept of home sharing is not new, its popularity has increased due to the proliferation of internet platforms like Airbnb, VRBO, and HomeAway, which allow hosts to post listings of their units and connect easily with guests who would like to rent those units online.

         As home sharing has increased in popularity with little oversight, cities across the country have sought to regulate the industry. The City's approach is the SHO, enacted on June 22, 2016 and further amended on February 22, 2017.[3] At a high level, the SHO requires hosts to register with the City in order to list and rent their units on sites like Airbnb or VRBO and subjects hosts to various restrictions and regulations. Additionally, the SHO requires listing platforms, like Airbnb, to obtain licenses and to provide the City with information on the units listed on their platforms.

         More specifically, the SHO applies to two types of short-term rentals: “vacation rentals” and “shared housing units.” The SHO defines a “vacation rental” as:

a dwelling unit that contains 6 or fewer sleeping rooms that are available for rent or for hire for transient occupancy by guests. The term “vacation rental” shall not include: (i) single-room occupancy buildings or bed-and-breakfast establishments, as those terms are defined in Section 13-4-010; (ii) hotels, as that term is defined in Section 4-6-180; (iii) a dwelling unit for which a tenant has a month-to-month rental agreement and the rental payments are paid on a monthly basis; (iv) corporate housing; (v) guest suites; or (vi) shared housing units registered pursuant to Chapter 4-14 of this Code.

SHO § 4-6-300(a).[4] The SHO defines a “shared housing unit” similarly as:

a dwelling unit containing 6 or fewer sleeping rooms that is rented, or any portion therein is rented, for transient occupancy by guests. The term “shared housing unit” shall not include: (1) single-room occupancy buildings; (2) hotels; (3) corporate housing; (4) bed- and-breakfast establishments, (5) guest suites; or (6) vacation rentals.

Id. § 4-14-010.[5] “Transient occupancy” means “occupancy on a daily or nightly basis, or any part thereof, for a period of 31 or fewer consecutive days.” Id. § 4-6-290.

         In order to list units for rental, individuals must obtain a license or registration number from the City and include that number in their listing. Id. §§ 4-6-300(h)(1), 4-14-040(a)(4). To obtain the registration number, shared housing hosts must attest that they have reviewed a summary of the SHO's requirements and “acknowledge that the listing, rental and operation of shared housing units in the City are subject to those requirements.” Doc. 29-2 § 4-13-215. Additionally, as part of the licensing and registration process, the City ensures that the rentals meet various requirements, such as location restrictions, set forth in the SHO. For example, in buildings with over five units, no more than six dwelling units, or 1/4 of the total dwelling units in the building, whichever is less, may be used as vacation rentals or shared housing units, unless the commissioner allows an adjustment. SHO §§ 4-6-300(d)(1), (1), 4-14-060(f). Single family homes may only be rented if the home is the licensee or host's primary residence, unless certain exceptions apply. Id. §§ 4-6-300(h)(8), 4-14-060(d). The SHO allows buildings to prohibit shared housing units in those buildings, creating a “prohibited buildings list” that, at the time of the filing of the amended complaint included over 1, 000 buildings.[6] Id. § 4-14-020(d). The SHO also provides for restricted residential zones, in which new or additional shared housing units or vacation rentals would be ineligible for licensing. Id. Ch. 4-17.

         Once a vacation rental or shared housing unit is licensed or registered, the SHO imposes additional requirements on the licensee or host in listing and operating the rentals. For example, the SHO requires licensees and hosts to maintain guest registration records, including the name, address, signature, and date of accommodation of each guest, and to keep such records for three years.[7] Id. §§ 4-6-300(f)(2), (3), 4-14-040(b)(8), (9). Licensees and hosts must post their license number, as well as the name and telephone number of a local contact person, in a conspicuous place near the entrance of the unit. Id. § 4-6-300(f)(7), 4-14-040(b)(6). Other requirements include: providing guests with soap and clean linens; sanitizing cooking utensils and disposing of food, beverages, and alcohol left by previous guests; complying with all food handling and licensing requirements if food is provided to guests; and notifying police of illegal activity. Id. §§ 4-6-300(f), 4-14-040(b). Licensees and hosts are subject to fines and penalties for allowing criminal activity, egregious conditions, or public nuisances in their rentals. Id. §§ 4-6-300(g)(4), 4-14-050(a). The SHO gives the City suspension and revocation powers if egregious or objectionable conditions occur. Id. §§ 4-6-300(j), 4-14-080.

