LaFHAC Shares Short-Term Rental Policy Priorities as City Council Rushes to Meet Court Imposed Deadline

In August of 2022, the 5th Circuit Court of Appeals ruled that New Orleans’ short-term rental (STR) laws were unconstitutional. By determining who can obtain an STR license based on a homestead exemption, or proof of ownership and occupancy of a single residence, the court ruled New Orleans’ laws in violation of the Constitution’s Commerce Clause, which restricts states and other jurisdictions from impairing interstate commerce. With a court-imposed deadline of March 31st to pass an ordinance that creates new STR regulations, City Council, with City Planning Commission recommendations in hand, is tasked with balancing the interests of out-of-state real estate investors and the needs of local New Orleanians.

For the Louisiana Fair Housing Action Center (LaFHAC), our efforts to impose tight restrictions and reliable enforcement on STRs has always been primarily driven by our commitment to fight displacement and segregation. The unchecked proliferation of STRs in New Orleans has contributed to the hollowing out of many historically Black neighborhoods and helped supercharge gentrification. 

LaFHAC knows that STRs only benefit a small minority of New Orleanians and estimates that the number of legally operating owners who are also New Orleans residents at just a few hundred people. The 159,000 households who live here should be the top priority in the STR regulation rewrite, the vast majority of which surely do not want to live next door to a whole-unit STR.1

1American Community Survey, 2021 1-year estimates. Table B25003. 

STRs in neighborhoods are not neutral businesses like restaurants or shops. They are nuisance businesses. STRs may benefit their owner, but they displace residents, increase taxes and rent for neighbors, artificially inflate housing costs, and bring quality of life violations and sometimes violence. New Orleans needs simpler rules, clear enforcement, serious penalties, and more resources deployed to actually meet the needs of our affordable housing crisis. 

At the end of January, the City Planning Commission (CPC) sent their approved recommendations to City Council, and LaFHAC’s latest policy recommendations are based on this report. There are places where the CPC got it right, and lots of places where regulations must be tightened and enforcement must be strengthened. 

What the City Planning Commission Got Right

  • STRs in residentially zoned areas should be limited to one permit per owner and one permit per operator.
  • Owners and operators must be natural persons, not LLCs.
  • Operators must live on site and verify residency through a lease, utility bills in their name, and multiple other forms of identification.
  • These STRs should be limited to three bedrooms or six guests.
  • STR permits must be a temporary use that expires each year rather the vesting a permanent property right.

Where City Council Should Tighten the Reins for Stricter Regulations

Density: The CPC recommended one STR per block face, or two per every block in the city. This is far to permissive. Whole-unit rentals should be banned entirely in residential areas, or at the very least STRs should be limited to one permit per square block. Any existing commercial STRs permits or Bed and Breakfast permits should count toward that total. 

Conversions: City Council should impose a conversion fee on any unit that changes from a long-term rental to a short-term rental, and those fees should be directed to the Neighborhood Housing Improvement Fund. The Healthy Homes Ordinance’s rental registry will be instrumental in tracking these conversions, and the fees will go back towards the City’s efforts to build affordable housing.

Swift Adjudications: City Council should write into the ordinance strict enforcement policies that require serious violations like operating without a permit, operating over capacity limits, and illegally advertising to be immediately referred to adjudication. We simply cannot wait while violations stack up to punish those who are acting in bad faith.

Steeper Penalties: The current fines are absorbed by bad actor owners and operators as “the cost of doing business.” We recommend that anyone in violation of the new STR laws should receive a ban on the property receiving an STR permit for 10 years into the future, preventing owners from easily flipping the property to a family member or friend and continuing to operate.

Commercial STRs Should Cross Subsidize Affordable Housing

Commercial and mixed-use zones, like Magazine St., St. Claude, and Oretha Castle Haley, are often adjacent to residential zones or even bisect them and function as neighborhood main streets. In these areas, Commercial STRs are more detrimental than hotels because they displace residents and don’t have 24 staff for security and quality of life concerns. These Commercial STRS provide no benefit to the residents in the surrounding neighborhoods unless they are required to cross-subsidize affordable housing. LaFHAC recommends the following:

  1. City Council should introduce a motion to extend the existing Interim Zoning Districts to temporarily stop issuing Commercial STR permits to the remaining downtown mixed-use zones that are not currently covered. The Treme, 7th Ward, St. Roch, Marigny, and Bywater should receive the same protections as the rest of the city. The new residential STR laws will impact the market in adjoining areas, so it’s imperative to get ahead of any speculation and displacement before it occurs.
  2. Limit CSTRS to affordable housing developments. The city’s Comprehensive Zoning Ordinance (CZO) already contains allowances for more density if a developer is willing to build a percentage of affordable units. Those developers should be able to receive a similar number of CSTR permits as an additional incentive to help subsidize the affordable units.As an example, a 20 unit building where 10% of units (2 units) must be affordable, should also be eligible for 2 CSTR permits.
    • Developers who choose to hold more than 10% of units affordable should be eligible for additional CSTR licenses on a one for one basis, with a cap at 25% of the units being CSTRs. The cap is important because if we allowed buildings that were 50% CSTRs and 50% affordable, a negligent developer may ignore property management of the CSTRs because their long-term tenants have little power to find other housing. 
    • Consistent with our existing inclusionary zoning regulations, CSTR units in these developments should be similar in size and bedroom number to the affordable and market rate units, with a cap on number of bedrooms in CSTR units at three. This will preserve the quality of life for long-term tenants in the building. 
    • By only allowing CSTRs in these affordable developments, there will be more city oversight that reduces the potential for illegal STR units. Developers and owners of affordable developments are already required to interact with Safety and Permits and the Office of Community Development on a regular basis.
    • Our new enforcement ordinance also creates a new additional threat that if an owner is caught renting more units as CSTRs than they have permits for, they will lose the ability to rent any unit on the property as an STR for five years. They will still be held to the affordability restrictions though. 
  3. To ensure CSTRs don’t exploit loopholes in these regulation by posing as traditional bed and breakfasts or hotels/hostels, we should: 
    • Grandfather in existing BnBs in commercial zones, but not allow new ones.
    • Amend the definition of hotel/hostel in the CZO to require on-site management.
  4. CSTRs should be banned in ground floor or single-family units to prevent another Brown’s Dairy. 
  5. Commercial STR licenses should also require all natural persons affiliated with the ownership of the property to be listed so the City can better track out-of-state bad actors.
  6. Like STRs in residential areas, CSTRs should be a temporary use.  

LaFHAC will continue to push City Council toward strict and quick enforcement and clear rules for the upcoming rewrite of New Orleans’ short-term rental laws. We are also dedicated to insisting that if short-term rentals are going to exist in our City, they should only be allowed when they provide real benefits to our residents and communities. City Council has the opportunity to stop the proliferation of STRs, halt the rapid gentrification of our historically Black neighborhoods, and finally address one of the worst actors in our ever-growing housing crises by prioritizing New Orleans residents over real-estate investors.

Take Action Now: Click through here to call your City Councilmember and tell them New Orleans needs simpler rules, clear enforcement, and serious penalties in the new short-term rental laws.

Posted by Malcolm Phillipson 02/22/2023and categorized as Blog, Press Releases, Uncategorized