by Todd Feurer, CBS Chicago web producerBy CBS 2 Chicago Staff

CHICAGO (CBS) — Homeowners and landlords would no longer have the option of renting out their houses or apartments through sites like Airbnb and HomeAway for only one night, and could face fines of up to $10,000 if they allow home-sharing guests to throw illegal parties, under a crackdown endorsed by the City Council License Committee on Tuesday.

Mayor Lori Lightfoot’s proposal to rewrite the city’s home-sharing ordinance would also require people applying to host short-term rentals to submit their applications directly to the city, rather than through intermediaries like Airbnb and HomeAway; and would give the city more leeway in revoking the permits of scofflaws.

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The changes are the product of a working group the city convened earlier this year, following a subject matter hearing in March to discuss possible updates to the original 2016 ordinance regulating the short-term rental industry in Chicago.

One of the biggest complaints about the industry over the past few years has been about homeowners and landlords renting out their property for only one night for large house parties, rather than legitimate guests looking for a place to stay other than a hotel while visiting Chicago.

Business Affairs and Consumer Protection Commissioner Rosa Escareno told aldermen the ban on single-night listings on home-sharing platforms is an effort “to address the proliferation of party houses.”

Hosts who use their space to allow for “egregious conditions” such as drug trafficking, gang activity, prostitution, or parties would face fines of $5,000 to $10,000.

The city also would be allowed to revoke a host’s license after only one case of an illegal party. For other nuisance issues — such as lewd behavior, public intoxication, excessive noise, or gambling — licensing officials could bring in hosts for a hearing to suspend or revoke their license after two violations within 12 months, instead of three violations.

Ald. Michele Smith (43rd), who led the effort to rewrite the home-sharing ordinance, said the industry was billed as a way for homeowners to make a few extra bucks by renting out their property on a short-term basis when they’re away.

“But we all know that the majority of such units in the Chicago area are not principal residences, they’re owned by investors,” she said.

Smith said the side-effect has been an erosion of the city’s long-term housing stock, and rising rents in neighborhoods where short-term rentals are popular.

Airbnb policy adviser Rachel DeLevie-Orey said the company opposed the proposed ban on single-night rentals, claiming they’ve already taken steps to crack down on hosts using their platform to rent out party houses — by banning all parties globally, capping bookings at 16 guests, and threatening legal action against guests who violate rental terms.

“During this time of economic downturn, putting limitations on hosting would take money out of the pockets of Chicagoans who need it,” she said.

According to DeLevie-Orey, single-night bookings have generated $4.9 million in revenue for hosts, while only 0.05% of single-night bookings have resulted in a “safety incident.”

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However, Smith said Airbnb’s efforts to curb party houses don’t go far enough.

“Airbnb’s statement to us that they were banning parties, and limiting them to 16 people, is a little bit too late, and it’s ineffective,” Smith said. “To meet Airbnb’s rules, you would have to have an eight bedroom house. There aren’t that many of them around here.”

The ordinance advanced by the License Committee on Tuesday would instead cap bookings at two people per sleeping room.

In addition, the changes include closing a loophole that allowed hosts to list their units while their applications are still pending. Now hosts would not be allowed to list a unit for short-term rental until their application receives final approval from the city.

The revised ordinance also requires hosts to file their applications directly with the city, rather than through home-sharing platforms like Airbnb and HomeAway, which currently submit hosts’ applications in batches every two weeks. Each individual host would be assigned a registration number allowing the city to track their application from start to finish.

“As a result, we will be able to verify the identity of hosts, and the specific locations of their shared housing units,” Escareno said.

The city also will create a tiered license fee for intermediaries like Airbnb and HomeAway. The city currently requires a flat $10,000 annual registration fee for such companies. The new ordinance would require a $5,000 annual registration fee for intermediaries with up to 499 units, a $7,500 fee for intermediaries with 500 to 999 units, and a $10,000 fee for intermediaries with 1,000 or more units. Annual per-unit license fees would more than double from $60 to $125.

Smith and Ald. Brendan Reilly (42nd), whose downtown ward includes a large number of home-sharing hosts, said they would have preferred the city also require that hosts only be allowed to offer short-term rentals at their primary residence, arguing that would reduce the likelihood of people allowing house parties or other problematic behavior on their property.

Reilly noted Los Angeles already bars home-sharing rentals at properties other than someone’s primary home.

“We don’t’ have quality of life issues and crazy party complaints when it’s an owner occupied unit. It simply doesn’t exist. It’s not a problem,” Reilly said “This ordinance does lots of excellent things, but could be simplified if down the road we were to adopt a requirement for owner occupancy.”

However, both Reilly and Smith said the ordinance advanced on Tuesday is a reasonable compromise for now.

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The measure now goes to the full City Council for consideration at its next meeting on Sept. 9.

CBS 2 Chicago Staff