The U.S. 5th Circuit Court of Appeals struck down a key provision restricting short-term rentals in New Orleans as unconstitutional. The 2019 ordinance limited short-term rental (STR) permits in residential areas to property owners who live on the property and have a homestead exemption. The 5th ruled that the ordinance restricting licenses discriminates against out-of-state property owners under the Commerce Clause of the Constitution. This Constitutional provision prohibits discrimination against interstate commerce. The 5th claimed that the residency requirement is explicitly discriminatory against out-of-state property owners. Previously, the U.S. District Court Judge had found that the city’s interest in keeping the housing market under control, reducing STR-related nuisances, and protecting the character of residential neighborhoods, created legal exceptions.

New Orleans implemented a homestead exemption requirement to address neighborhood nuisances that are associated with STRs. This requirement helps to preserve affordable housing and neighborhood character. In a 2018 report from Jane Place Neighborhood Sustainability Initiative, the geographic concentration of STRs shifted away from neighborhoods more commonly associated with tourism, to working-class Black neighborhoods that are close to downtown. These neighborhoods are heavily marketed as tourist destinations due to their strong cultural traditions. STRs make it difficult for families to return or remain in their neighborhoods because housing units are dedicated to tourists causing the price of overall housing to rise. 

The 5th Circuit’s decision would have rendered New Orleans’ STR regulations in residential neighborhoods unenforceable, opening up a wild west market where any STR speculator could evict tenants and turn entire blocks into de facto hotels.   To address the issue, the New Orleans City Council placed a six month pause on short-term rental applications in residential areas at the end of August. Shortly after, an out-of-state plaintiff filed a lawsuit and moved for a temporary restraining order after the City Council announced the pause on applications. 

The 5th is notoriously known as the nation’s most conservative federal appeals court. President Trump packed the appeals court with six more conservative federal judges and the Court has persistently issued rulings that impact communities of color. The 5th ruled that landlords rejecting Section 8 housing voucher recipients does not impose a disparate impact on the basis of race (Inclusive Communities Project, Inc. v. Lincoln Prop. Co., 2019 U.S. App. LEXIS 10480 (5th Cir. 2019)). Recently, in an en banc decision, the 5th Circuit also upheld a Mississippi Jim Crow-era voting restriction law admitting that while the provision was created with racist intent, it no longer operates in a racist manner in the state. (Harness v. Watson, 2022 WL 3646289 (5th Cir. 2022)). 

The Fair Housing Action Center has always engaged with the issue of STRs because they have hollowed out Black neighborhoods and cater to wealthy tourists, while encouraging the eviction of New Orleans residents. We helped push City Council to restrict STRs to owner-occupied buildings in residential neighborhoods and we will again be advocating for even tighter restrictions to protect our residents from displacement.