The New Orleans City Council on Thursday voted to overhaul the city’s laws governing short-term rentals. Together, the two new laws passed Thursday will revise short-term rental permitting requirements and restrict residential vacation rentals to one per block square, or one per four sides of a typical block — the first such citywide density cap on permits in residential areas that the council has passed since the city first legalized short-term rentals more than six years ago.
But it comes with a highly controversial stipulation allowing property owners to exceed the one-per-block rule in certain cases. The new rules go into effect July 1.
The votes come seven months after a federal appeals court ruled that a key portion of the city’s existing short-term rental restrictions was unconstitutional, and eight days before the court-mandated deadline for the council to get the law into compliance with the ruling.
Along with the density cap, the new laws also require every residential short-term rental property to have a manager that lives on the property full-time, force new monthly disclosures from platforms like Airbnb, create a new public database of short-term rental information and empower individuals to take rental owners to court over violations if the city doesn’t take action itself.
Although the seven City Council members were on the same page for the majority of the new rules passed Thursday, there was one contentious issue: an amendment from Councilman Freddie King allowing exceptions to the one-per-square-block rule.
The amendment, which passed, would allow the City Council to grant two additional residential permits per square block if people apply for a special exception — allowing up to three rentals on a standard block instead of just one.
King said the measure was a way to find compromise to balance the concerns from short-term rental critics — that short-term rentals displace residents, drive up home prices and rents and disrupt the character and safety of neighborhoods — and small, local short-term rental operators who say they need the source of income to fund their retirement or help cover their mortgage and insurance costs to allow them to stay in their homes.
“I’m trying to find common ground between both sides,” King said.
Under the rules passed Thursday, if the owners of two or more properties are trying to get short-term rental permits on the same square block in a residential neighborhood, the city will use a lottery system to pick which one gets the sole available permit. Some short-term rental owners have said that system is unfair and arbitrary and could result in them losing their permits even though they’ve always followed the city’s rules and run their businesses responsibly.
Short-term rental critics and some City Council members rejected the idea, however, saying it would create too many loopholes for shrewd real estate speculators with the wherewithal to lobby and sue the city. And they argued that while it was possible some residents could be hurt by the strict one-per-square-block restriction, there were far more people that could be hurt by the impacts of potentially allowing triple the amount of residential permits.
“My compromise is one per square because if you took a poll of my district, you’d find vast opposition for STRs,” Councilman Eugene Green said. “I am voting for their stability when I vote for one per square block. … One way to build stronger neighborhoods is to provide stability to those neighborhoods.”
King’s exception amendment was passed in a 5-2 vote, with Green and Councilman Oliver Thomas voting against it.
‘It was thrust upon us by a court’
This is the third set of short-term rental regulations the City Council has passed since 2016, when the council first voted to legalize the then-burgeoning vacation rental industry. Many criticized then-Mayor Mitch Landrieu and the 2016 law his office wrote, saying it was overly permissive and was allowing large-scale corporate operators to take over residential neighborhoods.
The City Council re-wrote the laws in 2019 to make them stricter, although still not as much as many short-term rental opponents wanted. The biggest new restriction only allowed residential short-term rental permits at properties that had a tax break called a homestead exemption.
Homestead exemptions are applied only to a property owner’s primary home, and no one is allowed to have one at more than one address. Tying homestead exemptions to rental permits, the council hoped, would stop speculators from buying multiple residential properties to run as scattered-site hotels. The council also hoped that if a vacation rental was also the owner’s full-time residence, they would take more care to mitigate negative impacts to their neighborhoods.
Some affordable housing advocates said the law didn’t go far enough, and Mayor LaToya’s Cantrell administration has faced criticism for weak enforcement. Some council members like JP Morrell said they wanted to re-write the rules yet again to make them more restrictive.
But ultimately, the council only undertook this most recent regulation re-write because it was forced to by the August ruling from the appeals court.
“It was thrust upon us by a court,” Councilman Eugene Green said.
The court order was the result of a lawsuit against the City Council filed by a group of short-term rental owners fighting against the new restrictions put in place in 2019.
In August 2022, a panel of judges from the U.S. Fifth District Circuit Court of Appeals ruled that the homestead exemption requirement for residential short-term rentals was unconstitutional. They said that the requirement discriminated against out-of-state investors, in violation of the U.S. Constitution’s commerce clause.
