Fed. Dist Court in Illinois Holds Chicago Short-Term Rental Ordinance Does Not Implicate First Amendment

Editor’s Note: The posting below originally appeared on the Rocky Mountain Sign Law Blog.

A federal court in Illinois denied a request for a preliminary injunction against the City of Chicago’s recently-enacted short-term rental ordinance.  In its order, the court determined that the ordinance, which seeks to regulate individuals’ rental of units on Internet-based services such as Airbnb, VRBO, or HomeAway, did not affect the plaintiffs’ First Amendment rights to free speech.  The decision marks an interesting constitutional development in continued efforts by local governments to regulate short-term rentals.

In summer 2016, Chicago enacted what it calls the “shared housing ordinance,” or SHO.  The SHO requires hosts of units available for short-term rent to register their housing units with the city prior to listing their units on any Internet-based services.  Airbnb, VRBO, HomeAway and other services are also required to register with the city.  As applied to individuals, the SHO imposes requirements on the services provided by the short-term rental, and also requires individuals to maintain guest registries, and post their licensing information at the unit.

The plaintiffs in the case, including a group that advocates for short-term rentals and individuals who rent units on Airbnb, VRBO, HomeAway, or other platforms, filed suit against the city challenging the licensing and other regulations.  The complaint included claims alleging that the SHO was an unconstitutional prior restraint on speech, that the regulations constitute compelled speech, and was a content-based restriction on speech, all in contradiction of the First Amendment.

On a motion for preliminary injunction, the court squarely rejected the plaintiffs’ First Amendment claims.  The resulting order distinguished between First Amendment-protected speech and commercial activity.  Quoting the Supreme Court’s decision in Sorrell v. IMS Health, the court stated, “[R]estrictions on protected expression are distinct from restrictions on economic activity or, more generally, on nonexpressive conduct . . . .  [T]he First Amendment does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech.”  In the court’s eyes, the plaintiffs had not established that their activities were anything but commercial activity, and that there was no expressive component to the short-term rental business.  The plaintiffs argued that their activities constituted speech because online platforms such as Airbnb gave them opportunities to meet new friends, learn about different cultures, and show visitors around their city.  But the court found instead that a short-term rental arrangement is a commercial transaction and, if such a transaction constituted First Amendment-protected speech, there could be no distinction between free speech and any other commercial transaction that involves interpersonal interaction.  Per the court: “That some hosts or licensees also derive a social benefit from home sharing makes no difference to the dispositive question of whether the SHO regulates economic activity.”

The court’s decision in Livable v. City of Chicago offers yet another development in the law relating to short-term rentals.  Many local governments have quickly established regulations of these new short-term rental forums in order to address some of the land use and business impacts of the “sharing economy.”  This decision, along with other recent decisions, suggests that courts have little patience for creative First Amendment challenges to these regulations.

Keep Chicago Livable v. City of Chicago, No. 16 C 10371, 2017 WL 955421 (N.D. Ill. Mar. 13, 2017).