Goldwater Institute Sues City of Chicago to Overturn Home-Sharing Regulations

Phoenix—Lawyers with the Phoenix-based Goldwater Institute joined with the Chicago-based Liberty Justice Center today to sue the City of Chicago over its recently-enacted anti-home-sharing ordinance. That ordinance imposes special taxes on people who let visitors stay in their homes, forbids homeowners from renting out property if they live outside Chicago, and requires home-sharers to allow city officials to search their homes without a warrant “at any time and in any manner.” Representing property owners in Illinois and Arizona, the lawsuit argues that the ordinance violates the federal and state constitutions.

The 58-page ordinance, signed by Mayor Rahm Emaunel in June, imposes a variety of restrictions on home-sharing, including allowing city officials to search homes listed on home-sharing websites without having any suspicion of a crime being committed in the home or without having a search warrant issued by a judge; a special tax that doesn’t apply to hotels; and threatens home-sharers with the loss of their license if their guests make noise above the “average conversational level”—a term that is left undefined and also does not apply to hotels. Homeowners who fail to comply with these regulations can be shut down, fined, or even thrown in jail.

“The search-warrant rule is one of oldest and most cherished of our constitutional traditions,” said Christina Sandefur, executive vice president of the Goldwater Institute, and one of the attorneys filing the case. “It’s astonishing that city bureaucrats think they can search people’s homes without a warrant, and without even any suspicion, simply because they allow visitors to stay in their homes.”

“More than 4,800 people in Chicago rent out their homes on Airbnb, earning an average of $5,300 per year. Many of them count on that money to pay their mortgages and their property-tax bills,” said Jacob Huebert, senior attorney at the Liberty Justice Center. “But now the city is taking that opportunity away from many of them – and forcing the rest to submit to serious violations of their constitutional rights just to be allowed to continue hosting guests in their homes. If the Chicago City Council won’t reconsider and repeal this ill-advised, unconstitutional ordinance, then the Cook County Circuit Court should strike it down.”

Home-sharing has become increasing popular in recent years, thanks to innovations in smart-phone and social-media technology, explained Sandefur, who authored a recent report on home-sharing in Regulation magazine. “It’s actually a very old tradition, to let people stay in your home in exchange for chores or for money. It’s just that the internet has enabled homeowners and travelers to connect better than ever before.” Home-sharing is now so popular that home-sharing sites like Homeaway and Airbnb offer more rooms than the entire Hilton or Hyatt hotel chains.

Data show that home-sharing helps local economies because it attracts visitors who stay longer and contribute more to the local economy; and homeowners who share their homes typically do so to help pay their mortgages.

“These regulations aren’t just detrimental to homeowners, travelers, and communities,” said Sandefur. “They’re also illegal under the United States and Illinois constitutions, which require government to treat people equally under the law. But this rule discriminates against home-sharers, and against people living in other states, and imposes vague and undefined rules on them—all of which gives bureaucrats power to enforce the law subjectively, however they feel.”

The lawsuit was filed on behalf of Leila Mendez, Alonso Zaragoza, and Michael Lucci, who live and offer homes for rent in Chicago, and Sheila Sasso, who lives in Arizona and owns rental property in Chicago. In addition to violating their property and privacy rights, the lawsuit argues that the law violates constitutional rules that forbid government from discriminating against people based on their state of residence.

New York, San Francisco, Honolulu, among many other cities have imposed restrictions on home-sharing. The Goldwater Institute crafted a law that has been adopted in Arizona to block cities from banning or overly restricting home-sharing. The law will be considered in additional states in 2017.

Read more about the lawsuit Mendez v. City of Chicago here.