Chicago aldermen call for $500 licenses for Airbnb renters
If Chicago politicians have their way, Airbnb prices will rise as the city enforces $500 licensing requirements against those who rent out rooms through online services.
A group of Chicago aldermen want to crack down on vacation rental service Airbnb by forcing anyone renting property through this service to acquire a $500 license.
This is a pattern for which Chicago is famous: A new innovation challenges a longstanding industry, and city officials swoop in to protect the entrenched industry through restrictive rules limiting innovation. Just as Uber is disrupting the taxi industry, and restaurants face competition from food carts, Airbnb is challenging the hotel industry.
Chicago has the highest travel taxes in the nation. Travelers pay a tax of 16.4 percent to stay at a hotel in Chicago, compared to 11 percent in Fort Lauderdale, Florida. They also pay amusement taxes of up to 9 percent in Chicago, compared to Fort Lauderdale, where this tax doesn’t even exist. These heavy taxes are squeezing tourists. But innovations in the sharing economy, such as Uber and Airbnb, are easing the financial burden and making travel to Chicago more appealing.
Airbnb is a web-based company that allows people to offer their extra space for rent online, generally for less than what it would cost to stay in a traditional hotel or bed-and-breakfast.
Chicago’s Airbnb licensing scheme has been proposed as a consumer safety measure, but that’s not the case.
Licensing requirements do not guarantee quality or consumer safety. One investigation, for example, found that large hotels, which are subject to licensing requirements, are not always properly cleaned. The city of Chicago has neither the resources nor the manpower to investigate every Airbnb transaction to ensure the locations are clean and safe. Licensing does not equal cleanliness.
Instead, a better route to cleanliness and safe, satisfactory customer experiences is through the market. Airbnb allows customers to rate their hosts. If a customer has a bad experience, he can describe the problems in a review. Consumers can steer clear of rentals with bad reviews. If a host receives a bad review, he has two options: Correct the errors, or continue offering poor service and lose customers.
Given the high cost of living in Chicago, Airbnb helps many residents pay for their apartments and houses. And with the impending imposition of Chicago’s new property-tax increase, the cost of housing in Chicago will soar even higher. Requiring $500 licenses for Airbnb hosts would price people out of the market and erect a barrier for lower-income people trying to earn a living.
Fewer Airbnb accommodations on the rental market would also stifle tourism. Staying at cheaper places through Airbnb enables travelers to visit cities they might not be able to afford otherwise. And when people spend less on rooming costs, they have more money to spend on shopping, dining and entertainment.
Chicago’s proposed Airbnb license requirement is nothing but another money grab by Chicago politicians desperate for new revenue sources. Nickel-and-diming Chicagoans and travelers this way harms striving residents and ordinary tourists, while protecting the already established hotel industry.