         The SHO also targets the platforms on which short-term rentals are listed. Again, the SHO creates two categories: “short term residential rental intermediaries” and “short term residential rental advertising platforms.” A “short term residential rental intermediary, ” such as Airbnb, is “any person who, for compensation or a fee: (1) uses a platform to connect guests with a short term residential rental provider for the purpose of renting a short term residential rental, and (2) primarily lists shared housing units on its platform.” Id. § 4-13-100. Intermediaries must bulk register all shared housing units listed on their platform with the City and remove listings without valid registration numbers. Id. § 4-13-230(a). The SHO also requires intermediaries to provide reports to the City regarding rental activity on their platforms, typically in anonymized formats. Id. § 4-13-240(f).

         A “short term residential rental advertising platform, ” such as HomeAway or VRBO, is “any person who, for compensation or a fee: (1) uses a platform to connect guests with a short term residential rental provider for the purpose of renting a short term residential rental, and (2) primarily lists licensed bed-and-breakfast establishments, vacation rentals or hotels on its platform or dwelling units that require a license under this Code to engage in the business of short term residential rental.”[8] Id. § 4-13-100. The SHO requires these platforms to provide unit registration data to the City, but the reporting requirements are not as extensive as for intermediaries because the vacation rental licensees register themselves. Id. § 4-13-040.

         After the City passed the SHO, Keep Chicago Livable and Wolf filed this suit, seeking to enjoin its implementation. Keep Chicago Livable is a non-profit formed by Chicago residents who participate in home sharing as hosts to “educate other Chicago owners and renters as to their rights and duties to participate in home sharing and to assist them with compliance with both state and local law as well as internally developed ‘best practices' for responsible home sharing and assist homeowners with compliance with applicable regulations.” Doc. 29 ¶ 13. The individual Plaintiffs, and others like them, use Airbnb for social interactions and for the sense of community it provides. As hosts, they claim to charge a fee because “[i]t is impossible for a host to create a listing on Airbnb - and thus, impossible for a person wishing to host a guest from this deep, vetted and insured guest pool - without including and maintaining a price term.” Doc. 29 ¶ 35; see also Id. ¶ 38 (“The primary purpose for many hosts on platforms such as Airbnb is not necessarily to obtain a profit. Hosts enjoy sharing their homes with guests for many reasons that have nothing to do with making a profit, such as making new friends, learning about different cultures, showing off one's home and city to a newcomer or simply out of empathy for a traveler who could not otherwise afford to stay in a downtown hotel.”).

         In reply to the original preliminary injunction motion, Keep Chicago Livable and Wolf included several affidavits from Airbnb hosts, some of whom have since become named Plaintiffs in the litigation. Wolf, a Chicago resident who has served as an Airbnb host and guest since 2012 but recently took down his listing because of this litigation, states that Airbnb has allowed him to meet a diverse group of people while in Chicago, “underscor[ing] the importance of cultural exchange.” Doc. 23-1 at 2. Aside from the social benefits, without Airbnb, he would not have been “able to afford the cost of living in [his] building and as a graduate student.” Id. His building is subject to the SHO's maximum cap provision, and he believes there may be over six Airbnb listings in his building. Adam Fried owns a single family home in Bucktown, which he lists “sporadically” on Airbnb. Id. at 4. He says he does not use Airbnb “solely or even primarily for profit-motivated reasons” but instead for security reasons when he is out of town because he would “prefer to be paid rather than to pay for ‘house sitting' services.” Id. Valerie Landis indicates that she used Airbnb “[d]uring a period of temporary unemployment” when she “enjoyed the company of [her] hand-picked guests.” Id. at 7. She has vocally opposed the SHO, which she claims resulted in harassment from her Alderman's office and caused her condominium association to fine her for violating its rules by having Airbnb listings for her second bedroom. Ron Sattar, who owns a single family home in Chicago, had a complaint filed against him by the City for operating an unlicensed bed-and-breakfast in July 2016. The City allegedly brought the complaint based on reports from his neighbor that he was booking guests through Airbnb but dropped the complaint provided he fix some minor electrical issues with his home. Sattar claims his neighbor has repeatedly harassed him and his guests without cause or justification. Antoinette Wonsey owns a single family home in Englewood and lists rooms for rent on Airbnb, using the money she earns to renovate her home and support herself. She uses a pseudonym on Airbnb, allegedly “to avoid harassment from City of Chicago police officers, ” harassment which has led her to file a federal lawsuit.[9] Id. at 29. Both David Boyd and Susan Maller live in an apartment building at 355 E. Ohio Street, where their landlord changed the locks on their units, allegedly based on rumors that they had listings on Airbnb in violation of their leases. Finally, after the condominium association learned of his activities on Airbnb, Waseem Gorgi was fined for renting out his condominium on Airbnb in violation of the condominium association rules.

         LEGAL ...

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