Short-Term Rentals in Chicago: Everything You Need to Know

The ‘Windy City’ has long been a magnet for tourists, offering a rich tapestry of cultural, historical and modern attractions. In 2023, the city witnessed a remarkable surge in tourism — 14% over 2021 — indicating a robust recovery and offering lucrative opportunities for short-term rental operators.

Why Chicago Appeals to Tourists

Chicago's status as a top tourist destination is undeniable. With strategic investments in tourism initiatives, a diverse range of festivals and events like Lollapalooza and the NASCAR Chicago Street Race and increased air connectivity, the city has become more accessible and appealing to a wide array of visitors. Its unique cultural offerings, affordability and commitment to sustainability further enhance its attractiveness.

In the first half of 2023 alone, hotel revenue in Chicago reached a record-breaking $1.12 billion — up 102% from pre-pandemic 2019 — a testament to the city's booming tourism sector. Such figures not only reflect the city's vibrant tourism industry but also underscore the potential for short-term vacation rental operations to thrive.

Potential Earnings and Strategic Considerations: The Short-Term Rental Market in Chicago

The influx of tourists has created a ripe environment for short-term rental operators. Understanding the demographics and preferences of Chicago's tourists, such as the increasing numbers of millennials and Gen Z visitors drawn to the city's cultural and neighborhood appeal can help rental owners tailor their offerings effectively.

The potential earnings from operating a short-term vacation rental in Chicago are promising. While specific earnings can vary based on location, property type and management efficiency, the overall high demand for accommodations presents a favorable scenario for rental owners.

According to February 2024 data from AirDNA for Chicago:

• Average annual revenue is $13.8k
• Average daily rate (ADR) is $140.9
• Revenue per available room (RevPAR) is $71.2
• 1-bedroom listings are the most common (64%)
• 70% of listings are entire homes
• 89% of listings are seasonal, available only for up to 90 nights
• Flexible, moderate and strict cancellation policies are more or less equally popular
• Minimum stays of 30+ nights account for 55.6% of stays, followed by 2-nights minimum (26.0%)

Navigating Chicago's Short-Term Rental Regulations: Airbnb Rules in Chicago

To operate successfully, it's crucial for short-term rental owners and property managers to navigate Chicago's regulatory landscape. Operators must ensure compliance with licensing requirements, pay necessary taxes and adhere to safety and health standards.

Registration and licensing

If you list a single rental or shared housing unit, that is part or the whole of a single-family home or a building with 2-4 units that is your primary residence, you must register with the city.

You can also list not more than one-quarter or a maximum of 6, whichever is less, of a building with 5 or more units that is not your primary residence.

You may be able to operate a shared housing unit in a single-family residence that is not your primary residence or a building containing 2-4 dwelling units that is not your primary residence, if the commissioner grants an adjustment.

If you are approved to operate more than one rental, you also have to obtain a Shared Housing Unit Operator License.

Listing information

The City requires all hosts to include the following information in every listing of their unit(s):

• Cancellation and check-in and check-out policies
• A statement on wheelchair/ADA accessibility
• Parking availability and restrictions
• Availability/restrictions of any amenities or recreational facilities applicable to guests
• A description of the unit including number of sleeping rooms and bathrooms and if the full or only a portion of the unit is being rented
• Registration number

Short-term rental hosting requirements

All short-term vacation rental hosts operating in Chicago must:

• Notify Chicago police immediately if they know or suspect of any illegal activity including public nuisance

• Provide soap as well as clean and good-quality bath cloths, towels and linens that are changed in between guests

• Clean and sanitize all dishes, utensils, pots, pans and other cooking utensils between guests. And dispose of any food, alcohol or other beverages left by previous guests.

• Include and conspicuously display the registration number in all advertisements, listings, rental agreements and bookings

• Conspicuously display contact information of a local contact near the entrance. Also an evacuation diagram

• Install smoke alarms and carbon monoxide detectors in the property

• Maintain records of guest registration for three years including name, contact information, dates and signature

• Comply with the all applicable food handling and licensing requirements of the City Code and Department of Public Health rules if they provide food to guests

• Nor serve or provide alcohol to guests or their invitees

Occupancy limits

Chicago permits a maximum short-term rental occupancy of

• two persons per guest room, not including guests’ children under 18, or
• one person per 125 square feet of floor area of the unit, or
• actual allowed occupancy of the unit based on the building code,

whichever is less.

Chicago tax laws

Short-term vacation rental businesses operating in Chicago incur a number of specific taxes including:

• Chicago Hotel Accommodation Tax (4.5%)
• Chicago Vacation Rental and Shared Housing Surcharge (4%)
• Domestic Violence Surcharge (2%)
• Cook County Hotel Accommodation Tax (1%)
• Illinois Hotel Operators Occupation Tax (5.98-6.17%)

All taxes are calculated for the total listing price including cleaning fees and guest reservations and for reservations 29 days or shorter.

Airbnb collects and remits all of the above taxes on behalf of its hosts.

Other considerations

The City of Chicago prohibits operating a short-term rental if you are not permitted to do so by the HOA, condo board or other tenant organization to which your property belongs.

Capitalizing on Short-Term Rentals in Chicago

Chicago's tourism boom presents a golden opportunity for short-term rental operators to capitalize on the increasing number and demographics of visitors. By offering a unique and high-quality lodging experience, understanding the market dynamics and adhering to local regulations, rental owners can tap into the city's thriving tourism industry. As Chicago continues to draw visitors from around the globe, the potential for short-term rentals to flourish alongside the city's tourism sector is significant.