Chapter 1

Chicago Airbnb Rules: What Hosts Should Know

Last updated: May 2025

Are you dreaming of owning and operating a short-term rental in the Windy City? Chicago’s Airbnb rules and regulations are constantly changing, so it’s important for hosts to stay up-to-date on the latest requirements.

This guide provides a comprehensive overview of the laws, licenses, and tax requirements that hosts need to know before listing their property on Airbnb in Chicago. Let’s dive in!

Don’t see the form to download our vacation rental agreement? Click here.

Is Chicago a good place to have an Airbnb?

Absolutely. Between its award-winning lakefront, world-class entertainment, and legendary deep-dish pizza, Chicago is a bustling destination for both tourists and business travelers. Owning and operating a short-term rental in the City of Broad Shoulders can be an extremely profitable venture.

Requirements to start an Airbnb in Chicago

As with any business, there are some necessary formalities one must undertake to start a short-term rental in Chicago. Keep the following Chicago Airbnb rules in mind when starting your new business.

The Shared Housing Ordinance and Vacation Rental Ordinance

The first thing to consider is whether your property will need licensing under the Shared Housing Ordinance or the Vacation Rental Ordinance. Both ordinances typically apply to properties where guests stay for 30 days or less.

  • Shared Housing Ordinance: Applies when renting out a portion of the home, like a single room, and the host is still staying on-site.
  • Vacation Rental Ordinance: May apply when the guest is renting out the entire property. The host is not required to stay on-site.

Short-term rental license vs. vacation rental license

Once you’ve determined which ordinance best applies to your property, you’ll need to register for either a short-term rental license or a vacation rental license:

  • Short-term rental license: This license applies to hosts who rent out part of their property while staying at the home. Alternatively, the license applies to hosts where the property is still their primary residence, but they rent out the entire property when they are away.
  • Vacation rental license: This item will apply when the listing is being used as a full-time vacation rental and is not the host’s primary residence.

What you need to apply for your license

Before you apply online with the city of Chicago, you’re going to need to make sure your ducks are in a row. Have the following on hand to support your application:

  • A valid government-issued ID
  • The unit’s floor plans
  • Proof of ownership or authorization from the property owner
  • Contact info for your local property manager (if you’re managing your property remotely)

Application fees

The specific amount you’ll pay for your application fee depends on the location of your property, how many units you’re renting out, and the type of license.

Typically, hosts can expect to pay between $250 and $350 per year, plus $60 per unit if operating less than 25 units. For more than 25 properties, annual fees begin at $500 and can reach up to $10,000 for those operating large enterprises.

Be prepared for an inspection

While listings under the short-term rental license don’t always require an inspection, properties with a vacation rental license often do. An inspector will confirm that your rental meets all safety codes and zoning requirements.

What to expect in a renewal process

Both short-term rental and vacation rental licenses must be renewed annually. This process is typically simple as long as there aren’t significant changes to your rental. The city will contact you directly about your specific requirements, but you’ll probably just have to confirm that there haven’t been any major changes and pay a renewal fee.

Chicago Airbnb laws

The most significant Chicago Airbnb laws to be aware of are those regarding zoning, safety and occupancy limits.

Zoning laws in Chicago

Chicago has several zoning districts, each with different regulations for short-term rentals. These laws dictate where you can and cannot operate a rental property. You can use Chicago’s zoning tool to ensure your property is within an area that allows short-term rentals.

Safety standards

To meet Chicago safety standards, be sure to include the following in your short-term rental:

  • Smoke detectors (required in every bedroom, outside of each sleeping area, in the basement, and on every floor of your property)
  • Carbon monoxide detector (needed on every level of your home and within 15 feet of any sleeping area)
  • Fire extinguisher
  • Clearly-marked exits
  • First aid kit
  • Emergency contact list that includes numbers for an immediate contact person and information on the nearest fire and police station

Occupancy limits

Short-term rental occupancy in Chicago is restricted by specific guidelines. The limits are determined as follows:

  • A maximum of two adults per guest room (excluding children under 18)
  • One individual per 125 square feet of the unit’s floor area
  • Occupancy capacity set by the building code for the unit

Chicago’s Airbnb tax rules

As with any other business, the income you earn through Airbnb is taxable. Let’s break down the different vacation rental tax rules you must be aware of.

Hotel Accommodation Tax

Chicago imposes a Hotel Accommodation Tax. It includes:

  • A standard 4.5% tax rate based on the total rental price for hotels and vacation rentals
  • An additional 6% surcharge for vacation rentals and shared housing units

State taxes

In addition to Chicago’s local tax, there are state taxes that apply to hotel accommodations and short-term rentals. At time of publishing, the state income tax on your net short-term rental income in Chicago is 4.95%.

Federal taxes

Finally, there are also federal taxes that may apply to your rental. These taxes are typically included in the total rental charge and can range from 2-7% depending on the type of accommodation and location.

Collecting your taxes

Airbnb automatically collects the Hotel Accommodation Tax for listings in Chicago. However, if you’ve received bookings through a different platform, you’ll need to manually pay these taxes.

FAQs about Chicago Airbnb rules

To break things down, check out a few of these frequently asked questions about Chicago’s short-term rental laws and rules.

Are Airbnbs illegal in Chicago?

No! Airbnb and other short-term rental platforms are legal and thriving in Chicago.

What are the rules for short-term rentals in Chicago?

Short-term rentals in Chicago must be registered with the city and comply with regulations such as obtaining a short-term rental license or vacation rental license, depending on the property. Additionally, hosts must adhere to rules regarding occupancy limits, safety standards, and the city’s zoning laws.

How profitable is Airbnb in Chicago?

According to AirDNA, a two-bedroom property in Chicago can expect to earn $84,100 per year.

What to take away from Chicago Airbnb rules

Navigating Airbnb laws in Chicago requires hosts to stay informed and proactive. It’s essential to be sure that you’re complying with regulations surrounding registration, zoning, and taxation to avoid potential penalties. While platforms like Airbnb help simplify processes such as tax collection, hosts are responsible for understanding their obligations, especially for bookings through other platforms.

If you’re ever in doubt, consult with an attorney or reach out to the Department of Business Affairs and Consumer Protection for extra guidance on following Chicago Airbnb rules.

And of course, if you need help managing your Chicago Airbnb, Lodgify is here for you. Start a free 7-day trial to see first-hand how Lodgify can help you build a direct booking website, sync your listings across all your booking platforms, and automate your business.

Don’t see the form to download our vacation rental agreement? Click here.