Naperville Banned It. Arlington Heights Just Did Too. Chicago Is Suing Airbnb. Here's What That Means If You Own (or Want) a Two-Flat.

Somewhere in Chicagoland right now, somebody is sitting at a closing table buying a three-flat with a spreadsheet that says "Airbnb the garden unit." That spreadsheet is about to meet a very long list of rules, and depending on which side of a village boundary the building sits on, the number in that cell might legally have to be zero.

Short-term rentals have become one of the most locally regulated things you can do with a house in this region. The city regulates them hard. A growing group of suburbs bans them outright. And in June, the City of Chicago stopped writing tickets and started filing lawsuits. This post walks through where the lines are, town by town, and what it means whether you're buying, selling, or already hosting.

Nothing here is legal advice. Ordinances change, and a few of these are being litigated as we speak. Check with the municipality and an attorney before you act on any of it.

First, the city: Chicago regulates, it doesn't ban

Chicago's rules live in the Shared Housing Ordinance (Chapter 4-14 of the Municipal Code), passed in 2016 and amended several times since. The core idea is simple: any stay under 31 nights booked through Airbnb, Vrbo, or a similar platform needs a city registration. Stays of 31 nights or longer aren't covered at all.

The rule that decides most people's plans is the primary-residence test, and it's a lot narrower than most new owners expect:

• Single-family home: it has to be your primary residence, and you can register one rental.

• Building with 2 to 4 units: same thing. The unit has to be your primary residence, and only one unit in the whole building can be registered, even if you own the building free and clear.

• Building with 5 or more units: primary residence isn't required, and the cap loosens to one-quarter of the units or six, whichever is smaller.

"Primary residence" means you live there at least 245 days a year. And here's the part that trips up investors: if you haven't claimed the Cook County homeowner exemption on that unit, the city presumes it isn't your primary residence. So the classic "buy a two-flat, live in one unit, Airbnb the other" plan is legal. The "buy a two-flat, live in Naperville, Airbnb both units" plan is not, without a Commissioner's Adjustment ($360, non-refundable, and the city treats it as a genuine long shot).

On top of that, a unit is ineligible outright if the building is on the city's Prohibited Buildings List (more than 2,400 buildings whose owners or condo boards have opted out), sits in one of 192 Restricted Residential Zone precincts where neighbors petitioned to ban new registrations, or if your own condo declaration or lease already prohibits it.

To put those numbers in perspective: the City Council's own analysis counted just 3,901 active registered units citywide as of November 2025. In a city with roughly 1.2 million housing units, that's a rounding error.

The taxes are the highest of any comparable tourism city

This is the number that changes the math. Chicago stacks its 4.5% Hotel Accommodation Tax, a 4% Shared Housing Surcharge, and a 2% Domestic Violence Surcharge on top of the county's 1% hotel tax, the state's hotel occupation tax, and state sales tax. The City Council's Office of Financial Analysis put the combined burden at 27.75% of every booking, which it flagged as the highest short-term rental tax burden of any comparable tourism city in the country. Airbnb and Vrbo remit most of it automatically, so hosts don't see it as a line item, but guests do, and it shows up in what they're willing to pay per night.

June 23, 2026: the city sued Airbnb

For years, Chicago's enforcement meant fines. Those have gone up: violations now run $2,500 to $10,000 per offense, each day counts as a separate offense, and a single serious incident (or two lesser ones in 12 months) can get a registration revoked for at least two years.

Then on June 23, the City of Chicago filed suit in Cook County Circuit Court against Airbnb itself, its Airbnb Living affiliate, and a high-volume host called Slumber Stay LLC. The city alleges the host was cited nearly 200 times across 2024 and 2025, reused a single non-transferable license number across multiple unrelated properties, and kept renting unregistered units after paying fines elsewhere. The suit accuses Airbnb of processing bookings for those unregistered units anyway. The city is asking for fines, disgorgement of profits, and an injunction.

