Emanuel cracks down on Airbnb through new tax and regulations

Mayor Rahm Emanuel’s proposed 2 percent tax and new regulations would harm Chicagoans trying to make ends meet by renting out space in their homes, as well as tourists looking for less expensive lodging.

Chicago Mayor Rahm Emanuel has proposed adding a 2 percent tax to rentals arranged through home-sharing services such as Airbnb. The proposed ordinance would also require all home-sharing hosts to register with the city. The law would further mandate that home-sharing hosts who rent out their space for more than 90 days a year obtain licenses.

The city would levy the 2 percent tax in addition to the existing hotel accommodations tax home-sharing guests already have to pay to stay in Chicago, which will total 17.4 percent when the new 1 percent Cook County hotel tax takes effect in May 2016. But unlike the existing taxes, which are imposed on all hotel accommodations, the new 2 percent tax will be imposed on vacation rentals, new bed-and-breakfasts and shared homes, such as those available through Airbnb. That means a guest staying in an Airbnb rental would have to pay taxes at a rate of almost 20 percent – a higher rate than that paid by a guest at the Ritz-Carlton or any other hotel.

In tough economic times, the city of Chicago should make it easier for struggling homeowners to pay their mortgages – not burden them with more taxes and regulations.

On top of the new tax, the ordinance also would require anyone who rents a shared housing unit to register with the city, undergo a zoning review, and obtain liability insurance. Anyone who rents out a unit for a total of more than 90 days per year would have to obtain a license that costs $250 annually. A violation of one of these provisions could result in a fine of $1,500-$3,000 per offense.

This is a classic example of the city’s using red tape to strangle entrepreneurs trying to earn a living. These policies hurt lower-income Chicagoans the most. Many Airbnb hosts rent out their space in order to help pay their own mortgages. A license or registration requirement would make earning income harder for those already struggling to make ends meet.

A higher tax on home-sharing services also hurts lower-income travelers, especially younger people. Airbnb makes travel more affordable and allows people to visit cities such as Chicago, where staying in traditional hotels can be expensive. It also allows travelers to stay in Chicago neighborhoods where there are few or no hotels, and brings more customers to local neighborhood businesses. When people spend less on rooming costs, they have more money to spend on shopping, dining and entertainment.

Chicago politicians should support policies that allow tourism to thrive, rather than hinder it. Airbnb and similar services help bring tourism to the city by reaching a demographic that otherwise might not be able to travel.

This is just another money grab by the mayor, which will have the unintended consequences of hobbling striving entrepreneurs and taking money out of the pockets of lower-income tourists traveling to the city.