As part of the process of rewriting the city’s short-term rental laws — following a recent federal court ruling that gutted officials’ legal ability to limit permits — the New Orleans City Planning Commission released a staff report late Wednesday (Jan. 18) suggesting a new regime that would, in some ways, be more restrictive than the current rules.
The suggested rules would cap short-term rental permits in residential neighborhoods to one per blockface, the side of block facing a given street and limit on-site operators to one residential permit at a time. The rules would also remove the current requirement that owners live full-time at a permitted residential site, instead requiring that operators prove residency there.
The city was forced to reconsider its short-term rental laws after an August 2022 ruling from the U.S. Court of Appeals for the 5th Circuit found that a key part of the city’s short-term rental law was unconstitutional. That rule required residentially zoned properties to have a homestead exemption in order for the owner to get a short-term rental permit.
Homestead exemptions are only supposed to be granted for a person’s primary residence, and a panel of 5th Circuit judges found the requirement violated the U.S. Constitution’s commerce clause because it discriminates against out-of-state investors.
The ruling was part of an ongoing lawsuit filed by a group of vacation rental owners frustrated by the New Orleans City Council’s decision in 2019 to rewrite short-term rental permitting laws, first enacted in 2017, to enact restrictions that council members said would rein in the growth of the industry.
Critics say that the proliferation of STRs in New Orleans has contributed to the city’s affordable housing crisis by taking away units that would otherwise go to long-term renters. As of this week, there were 2,349 active short-term rental licenses in the city, of which 1,262 were residential. Although there are likely thousands more illegally renting without a license.
Because short-term rentals can generate higher income than long-term tenants, investors, many from out of town, have snatched up properties across the city at a premium, raising prices by forcing prospective home buyers and renters, many of whom are low-income in New Orleans, to compete with commercial real-estate speculators.
Though the lawsuit was successful at forcing the city to revisit the 2019 rules, the plaintiffs may get stuck with even stricter regulations.
The Planning Commission’s study found that implementing the suggested blockface limit would see immediate removals of some vacation rentals in many of the highest-demand neighborhoods, including Treme, Marigny, Bywater, Central City and the Irish Channel.
The rules are far from finalized, however. The report represents City Planning Commission staff recommendations. The City Planning Commission itself now must hold a public hearing and vote on the report. That hearing is scheduled for Tuesday, Jan. 24.
After that, the City Council is required to review the commission’s recommendations and vote on whether to adopt or reject them. (The council also has the option of approving them with modifications.) And then the council must take yet another vote — in a meeting at least 21 days later — to change the law.
An attorney for the plaintiffs, Dawn Wheelahan, told Verite on Thursday that she hadn’t yet had a chance to review the report, but noted that “the City is under no obligation to adopt the CPC recommendations.”
The council faces a deadline to comply with the 5th Circuit decision. Under a court order and consent agreement with the plaintiffs in the 2019 suit, the city has until March 31 to finalize and approve new rules. In the meantime, the city has put a temporary ban on residential permits, although there are a couple exceptions. The Department of Safety and Permits has been granting renewals to certain properties that have held permits in the past.
Although the lawsuit triggered the current rule-rewriting process, many residents and officials were already calling for a rewrite for entirely different reasons than the plaintiffs. Officials, including Councilman JP Morrell, have said the 2019 law didn’t go far enough to curb the industry.
Along with the impacts to housing affordability, critics also say the proliferation of vacation rentals negatively affects the culture and living standards in residential neighborhoods.
A 2016 City Planning Commission report found that “Short term rentals reduce the quality of life of neighborhoods because of an increase in late night activity, partying, noise, crime, litter, property damage, fire danger, loitering, public urination, vehicles parked on the street, and other issues.”
That report said short-term rentals can change the character of the neighborhood and change “the neighborhood from one that serves residents to one that serves tourists.”
“As homes are converted to short term rentals, there are less full-time residents in the community,” the report said. “This reduces the cohesion in the neighborhood, reduces the number of people who are invested in the neighborhood, and damages businesses that serve the local population.”
Planning staff, however, said that there are potential benefits from short-term rentals as well, including restoring blighted properties, helping local residents maintain homeownership and creating tax revenue for the city. But it said that the practice still needed tight controls to prevent the negative impacts from overwhelming the positive ones.
The proposed rules
The City Planning Commission report focused on how to get in line with the federal ruling while maintaining the intent of the homestead exemption requirement — to stop the proliferation of vacation rentals in neighborhoods and ensure there’s a full time resident living at permitted properties.
