Chicago’s Heavy Home-Sharing Taxes Go to Court

August 13, 2020
By Jacob Huebert

If you want to stay at a hotel in Chicago, you’ll have to pay the city’s 4.5% hotel tax. If you’d rather book your Chicago accommodations on Airbnb or a similar home-sharing platform, you’ll still have to pay the hotel tax—and you’ll have to pay additional surcharges of 4% and 2% that hotel guests don’t have to pay.

The Goldwater Institute, together with the Liberty Justice Center, represents Chicago homeowners in a lawsuit arguing that the city’s discriminatory taxes on home-sharing—and other aspects of the city’s harsh anti-home-sharing law—are unconstitutional. Yesterday, the Cook County Circuit Court heard arguments from both sides.

The plaintiffs argue that the home-sharing surcharges violate the Illinois Constitution’s Uniformity Clause, which requires that the state and city governments don’t arbitrarily discriminate against some taxpayers and in favor of others.

There’s simply no reason why home-sharing guests should have to pay more than guests at hotels. The service the guests at both types of accommodations receive is the same—namely, nightly lodging—and therefore, the guests should be taxed the same.

There’s no evidence that home-sharing creates unique problems that could justify taxing home-sharing guests more than the city taxes hotel guests. Chicago’s 4% and 2% home-sharing surcharges fund services for, respectively, the homeless and victims of domestic violence. But there’s no reason to believe that home-sharing uniquely contributes to the need for those services, so there’s no reason why the costs should be placed on home-sharing guests but not hotel guests.

Cook County Circuit Court Judge Sanjay Tailor said he could rule on the challenge to the surcharges in six weeks.

In decisions issued in 2017 and 2018, the court dismissed the plaintiffs’ constitutional challenges to other aspects of the Chicago law, including vague noise rules, a provision authorizing the city to search home-sharers’ property without a warrant, a limit on the number of units in a building that may be used for home-sharing, and a requirement that someone who rents out a single-family home or a unit in a building within four or fewer residential units continues to use the home as his or her primary residence. The plaintiffs may appeal the dismissal of those claims after the Circuit Court issues its decision on the tax issue.

The Chicago case is one of several cases across the country that the Goldwater Institute has filed on behalf of property owners to defend their right to offer their homes to paying overnight guests. In July, the Goldwater Institute won a victory before the Florida Third District Court of Appeal, which ruled that Miami Beach’s steep fines for violations of its anti-home-sharing ordinance were unlawful. 

Jacob Huebert is a Senior Attorney at the Goldwater Institute.