Why would it be illegal?

Lots of municipalities have made short-term rentals illegal for the same reasons that hotels require a license (taxes, safety standards)

Also, people generally dislike having short term rentals as neighbors, because the people in them don’t stick around long enough to care for the community, or for punishment/warnings to work if they end up causing a mess.

Can confirm. My city shot down ALL Airbnb’s before I could even get in the game.

... and rent-seeking!