Short-Term Rental Prohibitions and Rental Prices in Chicago

Prepared for the City of Chicago — Department of Technology and Innovation

May 2026

STR prohibitions under the Shared Housing Ordinance are associated with a small, persistent increase in long-term rental prices — approximately $3–10 per month in affected neighborhoods.

Background

Chicago’s Shared Housing Ordinance allows residential buildings to ban short-term rentals by joining a prohibited buildings list. Since 2015, hundreds of buildings across the city have been added to this list, with adoption concentrated in neighborhoods with high short-term rental activity. A key question for policymakers is whether these prohibitions improve or worsen housing affordability for long-term renters.

To answer this, we constructed a monthly panel of rental prices and prohibition status for every census tract in Cook County and estimated the causal effect of prohibition adoption using modern econometric methods designed for staggered policy rollouts.

What We Found

  • Prohibitions raise long-term rents by roughly $6 per month on average, with a credible range of $3–10. The effect is modest relative to typical Chicago rents but statistically significant and consistent across every analytical check we performed.

  • The effect grows over time. Rents in affected tracts increase by about $2.50 per month in the first year after prohibition, $5.80 in the second year, and $8.60 in the third year, with no sign of leveling off.

  • The effect is stronger where short-term rental activity is denser. Tracts with more Airbnb listings and stricter prohibition intensity see larger rent increases. Tracts with higher renter shares also show larger effects.

  • Income does not drive the effect. High- and low-income neighborhoods experience nearly identical rent impacts, meaning the effect is not confined to affluent areas.

  • Neighboring tracts are also affected. Never-treated tracts adjacent to prohibited tracts see rent increases of roughly $18 per month compared to isolated tracts — suggesting the direct estimate understates the total market impact.

What This Means

The positive rent effect is counterintuitive at first glance. Returning units from the short-term to the long-term market should, in theory, increase supply and push rents down. But the data indicate that a stronger force operates in the opposite direction: prohibitions signal that a neighborhood prioritizes residential stability, which attracts long-term renters and bids up rents. The demand effect outweighs the supply gain.

This does not mean the policy is harmful. Prohibitions serve legitimate goals — reducing nuisance, preserving building communities, and asserting residential control — and the rent increase is small in dollar terms. But policymakers should be aware that STR prohibitions do not reduce rents and may modestly increase them, particularly in neighborhoods with active short-term rental markets.

Limitations

The estimate reflects an average across census tracts and may not apply to individual buildings or blocks. Rental price data is measured at the ZIP code level and interpolated to tracts, introducing some imprecision. The spillover finding is suggestive but relies on a small number of comparison tracts and should be interpreted cautiously.

Bottom line: STR prohibitions do not lower rents. They are associated with a small, growing increase in long-term rental prices, driven by the signal that prohibition sends to the long-term rental market. The effect is real, robust, and worth monitoring as the city evaluates its approach to short-term rental regulation.

Full methods, robustness checks, and references: technical paper.