Whatever the outcome, the signal is clear: the city is now going after the platform's compliance practices, not just individual hosts. If you're a small host doing everything right, the practical effect is that platforms will verify registration numbers more aggressively, and an unregistered listing has a shorter shelf life than it used to.

Now the suburbs: a patchwork of bans, pilots, and caps

Here's where the map matters. Illinois has no statewide short-term rental law and nothing that preempts local rules, so every village makes its own call. The pattern over the past six years has been one direction.

Town	Status	Key details
Naperville	Banned since Sept 1, 2020	Ordinance 20-087. Stays under 30 days are illegal to operate or advertise. Fines $1,000 first offense, $2,500 each subsequent offense within 12 months, per day.
Arlington Heights	Banned effective July 1, 2026	Unanimous vote. STRs classified as "nuisances" in village code. Exempts hotels and leases tied to a property sale. Officials said they'd revisit if the Bears build on Arlington Park, but that's not written into the ordinance.
Hinsdale	Banned	Full ban on residential short-term rentals.
Schiller Park	Banned	Full ban on residential short-term rentals.
Glen Ellyn	Banned, under legal challenge	A federal judge blocked enforcement against one operator (Blakelick Properties) in December 2025. The ban still applies to everyone else, but its durability is an open question.
Skokie	18-month pilot, passed Feb 3, 2026	Bans new investor-owned STRs; existing operators can register. Owner-occupied limited to one license per block, five-night minimum stay, max 18 bookings during the pilot. Fees $2,400 (owner-occupied) to $3,600 (non-owner-occupied). Fines up to $1,500. Village estimated 75 to 90 active units.
Evanston	New cap system, passed Feb 23, 2026	Ordinance 2-O-26 passed 8-0 after a moratorium that ran from September 2025 to March 9, 2026. Licenses capped at one per 100 long-term rental units citywide (roughly 144). Owner-occupied and non-owner-occupied both allowed. No more than 25% of units in a multi-unit building. Property manager must live or keep an office within three miles. Fines raised to $1,000. A proposed 600-foot spacing rule was struck at the last minute.
Chicago	Regulated, not banned	Registration required, primary-residence rule for 1–4 unit buildings, $250/year, 27.75% combined tax, $2,500–$10,000 fines.

Notice the split. Chicago's approach is "register and pay." The suburbs increasingly go with "no." And the towns that stopped short of a ban, Skokie and Evanston, both built systems specifically designed to shrink the number of investor-owned units over time.

The Arlington Heights wrinkle

Arlington Heights deserves its own paragraph because it's the strangest case on the list. The village banned short-term rentals unanimously, with only 10 to 20 listings in town, and then the mayor said out loud that the question "will come up again" depending on what happens with the 326 acres on the west side. Translation: game-day rentals near an NFL stadium are a different conversation than a party house on a cul-de-sac. If you read our post on the Bears and your property tax bill, you know the stadium is far from certain. For now, the ban is the ban.

What this means if you're buying

• Don't underwrite a suburban purchase on nightly rental income unless you've read that specific village's code this month. Naperville, Arlington Heights, Hinsdale, Schiller Park, and Glen Ellyn are closed. Skokie is closed to new investors. Evanston is capped.

• In the city, the two-flat house-hack still works, and it's about the only version that does. Live in one unit, register the other, claim your homeowner exemption. If you won't live there, the building needs five or more units.

• Check the Prohibited Buildings List and the Restricted Zone list before you write an offer on a Chicago condo or small multi-unit. Both are public datasets on the city's data portal, and both are dealbreakers.

• Read the condo declaration. Even in a building that isn't on the prohibited list, the association's own rules control. A lot of Chicago condo boards banned STRs years ago.

• Remember the 31-night rule. A furnished mid-term rental (traveling nurses, corporate relocations, people between houses) needs no registration in Chicago and is exempt from most suburban bans, which all define "short-term" as under 30 days. For a lot of owners, that's the realistic version of this strategy.

