The New Orleans City Council gave preliminary approval to a new set of rules for short-term rentals on Thursday (March 2), six months after a federal appeals court ruled that a key portion of the city’s existing restrictions — a requirement that a residential short-term rental property is also the owner’s primary residence — is unconstitutional.
The council now faces a court-imposed deadline of March 31 to change the law to reflect the ruling, while still attempting to maintain some limits on the number of short-term rentals in the city’s residential neighborhoods.
If the new rules get final council approval later this month, the biggest change would be a new limit on the number of residential short-term rentals per block. But the council is still debating how restrictive that limit should be. There are three options on the table.
The first and least restrictive option is a limit of one permit on each side of a block, also called a blockface. The second is a limit of one permit per block, which would mean that two short-term rental properties could not operate across the street from each other. The third and most restrictive option would limit one permit per block square.
The other major open question for the council is whether to add a “release valve” that would allow the city to make exceptions to new block limits in certain scenarios.
The council plans to have two more meetings on the new rules — a hearing on March 14 and a final vote on March 26.
Also on Thursday, Councilwoman Helena Moreno introduced a related ordinance — which will be considered and voted on at the same two meetings — to create rules for licensing and operating short-term rentals in city law.
Moreno’s companion ordinance would ban all short-term rentals at properties subject to the city inclusionary zoning rules, which require new housing developments in certain neighborhoods to set aside affordable units. It also adds language aimed at forcing the city to ban permits at properties with repeated problems. And it would also allow private residents who live within 300 feet of a rental to take short-term rental owners to court themselves to get permits revoked if the city isn’t acting against problem properties.
Short-term rentals are a contentious issue in New Orleans and have been a subject of debate for years. Opponents have long complained that vacation rentals have deepened the city’s affordable housing crisis and hurt neighborhood character, while rental owners have argued the income they bring in is a lifeline to keep their homes and to fund their retirement as the cost of living skyrockets.
Councilman JP Morrell warned the public that at the end of the day, any new rules would inevitably cause problems for some people.
“There just isn’t any way to resolve this issue without pain,” he said. “If there was an easy solution we would do it.”
Even after the council takes a final vote on the rules, the debate is far from over. There are still practical details to be figured out, like how the city will operate a lottery to issue rental permits when more than one property on a square block apply for one.
During the roughly two hours of public comment, short-term rental operators expressed concern over the restrictions and urged councilmembers to pass more lenient rules. Short-term rental owner and operator Shalice Green expressed concern about a potential scenario in which two neighbors apply for permits but are subject to the same limit.
“I don’t agree with one per block, I don’t agree with one per blockface,” Green said in a public comment. “You’re pitting neighbor against neighbor.”
On the other side of the debate, short-term rental critics say that the more important issue is the wider housing affordability crisis in the city, which is made worse by the proliferation of vacation rentals. Some said that even the one-per-block square limitation didn’t go far enough.
“We’d still like to see a ban on whole home rentals in all of our neighborhoods,” Maxwell Ciardullo, policy analyst with the Louisiana Fair Housing Action Center, said on Thursday. “We want neighbors we can rely on. People you can ask to watch your home when you’re away, water your plants, give you a ride when your car floods. Not land speculators who buy properties above asking price, raise our taxes and evict our neighborhoods all to make room for bachelor parties and out-of-towners who don’t respect our neighborhoods.”
And there was wide agreement among the public and council members that the rules currently under consideration do not deal with all the various problems with current short-term rental regulation. Many pointed out that the city continues to have thousands of rentals operating illegally with no permit at all.
The current rules also only deal with residential short-term rentals, not short-term rentals in commercially zoned areas, which make up roughly half of the current 2,442 legal permits issued by the city.
Federal ruling put council under the gun
This is the third time in the last seven years the City Council is undertaking a major change to the city’s short-term rental rules. The first local law to regulate short-term rentals was passed in 2016, under then-Mayor Mitch Landrieu’s administration. Those initial rules, which were written in close coordination with industry giant Airbnb and the company’s lobbyists, were widely criticized as too lax. In 2019, the council rewrote the rules after widespread criticism that the original law was too permissive.
The 2019 law was stricter, especially for rentals in residential areas. But even with those new rules, residents and government officials have continued to express issues with the rules and the failure of the Cantrell administration to enforce them. When Morrell was running for council, he vowed to rewrite the rules to make them more restrictive.
But the current imperative to revise the rules was forced upon the council. It was the result of a lawsuit brought against the city by a group of short-term rental owners challenging the legality of the 2019 law. Last summer, the group succeeded in getting a panel of judges from the U.S. Court of Appeals for the 5th Circuit to rule that the city’s prime rule for limiting vacation rentals in residential neighborhoods was unconstitutional.
That rule required every residential short-term rental owner to have a homestead exemption for the rental property. Homestead exemptions are tax breaks that are supposed to be applied to a person’s primary residence. The rule effectively limited each person to one short-term rental each and, in theory, was supposed to ensure that the property was the owner’s primary home.
The Fifth Circuit ruling said that the homestead exemption requirement violated the U.S. constitution’s commerce clause by discriminating against out of town investors. They gave the council until the end of March to replace the homestead exemption requirement with a new rule. The council created temporary restrictions on new permits in the meantime to prevent an onslaught of new rentals.
The ruling and deadline put the council under the gun to find a new rule that would achieve the same general impacts as the homestead exemption rule — limiting the density of permits in certain neighborhoods and preventing individuals from owning multiple residential rentals.
Debating density caps
In January, the City Planning Commission approved recommendations to the council on how they should go about replacing the homestead exemption rule — a legally necessary step for the council to change the city’s zoning laws.
The commission recommended creating a limit of one residential rental permit per each side of the block, also known as a blockface, and limit each person to one residential rental each.
Those recommendations received a mixed reaction from the public. Short-term rental critics said that the one-per-blockface limit would likely only have a modest effect on the overall number of permits, and could even set up a potential increase in the overall number of rentals.
The City Planning Commission found that only 128 blockfaces had more than one residential permit, with about 300 permits in total. An analysis by Verite found that if the cap were enacted, it would eliminate only about 170 short-term rental permits.
On Thursday, the council amended the City Planning Commission recommendations to replace the one-per-blockface limit with a one-per-block square limit. But it was approved on a narrow 4-3 vote. And council members said that the question is still very much on the table.
Towards the end of Thursday’s meeting, Councilwoman Helena Moreno suggested that there could be a compromise to create a one per block limit, meaning that two properties that face each other but are on separate blockfaces could not both have permits.
“I’m still willing to work on this particular compromise between block square and blockface,” Moreno said.
The council is also expected to debate whether to add a process to make exceptions to whatever block limit they end up passing. In situations where more than one property wants a permit when only one is available, the city would set up a lottery system. But some council members were sympathetic to the argument that there were scenarios where it was unfair to arbitrarily decide between two residents who have operated legally and responsibly for years and rely on the income to pay their mortgage or fund their retirement.
Moreno said that an exception system should include the opinions of the property’s neighbors.
Morrell had originally submitted an amendment to get rid of block restrictions all together, but he withdrew that amendment before it was considered on Thursday.
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