Residential Short-term Rentals Recap

City Councilmembers talked the talk on protecting our neighborhoods from the proliferation of short-term rentals (STRs), addressing the affordable housing crisis, and preventing the destruction of historically Black neighborhoods at their March 23rd meeting. Unfortunately, their votes, with the exception of Councilmembers Green and Thomas, for a last-minute amendment weakened the new law.

At that meeting, the New Orleans City Council finalized new residential STR regulations after a months-long debate triggered by the 5th Circuit Court of Appeals ruling that New Orleans’ STR regulations were in violation of the Commerce Clause of the Constitution. Throughout the process, density restrictions received the most public attention, with Louisiana Fair Housing Action Center, neighborhood groups, and other housing advocates calling for no residential STRs or very strict density restrictions. Meanwhile STR owners and operators asked for the loosest density restrictions or a complete free-for-all on STRs in all neighborhoods. 

In the first full council hearing in early March, City Council initially voted in favor of a strict limit of one STR per square block through an amendment authored by Councilmember Eugene Green. This amendment significantly reduced the density cap suggested by the City Planning Commission of four STRs per square block and would have been a step in the right direction to preserve our neighborhoods.

The evening before the final hearing, Councilmember Freddie King introduced a last-minute amendment that would allow for an exception to the rules where STR owners who do not receive a license in the lottery process can apply for up to two additional permits per square block. As a consequence, the density of STRs on every square block in every neighborhood can go up to three STRs. The amendment passed with two nays from Councilmembers Green and Thomas. 

We know that limiting these hotels in our neighborhoods will allow more New Orleanians to stay in their neighborhoods close to their families, schools, and jobs, and the looser restrictions will disproportionately displace Black and Brown New Orleanians. This is important to us as a Fair Housing organization as we closely watch the disparate impact this has on communities of color, especially since the City is responsible to affirmatively further fair housing, or to take meaningful actions, make investments and achieve outcomes that remedy the segregation, inequities, and discrimination the Fair Housing Act was designed to redress. 

In more positive news, an accompanying enforcement code ordinance outlines common-sense and strict rules for effective enforcement and real consequences for bad actors. Corporate mega-platforms like Airbnb and VRBO will be required to share data with City Council, a major step that if properly enforced, can prevent illegal STRs from operating. While we are hopeful for the new enforcement policies, we will cautiously observe if the new exception process allows further proliferation of STRs into residential neighborhoods and if it gives preferential treatment to those with inside connections or heavily lined pockets. 

As promised, City Council has asked the City Planning Commission to offer a study and recommendations on the regulation on commercial short-term rentals, a separate type of license that is notorious for problematic loopholes. As the debate kicks off at what is scheduled to be the first City Planning Commission hearing on Tuesday, May 9th at 1:30pm in City Council Chambers, we’ll be advocating for the policy platform below:

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.  

Finally, we want to thank all of you who sent over 4,400 emails to councilmembers, made countless phone calls, and showed up to give impassioned testimony. While we didn’t get the exact results we hoped for on residential short-term rentals, thanks to your hard work, we moved the needle in the right direction.

Posted by Malcolm Phillipson 04/24/2023and categorized as Blog, Press Releases, Uncategorized