Regulating Airbnb and the Short-Term Rental Market 11
In Chicago, violation of rules governing short-term rental activity can result in
a host being fined $1,500 to $3,000 dollars per oence per day. Instances that in-
volve criminal activity or public nuisance fines are even steeper, starting at a pen-
alty of $2,500 to $5,000 per oence.
Most condominiums in Illinois prohibit short-term rentals as stated in condo-
minium association declarations. If owners or tenants of condominiums are found
to oer units as short-term rentals, they receive a notice requiring them to cease the
listing, they can face fines, they can be taken to court by the condominium associa-
tion, and they can even be evicted.
While a fine system is in place to punish violations, the problem is that the onus
is on the condominium associations to regularly check the various online platforms
for illegal listings. In this case, enforcement has been ooaded to condominium
boards as opposed to government ocials.
New York City operates under a hierarchy of fines: a first-time infraction by a host
costs $1,000, with subsequent infractions costing up to $7,500. A similar fine system
has emerged in Miami Beach, where violators are initially fined $1,000 for a first-
time oence, followed by fines of $5,000, $7,500, and $10,000 for subsequent vio-
lations. Since short-term rentals of single-family homes are banned in Miami Beach,
any host oering a single-family home for less than six months and one day can face
a fine of $20,000 for a first-time violation.
In Phoenix, hosts found to operate without registering face a $150 daily fine.
But a bizarre feature of the regulations in Phoenix is that a tax exemption is oered
for hosts with less than three short-term rentals — which, according to many defin-
itions, still classify as “multiple hosts.”
Another potentially problematic feature of tax regulations in many cities is that
the collection of tax revenue depends on hosts filing taxes on their short-term rent-
al income. Many short-term rental hosts do not file taxes because they are unaware
of their tax obligations or take comfort in lax enforcement of tax measures, thereby
engaging in tax avoidance.
The shortcoming in such models is that platforms such as Airbnb are not held ac-
countable for tax compliance and are simply asked to provide their hosts with friend-
ly reminders about paying their tax dues.
A more eective compliance model for taxation would make platforms directly
responsible for tax collection and remittance. A prominent example is Philadelphia,
where Airbnb is required by law to collect a sales and hotel tax on behalf of the city.
The platform automatically charges the tax to the guest’s final transaction bill. This
kind of model minimizes tax avoidance and encourages accountability.
In Canada, Quebec is leading on the regulation front and has prescribed legal
fines for short-term rental violations. Fines for small-scale hosts range from $2,500