What this means if you're selling

• Chicago has a written disclosure duty. If you own the building and know a unit is registered as a shared housing unit, or know it's ineligible under the ordinance, you have to disclose that in writing to a prospective buyer before money changes hands. This gets missed in fast closings.

• Registrations don't transfer. A sale means the new owner starts from zero. Don't let a buyer's agent price your building as a "turnkey Airbnb," because it isn't one on the day after closing.

• If you're in a ban town and you've been hosting, your buyer pool just changed. The house is worth what it's worth as a house. That's not necessarily bad news in this market (see July's 13.3% jump), but it's a different pitch.

• If you own a vacant investment property you were planning to Airbnb, the vacant-building rules in this earlier post apply in the meantime.

The honest case on both sides

The case for the crackdown: Evanston's council said it plainly. They didn't want operators "who don't live in Evanston" pulling units out of a tight long-term rental market. Chicago has 622,000 rental units and, per the debate over the renter ordinance we covered here, roughly 40% of renter households are cost-burdened. Every unit that goes nightly is a unit a family can't lease. Party houses are real, and neighbors on a residential block didn't sign up to live next to a hotel.

The case against: With 3,901 registered units in a city of over a million housing units, the housing-supply effect of STRs in Chicago is close to invisible in the aggregate. Owner-occupant hosts, the two-flat owner renting the garden unit to cover the mortgage, are the people most likely to follow the rules and most likely to get squeezed by the same regulations aimed at commercial operators. And a 27.75% tax on every booking is a real cost that lands on visitors and on the neighborhood restaurants they'd otherwise spend at. The Glen Ellyn litigation will tell us something about whether outright bans hold up in federal court.

Both things can be true. The practical takeaway for anyone with a mortgage in the region is narrower: know the rule for your address before you buy, and disclose it before you sell.

If you're weighing a purchase or a sale around any of this

I've spent 25 years working two-flats, three-flats, and condos across the city and the suburbs, and the first thing I do on any small multi-unit deal now is pull the village code and the city's prohibited-building data before we talk price. If you're buying, I'll run the actual numbers as a long-term or mid-term rental so the spreadsheet matches what's legal. If you're selling, my listing commission is 1.25%, with full service: professional photography, 3D Matterport tour, and complete online marketing. There's a Zero Commission Clause if you find your own buyer and no lock-in if you change your mind.

Call or text me at 312.882.9797, or request a free home valuation at https://www.jasonrosenbergrealestate.com/.

Jason Rosenberg is a licensed Illinois real estate broker with The Rosenberg Group at Infiniti Properties, serving Chicago and the entire Chicagoland area.

Sources

• City of Chicago, Shared Housing Ordinance (Municipal Code Ch. 4-14) and Shared Housing Registration Guide 2026 (chicago.gov/sharedhousing)

• City of Chicago, House-Share Prohibited Buildings List and Restricted Residential Zone Precincts (data.cityofchicago.org)

• Chicago City Council Office of Financial Analysis, Aldermanic Request Report on short-term rental taxes and fees (2025)

• City of Chicago Department of Law, press release: City of Chicago Sues Airbnb and High-Volume Host for Operating Illegal Short-Term Rentals (June 23, 2026)

• BNBCalc, Chicago Short-Term Rental Regulations: A 2026 Guide (updated Aug 24, 2026)

• City of Naperville, Ordinance No. 20-087 (effective Sept 1, 2020)

• StaySTRA, "A Chicago Suburb Just Banned Short-Term Rentals" (Arlington Heights, March 27, 2026)

• City of Evanston, Ordinance 2-O-26 memorandum to City Council (Feb 9, 2026)

• Evanston RoundTable, "Short-term rental overhaul passes on third try at City Council" (Feb 24, 2026)

• The Daily Northwestern, "City Council passes amended Vacation Rentals Ordinance" (Feb 24, 2026)

• Evanston Now, "Alders to vote on vacation rental limits Monday" (Feb 7, 2026)