for this owner-occupant room rental situation in which a friend is writing checks to you, you should worry a lot more about the IRS than the city

the IRS has much more sophisticated data mining capabilities - basically they look for patterns in the transactions to red flag you (if you are receiving checks)

occasionally we'll have people stay with us for a month or two - i report it as rental income on my taxes but I am not going to get the city involved

never try to cheat the IRS on the income side, just push the deductions hard