Airbnb Allowed to Operate Under Restrictions in Chi-town
Chicago allows Airbnb to operate under restrictions
Short-term rentals are back, but not everyone’s happy
By Kai EL’ Zabar
A big win for Airbnb facilitators in Chicago. Fans of alternate housing touring the Windy City, can look forward to their Airbnb experience in Chi-town. Two measures were passed by Chicago’s city council Wednesday allowing short-term rentals, and permitting users to post their spaces on Airbnb as long as they do so according to new rules.
The new deal allows for only so many living areas to be listed at one time in multi-unit residences. Exactly how that’s going to work remains a mystery. Unless you ask your neighbors who’s scheduled to rent out their apartment on which days how will you know, and what’s more how will the city police this?
Intended to give Chicago citizens a greater say in how residences are used, the new restrictions require short-term renters to register every listed unit with the city. The size of the building determines the exact limits they have to abide by. Those with five units or less can only list one at a time, while larger complexes can only list six apartments or 35 percent of the total, whichever is less. Areas with single-family homes can petition to ban short-term rentals outright in their area or restrict it to the “primary residences” of the listed properties. Naturally, that petition can be petitioned.
The different companies like Airbnb will be required to pay fees to the city including a $10,000 annual operating license, along with a $60 charge for each Chicago address listed on sites. In addition, the city will also take a 4 percent tax on every rental, which goes to homeless services.
Supporters of the measure’s including Mayor Rahm Emanuel, affirm that the incoming funds will make up for the inconvenience. Of course that will all depend on how well they follow up with regulation.
It makes sense that the city wouldn’t let go of what is a growing industry. And Chicago is one of the best markets in the country for people who rent out their condos through Airbnb.
Though Airbnb has stirred up a of regulatory piranha feast and tax issues in Chicago and other cities, it has created a business opportunity for homeowners that didn’t exist before the Internet.
A two-bedroom Chicago home rented through Airbnb generates an expected annual profit of $24,175, according to an analysis by SmartAsset, a New York-based financial advice firm. Chicago ranks third in the nation in profitability potential among the 15 cities included in the analysis, after San Diego, at $31,481, and Miami, at $28,696.
Founded seven years ago, Airbnb has grown to become the top vacation-rental website in the country, with more than a million rooms available around the globe, more than hotel chains such as Hilton and Marriott International. It offers about 2,800 homes or rooms in Chicago, and growing.
It is estimated that the average expected annual profit among the 15 cities assessed by SmartAsset was $20,619. So granted the profit margin isn’t enough to quit your day job. To profit many ‘professional’ Airbnb hosts rent multiple properties,” according to the report.
The question is, how will the new regulations requiring an annual operating fee of $10,000 impact the industry’s growth and or enthusiasm of would-be Airbnb property owners.
Using data provided by Beyond Pricing, a service that helps short-term rental owners set prices, SmartAsset calculated an expected profit for two-bedroom homes in each city by subtracting estimated annual expenses, including rent, from an annual rental revenue figure.
Chicago’s expected profit was based on a two-bedroom nightly rate of $184, annual expected revenue of $47,525 and estimated expenses of $23,349.
The report also calculated that single-room rentals in two-bedroom homes, determining that they can help Airbnb hosts cover their own monthly rent but aren’t a source of profit. In Chicago, single-room rentals generate enough expected revenue to cover 93 percent of a host’s monthly rent. That’s the third-highest percentage among the 15 cities, after Houston, at 106 percent, and Philadelphia, 94 percent.
Obviously the full apartment rentals are the way to go, because they rent higher than those for single rooms and income after expenses ranged from $15,000 to $31,000 according to the report.
All this was before the passing of the new regulations earlier this week.