My partner and I are interested in purchasing properties in the Chicago
area and opening up half way houses related to the rehabilitation of
drug and alcohol addicts. We are curious on the local zoning laws,
restrictions, insurance, regulatory laws, non-profit issues, permits,
etc. regarding this industry.

Chicago's zoning laws are quite complex and voluminous. However, you
can access all of Chicago's zoning laws and ordinances in one
convenient place online for a $150 subscription fee. You will get
laws, ordinances, zoomable zoning maps, definitions, descriptions,
table of contents, index and even a search engine.

CHICAGO ZONING ORDINANCE
http://www.chicagozoning.com/demon.cfm#start

Please let me know if this comprehensive source answers your question.

Regards;
tutuzdad-ga

Typically zoning boards are at least a bit corrupt, so practices may
little resemble the rules and ordinances. Neadless to say, neighbors
will not want a halfway house for recovering drug adicts nearby, so
you may run into some unethical, if not ilegal stonewalling. If you
have picked the approximate neighborhood, you need to network with
some Chicago natives who have resently gotten their projects approved
by the zoning board. The Optimist Club or JCs = Junior Chamber of
Commerace may be a good place to find a knowledgeable friend.  Neil

Dave:

You should note that not all comments are from researchers, as in the
example above. Some commenters have a habit of posting what they think
"Typically" occurs, but again, as in the instance above, the
information is totally unfounded and certainly not universal to all
zoning boards everywhere. In fact, in my opinion, that comment is
total nonsense and should be ignored entirely and I would hate to see
such uninformed hogwash scare you out of your noble project.

In truth, what "is" typical is that most zoning boards are actually
made up of people with great intergity who have a heavy responsibility
to make and enforce the laws for the good of the community.

Again, I'd be interested to know if my source was helpful to you and
suitable as an answer to your question.

tutuzdad-ga

I have lived and worked with a halfway house in California for several
years now.  I am going to suggest something that seems obvious, that
you may already have thought of, but is nevertheless VERY important.
Before you jump into this with expensive investments in property and
so forth it is immportant that you talk with the staff and directors
of halfway houses in your area, as many as you can.  They will be able
to answer a lot of your questions, and if they don't know they
probably know someone who does.  Also, talking to people in the
business can save you a lot of time and hassle trying to figure out
all the answers from government/bureaucratic sources on your own. 
Chicago and environs is a big city and large metropolitan area-you
shouldn't have any problems locating existing halfway houses.  Good
luck!