Late last year, a federal judge gave the city a deadline of March 31 to rewrite the law and get rid of the homestead exemption requirement.
The homestead exemption requirement in the city’s previous short-term rental law was the main way the city limited the spread of vacation rentals in residential neighborhoods. But after the court ruling found that unconstitutional, the council on Thursday replaced that with the new geographically-based density limit.
Originally, the New Orleans City Planning Commission suggested the council approve a limit of one per block face, meaning one side of a city block. The council decided to go with a more restrictive limit — one permit per block square, meaning one permit per four block faces on a typical, four-sided block square.
Although the federal ruling prohibits the city from requiring the property owner live on site, the new laws require every rental to have an operator that lives on the property and is present during all guest stays. They will be required to resolve all complaints made by neighbors, guests and city officials within an hour.
The owner and operator will have to be “natural persons,” rather than a business. The operator can be the owner, but doesn’t have to, and they can prove they live at the property by providing a copy of their lease.
The point of the on-site operator is to ensure there is someone at the property to deal with complaints. Councilwoman Lesli Harris said that someone who lives at the property full time would be more invested in ensuring they’re mitigating negative impacts from the rental, like loud parties or violence.
“It seems indisputable that someone who makes their home on a lot, who has to look their neighbors in the eye every day and live in immediate proximity to the STR will be more engaged with the short-term rental and better positioned to enforce quality of life rules,” Harris said.
The newly passed rules also add some new oversight measures by increasing required disclosures from owners, operators and platforms. Short-term rental platforms like Airbnb will have to hand over a wide array of information in monthly reports to the city, including their customers’ permit numbers, addresses and the URLs for all New Orleans rental listings and the amount of rent paid by guests for each listing.
“This is something that we have been working towards for such a long time,” Moreno said. “We’ve been constantly threatened as to why we coul;dn’t do this or why it wouldn’t work or why it isn’t possible. But we don’t believe that. And now we’ve seen other cities being successful.. We’re just following what other cities already do. Therefore there should be no legal issues.”
‘I’m done’
Not everyone was satisfied by the extent of the new limitations. Many short-term rental critics in attendance at Thursday’s meeting said they want to see short-term rentals banned outright in the city, or at least in all residential neighborhoods. They said that anything short of a full ban will leave too many loopholes for real estate speculators to take advantage of, allowing short-term rentals to continue proliferating into and damaging neighborhoods.
Councilman JP Morrell said that while the council was trying to be fair to short-term rental owners in these laws, the industry has continued to blatantly flout the city’s rules. A recent report from Jane Place Neighborhood Sustainability Initiative — an affordable housing group that has long opposed short-term rentals — found 6,927 New Orleans listings on Airbnb as of Dec. 2022, compared to only about 2,332 active short-term rental licenses.
Morrell said that this was the final time he was going to try and completely rewrite short-term rental regulations. He said that if the council was forced to revisit the issue due to lawsuits from short-term rental owners or continued legal violations, he would move to ban them completely.
“We as a council and a community cannot continue to operate in good faith with greedy platforms and greedy corporations and greedy LLCs always finding loopholes,” Morrell said. “If it comes back yet again… and there won’t be short-term rentals in the city of new orleans. I’m done.”
Compared to previous efforts to write short-term rental laws, the council was working on a tight schedule. Because of the short timeline, there is wide recognition that Thursday’s ordinances don’t fix every issue with the city’s short-term rental rules, such as enforcement.
The ordinances also only deal with rentals in residentially zoned areas. It doesn’t apply to commercial permits, which make up about half of more than 2,400 active permits in the city.
The council passed a separate measure on Thursday for the City Planning Commission to study the city’s rules on short-term rentals in commercially zoned areas — kicking off the legislative process for the council to legally change those rules as well. It instructed the commission to look at how commercial short-term rentals affect the city’s long-term housing stock and suggest rules “that would prevent a rapid increase in the number of commercial short-term rentals,” Harris said.
“With new regulations in place for residential short-term rentals, this council has heard a lot of concern that this will lead to the proliferation of commercial short-term rentals throughout the city,” Harris. “This is especially concerning because many of the mixed-use zoning districts in and around residential neighborhoods allow commercial short-term rentals by right.”
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