Uber and Airbnb ordinances show Chicago ushering in new era of hyperregulation

In the face of fleeing residents, the Chicago City Council has chosen to add more and more layers of regulation instead of reforming.

Chicago City Council has had a busy June, spent in large part determining the fates of thousands of residents seeking to simply earn a living through the sharing economy. On June 17, the Joint Committee of the Committee on Transportation and Public Way and the Committee on License and Consumer Protection moved forward with plans for new, burdensome regulations on ridesharing services such as Uber and Lyft. And the Joint Committee of the Committee on Housing and Real Estate and the Committee on Zoning, Landmarks and Building Standards] is expected to approve additional new regulations and sky-high taxes on short-term rentals through services such as Airbnb. Both of these regulation-heavy ordinances are expected to pass the full City Council on June 22.

Ridesharing regulations

Alderman Anthony Beale, 9th Ward, has been working behind the scenes for years to enact strict regulations on the ridesharing industry that would bring drivers in line with the highly regulated taxicab industry. The latest proposed ordinance requires rideshare drivers, who already undergo company-required background checks, to submit to city-overseen vehicle inspections and to acquire a chauffeur’s license. A proposal to require fingerprinting of rideshare drivers has been put on hold for six months pending further study of the matter, according to the Chicago Tribune, and the full imposition of a disabled-accessible vehicle mandate has also been delayed to give the services time to draw up their own plans.

Ultimately, Chicagoans lose due to insider politics. Many drivers who work for Uber part time have already expressed concerns that they may be unable to continue supplementing their income if they must meet the same strict requirements that weigh down full-time taxi drivers. Additionally, riders from the underserved South and West sides stand to lose as taxis don’t frequently visit their neighborhoods. Conversely, more than half of all UberX rides begin or end in underserved areas of the city.

Aldermen have said enacting these rideshare rules is “fair.” But it’s hard to take that argument seriously when it’s coming from a group of aldermen indebted to the taxicab industry. According to the Illinois State Board of Elections, in 2015, aldermen took in a total of $51,500 from the Illinois Transportation Trade Association Political Action Committee, or ITTA PAC, an organization that promotes the interests of the taxicab industry. Beale, the chairman of the Committee on Transportation and Public Way, has received $10,000 in calendar years 2015 and 2016 from the ITTA PAC.

Level playing ground is important, but the answer isn’t to overregulate all parties. The Institute for Justice, which represents rideshare drivers in a federal lawsuit filed by taxicab companies, has pointed out the need for reducing regulations on the taxi industry, rather than increasing regulation on rideshare services.

Uber and Lyft warned aldermen that passing a severely restrictive ordinance could force them to cease operations in Chicago. The full City Council is expected to vote on an ordinance June 22. This comes mere weeks after the ridesharing platforms shut down in Austin, Texas, due to heavy restrictions.

Airbnb regulations

While the ridesharing ordinance has been in process for years, the Airbnb ordinance has moved rather quickly. Chicago Mayor Rahm Emanuel pushed through an amended version of his Airbnb ordinance on May 18, just minutes before the full City Council meeting. Alderman Joe Moore, 49th Ward, and Alderman Emma Mitts, 37th Ward, the chairs of the governing committees, postponed a full vote in City Council by invoking parliamentary procedure. This allowed Emanuel to rework the ordinance to appease skeptical aldermen.

The latest version of the ordinance features a $60 fee to help the city enforce laws to curtail wild partying and illegal rentals. This fee is on top of the 4 percent surcharge on short-term rentals and on top of Chicago’s 17.4 percent hotel tax. Additionally, Emanuel is including a feature whereby Chicagoans would have the ability to vote against having short-term rentals in their individual precincts – akin to voting for “dry” precincts where establishments cannot sell alcohol.

Similar to the established players in the case of ridesharing, the hotel industry is shelling out thousands of dollars to aldermen to secure their support for the anti-Airbnb measure. According to the Illinois State Board of Elections, in the past year, aldermen and their ward organizations took in nearly $30,000 from the Illinois Hotel & Motel PAC.

If the guiding principle were to protect the community from danger, there would have been no need to include a 4 percent tax on top of one of the highest hotel taxes in the country. Just as with hotel stays, this entire tax burden is shouldered by visitors to Chicago. However, Emanuel and the aldermen saw a potential cash cow and didn’t hesitate to throw visitors under the bus to protect the hotel industry. Chicago has one of the highest tax burdens in the country, and with legislation such as this, it continues to get higher.

Chicago should get out of the way

The likely effect of passing these regulations on June 22 is that fewer individuals will participate in the sharing economy. This would be a great loss for Chicago, as the sharing economy has provided an opportunity for thousands of individuals to better their financial situations.

Instead of strangling the sharing economy through regulatory burdens, Chicago should loosen regulations to encourage individuals to participate in growing the greater economy in Chicago. And City Council should relax its death grip on taxicab regulations, as well. For years, city rules have made it costly and time-consuming to enter the taxi industry. Instead of imposing the same painful rules on ridesharing, the city should take a look at how it has hurt taxi drivers. It’s time City Council worked on behalf of its constituents to create a more friendly business environment instead of overregulating and taxing them to the point of no return.