On June 22, 2016, the Chicago City Council voted 43-7 to enact an ordinance amending Titles 2, 3, 4 and 17 of the Municipal Code regarding Shared Housing Units and Vacation rentals (the “Shared Housing Ordinance” or “SHO”). Chicago Mayor Rahm Emanuel signed this legislation on June 24, 2016, and the Shared Housing Ordinance was published in the City Council Journal of Proceedings on July 20, 2016 at pages 27714 through 27770.
The Shared Housing Ordinance is divided into several primary sections. This blog will discuss the maximum cap placed on the number of shared housing units in a particular building and obtaining a commissioner’s adjustment. Are you operating short term rentals in a multi-unit building? If so, you may need to obtain a commissioner’s adjustment in order to continue operating your business. Maximum Number of Vacation Rentals
The most drastic revision to the Shared Housing Ordinance may be the restriction imposed on the number of vacation rentals that can be licensed in a multi-unit building at any given time. 2-4 Unit Buildings
. If the dwelling unit is located in a building containing two to four dwelling units, inclusive, the Shared Housing Ordinance requires that the dwelling unit: (i) is the applicant's or licensee's primary residence; and (ii) is the only dwelling unit in the building that is or will be used as a vacation rental or shared housing unit, in any combination. If the dwelling unit is not the applicant's or licensee's primary residence or is not the only dwelling unit in the building that is or will be used as a vacation rental or shared housing unit, in any combination, the Shared Housing Ordinance requires the following in order to operate a legal vacation rental: (a) a commissioner's adjustment under Section 4- 6-300(1), or (b) the applicant or licensee, as applicable, held a valid vacation rental license, as of June 22, 2016, for the dwelling unit. 5 or More Unit Buildings
. If the dwelling unit is located in a building containing five or more dwelling units, no more than six dwelling units in the building, or one quarter of the total dwelling units in the building, whichever is less, can be used as vacation rentals or shared housing units, in any combination. Commissioner’s Adjustment
If your business operates more than one (1) short term vacation rental unit in a building containing 2-4 units, and you did not have a valid vacation rental license as of June 22, 2016, you are in violation of the Shared Housing Ordinance which only allows one (1) short term rental to be operated at any given time. You are also in violation if the unit is not your primary residence. In order to avoid this result, you will need to seek a commission’s adjustment from the City of Chicago. A commissioner’s adjustment maybe requested by the owner, homeowners association or board of directors of the building.
Per the Shared Housing Ordinance:
(1) The commissioner is authorized to grant an adjustment to allow:
(a) issuance of a license to a vacation rental located in:
(i) a single family home that is not the applicant's primary residence; or
(ii) a building containing two to four dwelling units, inclusive, where the dwelling unit is not the applicant's primary residence;
(b) in a building containing two to four dwelling units, inclusive, an increase in the number of dwelling units that may be used as vacation rentals.
Section 4- 6-300(1).
In determining whether to approve the commissioner’s adjustment, the City looks at several factors to ensure that such an adjustment would eliminate an “extraordinary burden on the applicant in light of unique or unusual circumstances and would not detrimentally impact the health, safety, or general welfare of surrounding property owners or the general public.”
Factors which the commissioner may consider with regard to an application for a commissioner's adjustment include: “(i) the relevant geography, (ii) the relevant population density, (iii) the degree to which the sought adjustment varies from the prevailing limitations, (iv) the size of the relevant building and the number of units contemplated for the proposed use, (v) the legal nature and history of the applicant, (vi) the measures the applicant proposes to implement to maintain quiet and security in conjunction with the use, (vii) any extraordinary economic hardship to the applicant, due to special circumstances, that would result from a denial, (viii) any police reports or other records of illegal activity or municipal code violations at the location, and (ix) whether the affected neighbors support or object to the proposed use.”
When applying for the commissioner’s adjustment, the applicant must provide a copy of the application to all adjoining neighbors. Approval and sign-off from the neighbors may prove to go along way. The commissioner will review the application and request a recommendation from the applicable alderman.
Obtaining a commissioner’s adjustment from the City of Chicago may be necessary in order for some hosts operating in multi-unit buildings to continue with their business. Although this process is in its initial stages and there is not a precedent for approval, it is important that your commissioner’s adjustment application is complete and thorough. Please contact us if you would like assistance. Evan M. Sauer is a Chicago real estate and business attorney at Reda & Des Jardins, LLC a forward-thinking, technologically savvy law firm providing top-notch legal services to clients ranging from startups to large companies in a variety of industries. R&D's practice includes business, real estate, litigation and estate planning.