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Fire damage remains on the facade of 1016 Canal St. in New Orleans from a six-alarm fire in January 2016. Sonder and Quarter Holdings plan to rebuild the historic building for retail space and commercial, short-term rentals.

Developers, city planners and city officials are eyeing long-vacant upper floors of Canal Street high rises for short-term rentals, in the hopes that turning those spaces into year-round rentals on platforms like Airbnb could spur new retail and other development on the ground level.

But affordable housing advocates argue that chasing after unlimited short-term rentals overlooks a massive need for housing, particularly in a stretch of the city that also employs thousands of people.

Canal Street is part of a dense hub of tourism and hospitality jobs but few, if any, areas for so-called workforce housing. Advocates argue it could be used to house downtown workers closer to their jobs and transportation rather than be pushed further out into more “affordable” neighborhoods — or out of town completely — and rely on disconnected or unreliable transit options to get to work.

The City Planning Commission staff’s recently completed study of Canal opens up another round of deliberation over its future — specifically the potentially lucrative blocks between Claiborne Avenue and the Mississippi River, after several reports and studies over the years have pointed to a number of “revitalization” efforts to turn the thoroughfare into what Council President Jason Williams calls the “Champs Elysees” of New Orleans.

That narrative spins from the street’s history as a shopping center and gateway to downtown New Orleans, before suburban sprawl, integration and automobiles sent retail and people to the outskirts while buildings languished through often-fractured ownership and management of the properties. City officials and downtown agencies want to resurrect its former glory as the city continues to see rising tourism numbers.

Short-term rentals, they argue, could act as an incentive to bring much-needed renovations to many of those buildings, while also funneling STRs away from neighborhoods and into commercial corridors. In turn, they anticipate “better” shops and restaurants vying for ground-floor retail space, rather than the convenience stores and T-shirt shops currently occupying those spaces.

Housing advocates argue that the city should be using those incentives as a prime opportunity to create affordable places to live, rather than reward developers with the promise of more tourist housing; an overly dense area of STRs on Canal merely shifts proliferation from one neighborhood to another, or adds yet another dense pocket of tourist housing to the map.

Plans for a generous expansion of STRs already were in progress well before city planners made their recommendations for Canal’s future.

A day after the City Planning Commission sent recommendations for the future of STRs to the City Council, developers and several council members argued that commercial STRs on Canal Street could be used to attract more business downtown.

Peter Bowen of Sonder, which operates more than 200 STRs in New Orleans, is leading a "coordinated and strategic effort to revitalize several properties on Canal street" at three addresses for use as year-round commercial rentals, he told the City Council Oct. 4.

The CPC staff's latest report recommends capping the number of commercial STRs in a building to up to 25 percent of the building, or one unit, whichever is greater. Bowen opposes that cap, saying it would "eliminate Sonder's ability to partner with local developers" outside the Canal corridor.

Sonder will manage the four-story building at 1016 Canal St., which was damaged by a six-alarm fire in 2016; 623 Canal St., formerly Vitascope Hall, now is a liquor store and souvenir shop; and 444 Canal St. All are owned by Quarter Holdings LLC and operated by Aaron and Mike Motwani.

Sonder has agreed to lease the spaces to operate 200 STRs on their upper floors. Sonder currently operates more than 200 temporary and commercial STRs throughout the city, according to city records.

Williams joined a groundbreaking ceremony for the $10 million 1016 Canal Street project last week. Renovations are expected to be completed in 2020.

"Sonder's support of this project and their intended work for other properties on Canal Street and throughout the city are vital to helping us secure quality retail businesses for the area,” Williams said in a statement. “Canal Street can be poised for an Apple Store, a Crate & Barrel, a Restoration Hardware and the like."

In May, Williams authored a motion for city planners to look at what kinds of barriers prevented previous recommendations for Canal’s redevelopment, and what other recommendations it has to attract more development, particularly on upper floors. He also tasked city planners with studying how short-term rentals could be a part of those incentives. "Canal Street is our grand boulevard,” he said in a May 24 statement. “Every citizen and every guest experiences Canal Street at some point. It has languished in disrepair for decades, and we must tend to it and restore it to its vitality and grandeur with deliberate haste.”

Mayor LaToya Cantrell spoke with downtown developers Oct. 23 to announce her commitment to Canal Street’s redevelopment, while city planners presented their latest Canal Street study, which recommends short-term rentals “as a use that could incentivize the renovation of these long vacant spaces.”

The report also suggests if developers wanted to exceed the proposed cap on the number of STRs in commercial units, “certain benefits could be leveraged by allowing this in specific cases.”

“The proposal for there to be no cap on the number of STR units in the buildings on Canal Street leverages the attractiveness of these units and their profitability to effect a change that has been desired for many decades,” the report says.

City planners assured that the report’s recommendations are in tandem with the latest STR report, which suggested some consideration of a “one-to-one” match for affordable unit creation. “We have been doing this study and the STR study at the same time, and did consider recommendations consistent with each other,” said city planning director Bob Rivers at the Oct. 23 meeting.

“What I see is a real missed opportunity to address affordable housing needs in a neighborhood that can really benefit from workforce housing,” said Breonne Dedecker, program manager with Jane Place Neighborhood Sustainability Initiative. “I really strongly urge you to press pause on this moment ... and seriously study this incentive.”

“These should not be done in boxes outside of each other,” said Andreanecia Morris, director of Housing NOLA. “It’s troubling to see this continued bifurcation of issues that are related to each other.”

In a letter submitted to the CPC, Maxwell Ciardullo, director of policy and communications for the Greater New Orleans Fair Housing Action Center, notes that buildings in historic structures along Canal already are poised to receive significant historic tax credits, in addition to whatever incentives through STRs that city officials are prepared to add.

Ciardullo says any study of those portions of Canal also should “examine how changes can be used to simulate not just development for the sake of development, but also solutions to our affordable housing crisis.”

The GNOFHAC recommends one of two proposals to add STRs with affordable housing components — and warns that those historic tax credits could end up stimulating STR creation.

One proposal is to allow STR permits up to a 15 percent cap of the building's total units, but only if the building also holds a matching number of affordable units. Another proposal would create a one-to-two match without a cap, allowing an unlimited number of STR permits per building on the condition that the building also provide two affordable units per STR.

“These larger buildings require a regulatory mechanism to ensure they do not become undercover hotels, avoiding taxes and pulling supply from the residential market in a highly valued area of the city,” he writes.

Ciardullo says for smaller historic buildings with fewer than 10 units, the organization hopes city planners will “recommend a very narrow solution that takes into account the possible historic tax credit subsidy available to developers of these buildings and does not unnecessarily stimulate STR growth.”

The City Planning Commission voted to send the report to the New Orleans City Council to consider any next legislative steps.