The rule “ensured that property owners are full time residents of the permitted structure and are onsite during a guest’s stay to mitigate the negative impacts such as noise, trash, crime, etc,” the City Planning Commission report said.
“The use is residential in nature but has commercial-like impacts,” the report said. “Mechanisms to limit the expansion of the use throughout residential neighborhoods is critical to preserving the character of residential neighborhoods.”
The 2019 laws created two broad permit main categories — residential permits for residentially zoned properties and commercial permits for everything else. Residential permits were further broken down into large, small and partial unit permits. The new study recommends consolidating those three residential permit types into a single category: “non-commercial.”
Under current rules, each short-term rental property must have a licensed operator to serve as a point of contact for visitors. But that operator isn’t required to live on the premises.
Instead of requiring the property to be the owner’s full-time residence, the new rules would require the operator to live there. The operator could be the property owner, but it wouldn’t have to be — a key to staying in line with the recent federal ruling. The operator would have to prove residency with a lease plus other documents, possibly including an ID, bank statements or pay stubs showing the address.
The new rules could possibly allow property owners to hold more residential permits than under the current law. The homestead exemption requirement effectively limited property owners to one residential permit at a time. The proposed rules don’t suggest any cap on the number of permits a single owner can have.
But the new operator rules would prevent individuals or companies from managing more than one at a time. Currently, operators, sometimes working for short-term rental management companies, manage as many as 20 residential short-term rental properties, according to city permit data.
But perhaps the most significant new proposed restriction would limit non-commercial permits to one per block face. The study found that the majority of the city’s residential permits already comply with this rule. It found that of the current 1,229 residential permits, 77 percent of them are the only ones on their blockface.
The study found that 128 blockfaces in the city have multiple residential permits, with a total of 288 permits on those blocks. The majority of those blockfaces are located in high-demand areas, like Treme and Marigny. Many of those high-demand neighborhoods surround the two parts of the city that currently enjoy total bans on short-term rentals — the Garden District and most of the French Quarter, excluding several blocks of Bourbon Street.
Blockface limits have been suggested by short-term rental critics in the past. But some have also raised concerns. In a policy memo sent to the City Planning Commission, the Louisiana Fair Housing Action Center cautioned that a blockface limit could be hard to enforce and could create a competitive advantage for corporate-backed owners who have more resources to secure permits.
“We also believe that block face limits will be difficult to police and foster inequality by benefiting the larger, better funded corporate operators,” the memo said. “Most of the cities using block face limits that the CPC staff cited in previous reports have abandoned them for more restrictive rules.”
The staff report suggested that to divvy out the limited permits, “the Department of Safety and Permits will design a lottery system that ensures an equitable distribution of permits per blockface.”
One key finding in the staff report is that properties that previously held residential permits may not be entitled to keep them. Properties that have been previously permitted for a certain use, such as live entertainment or a fast food restaurant, can be allowed to continue that use even if zoning laws are changed to prohibit it. In zoning jargon, that’s called a “non-conforming use.”
But the study notes that granting non-comforming use status to properties that previously held residential short-term rentals would give an advantage to owners with homestead exemptions and therefore “may perpetuate the unconstitutional regulatory regime struck down by the 5th Circuit.”
“Based on the court decision, current STR permit holders may be unable to maintain that entitlement,” the report said.
The report also suggested preventing any non-comforming use status going forward by classifying non-commercial permits as a temporary use. A temporary use permit can’t be used to establish a non-comforming use in the future, the report said.
That finding could be vital to reducing the number of current residential permits. When the City Council embarked on rewriting the law last August, it put a temporary moratorium on granting residential permits but allowing existing ones and those in the application pipeline to remain in effect until March. In October, the council rescinded that moratorium, replacing it with a new one meant to freeze all residential permits, including pending applications for new or renewed permits.
But due to an agreement with the plaintiffs and a recent interpretation by the Department of Safety and Permits, there are some exceptions to that temporary ban.
In a December policy statement, the department said that in spite of the temporary moratorium, properties that had a permit as of late August can apply for renewals.
And under a recent court order in the 2019 suit, which the city agreed to late last month, calls for the creation of a new short-term rental permit category for property owners who were previously denied due to a lack of a homestead exemption. However, under the agreement those permits — which have yet to be codified into law by the council — will expire once new rules are in place.
City records show that the Department of Safety and Permits has issued more than 200 permits since Oct. 20, when the council approved the current moratorium.
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