22-Mar-17 – Saying she doesn’t believe the rules impinge the constitutional rights of homeowners and others wishing to share their homes with guests through Airbnb and similar websites, a federal judge has refused to bar the door to a new Chicago ordinance regulating home-sharing arrangements in the city.

United States District Judge Sara Ellis sided against a group of homeowners and others who had either listed property through Airbnb, VRBO, or other home-sharing sites, or stayed as home-sharing guests through the popular sites, denying their request for an injunction that would have blocked the city’s regulatory ordinance from taking effect.

Home-sharing has become quite a cottage industry – and in some areas a community issue – throughout popular neighborhoods on the north side such as Gold Coast, Lincoln Park, and Wrigleyville.

Judge Ellis had doubts concerning the ability of the plaintiffs in the case to either demonstrate how the ordinance trespasses on their constitutional rights, or how they would suffer irreparable harm, should the city’s rules be allowed to take effect. In her March 13 ruling, Ellis said she believed the “balance of harms” leans in favor of the city, which, she said, had a legitimate interest in “putting into place a more orderly system for the home-sharing industry.”

“Like with peddlers who hawk their goods but are lawfully subject to a regulation as to where they sell those goods,” wrote Ellis (left), “the city may lawfully subject home-sharing to regulation without implicating the First Amendment because the [ordinance} regulates conduct – the temporary rental of property in exchange for money – instead of speech.”

Litigation over the ordinance had landed in federal court in late 2016, when the group known as Keep Chicago Livable and plaintiff Benjamin Wolf stepped forward as the first to challenge the ordinance. Other plaintiffs joined the legal action, including owners of condominiums and apartment tenants. The challengers asserted the city’s rules violated the constitutional rights of those seeking to rent homes, condos, apartments, or rooms through home-sharing sites.

Plaintiffs alleged they had already been harassed by neighbors, police officers, city employees, condo associations, and landlords, among others, and feared their plight would grow worse should they be required under city rules to publicly identify themselves and register the properties.

In their complaint, Keep Chicago Livable and other plaintiffs specifically alleged the ordinance’s requirements would trample hosts’ private property rights and freedoms of speech, association, and due process.

(Right) 7,000 square foot “winter park cabin” in Colorado offered on HomeAway for $1,287 per night. (Click on image to view larger version.)

“The shared-housing ordinance, which purports to attempt to regulate the phenomenon of home-sharing on internet sites such as Airbnb, HomeAway, FlipKey, and VRBO, in fact operates as a de facto and in some cases outright ban on the use of internet home-sharing services, and violates the constitutional rights of Chicagoans to speak and communicate freely and anonymously on the internet, to use their own property, to have privacy, and to not be subject to arbitrary and discriminatory enforcement of the laws,” the lawsuit alleged.

Supporters of the ordinance, which was approved last summer, said the rules were needed to strengthen the ability of the city to police short-term rentals of condos, apartments, and homes in the city’s neighborhoods and high-rises. They said the regulations arose in response to complaints from neighbors of the rented properties who said the short-term tenants disrupted their neighborhoods or their buildings and threatened public safety.

The hotel and motel industry had also complained, saying the home-sharing platforms enabled building owners to essentially run small hotel operations using otherwise vacant homes and apartments, sidestepping city hotel regulations.

Ordinance was not in effect pending court ruling

The ordinance had been scheduled to take effect in December but the city postponed that date to give the court a chance to rule on the plaintiffs’ injunction request. In the meantime, the Chicago City Council amended the ordinance to address some of the plaintiffs’ complaints, including removing a provision which had claimed the power to force home-sharers to give city officials access to their records – including guests’ personal information – without a warrant.

The plaintiffs continued their legal action, asking the judge to block the amended ordinance, as their attorneys asserted the remaining rules still violated home sharers’ constitutional rights. Judge Ellis disagreed, indicating she believed the city would ultimately prevail on the key questions of whether the ordinance violated home sharers’ free speech, association, and due process rights.

Home-sharers had argued the home-sharing process was fundamentally different from hotels, or even apartments, as home-sharers obtain several social and intangible benefits, going beyond mere profit, from the home-sharing arrangement.

Ellis, however, sided with the city in declaring she believed the process of listing a property on Airbnb and similar sites was a commercial act, so listing a property on such platforms falls under the category of “commercial speech,” which is more open to government regulation.

Ellis appeared to hint the property owners could find more success in their arguments against the “maximum caps” provision of the ordinance, which limits the number of properties in certain buildings that can be listed on home-sharing sites. But the judge said, to date, the home-sharers had not presented any arguments to persuade her they would prevail on that point, either.

“[The] challenge fails because they have not provided the court with an explanation for why the maximum caps provision is vague in all of its applications,” Ellis said. “Instead, they themselves make only vague references to the simplicity of the argument and how it needs no further explanation. but such [an] explanation does not suffice to carry plaintiffs’ burden of demonstrating likelihood of success on [this] claim.”