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Saratoga Apartments are seen here at 212 Loyola Ave. in New Orleans, La., Tuesday, Oct. 3, 2017. The building and others around town face accusations of illegally converting many units to short-term rentals.

Advocate staff photo by MAX BECHERER

A New Orleans developer has come under fire for converting many of the units in two apartment buildings into short-term rentals, a move that while legal locally could run afoul of federal housing requirements.

The properties in question are the Saratoga Building, 212 Loyola Ave., and the Maritime Building, 800 Common St. Both former office buildings, they are owned by Marcel Wisznia, a prominent developer in the Central Business District.

More than half of the Maritime’s units and more than a quarter of the Saratoga’s units are legally registered with the city as short-term rentals, according to public records.

But a housing rights group claims the arrangement violates federal rules that ban the conversion of housing units insured by the U.S. Department of Housing and Urban Development into profit-reaping temporary rentals.

The group, the Jane Place Neighborhood Sustainability Initiative, filed a complaint against Wisznia with the agency Tuesday.

“Developers and policy makers promised that these luxury towers would ease pressure in the New Orleans housing market by bringing in more market-rate units for middle-income residents — but that can’t be true if hundreds of units are instead leased to short-term rental profiteers,” said Breonne DeDecker, the organization’s program manager.

Wisznia, reached by email, said he was unaware of the complaint.

“My only response is that I would never intentionally do anything to counter HUD’s regulations,” he wrote.

The complaint refers to a federal law that has implications for dozens of apartment complexes and condominiums in New Orleans, which are increasingly favored by tourists who shun hotels in favor of units listed on short-term rental sites like Airbnb. 

That requirement governs developments that have mortgages insured by HUD, as both the Saratoga and the Maritime do. It forbids such housing from being used for “transient or hotel purposes,” according to a “borrower’s oath” HUD requires developers seeking mortgage insurance to sign.

Such government-backed insurance typically allows borrowers to obtain lower interest rates and better financial terms.

No such restriction exists at the city level. And the city has licensed more than 100 units at the Saratoga and Maritime buildings as legal short-term rentals.

The majority of those units can be rented out year-round. Most of the units at the Maritime are managed by the vacation-rental companies Stay Alfred and Sonder.

Wisznia also has 14 more short-term rental licenses pending for the two buildings.

But the guaranteed financing Wisznia and other developers received was never intended to be used for that purpose, DeDecker wrote in her HUD complaint.

She said the issue is particularly troubling in light of the city’s affordable housing crisis, which has begun to affect even middle-class New Orleanians and which is being exacerbated by short-term rentals aimed at tourists.

DeDecker’s group learned of the problem after a prospective tenant attempted to lease a Wisznia apartment, only to be turned away, later finding out that the last units available were being used as short-term rentals. Wisznia’s apartments typically lease for anywhere from $1,100 to $4,220 a month.

“These two properties have taken dozens of units off the rental market and effectively become hotels in violation of federal law and their recorded deed restrictions,” DeDecker said.

Her complaint calls for an immediate federal investigation into the matter and for HUD to force Wisznia to remove his short-term rentals from the market.  

Wisznia could be just one of many developers who — intentionally or not — have run afoul of HUD requirements, she continued.

Many of the city’s prominent developments are HUD-insured properties, such as the South Market District’s Paramount Residences and the Woodward Loft Apartments in the Warehouse District.

A search of the city's database found at least one unit at Woodward to be operating as a commercial short-term rental. 

That rental is licensed to Mia Mitchell, of Grandpre Hospitality, in Los Angeles. Mitchell did not respond immediately to a request for comment. A spokeswoman for HRI Properties, which owns the Woodward Lofts, said the firm is aware of the rental restrictions and that it filed eviction proceedings against Mitchell but was blocked by a judge. 

Follow Jessica Williams on Twitter, @jwilliamsNOLA​.