New Orleans City Council hits 'pause' on whole-home short-term rentals_lowres

A map of STRs and STR applications in New Orleans.

The New Orleans City Council has agreed to temporarily ban new whole-home short-term rentals in residential neighborhoods until new rules are drawn up at City Hall.

The motions “press pause” on one of the most prolific types of rentals — the 90-day-limit temporary STRs, which encompass half of all 4,500 STRs on platforms like Airbnb — “until we tailor regulations to meet the needs of the city of New Orleans," said District C Councilmember Kristin Gisleson Palmer, who authored the motions. Once those temporary permits expire, they can’t be renewed. Those restrictions are effective immediately for up to nine months.

Lengthy debate broke out at the first full meeting of the new City Council May 24, echoing previous debates over the rules governing STRs, which formally went into effect last year.

"This legislation is a first step towards revising and improving the STR regulations to restore and preserve the residential fabric in historic areas of the city," Palmer said in a statement.

The City Council unanimously approved three motions — one to create an interim zoning district prohibiting new STRs and license renewals for some types of rentals, another to prohibit some new commercial STRs, and another to redirect the New Orleans City Planning Commission (CPC) to issue a broader study of the city’s STR laws within the next few months, which it already was doing with a limited scope.

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The CPC started that study at the request of the previous City Council administration. The new study directs the CPC to look at New Orleans' laws and STR presence compared to similarly sized cities like Austin, Charleston, Nashville and Savannah, and whether those cities' laws could work in New Orleans, and will review STRs' contributions to the city's affordable housing fund as well as its data-sharing and enforcement mechanisms.

A previous draft of the motion tasked the CPC with studying whether the city uses parcels of land — rather than municipal addresses — to determine whether those applicants get a license or permit. An amendment removed from that from the new motion.

Under the motion, new temporary rentals (and renewals for those types of rentals) will be prohibited — that includes listings in Historic Core, Historic Urban, CBD, Mixed Use -1 and 2 zoning districts. That excludes most of Gentilly, Lakeview, New Orleans East and the suburban parts of Algiers.

In her original motion, Palmer had planned to halt all new commercial-type STRs, which allow for unlimited rentals throughout the year in areas zoned for commercial use. An amendment introduced today limited the scope of that prohibition to commercial STRs on the first floor of a multi-story building that also has residential use.

Accessory STRs, which allow residents to rent out a room or half of a double with a homestead exemption, aren’t affected.

The CPC will hold a public meeting by July 23 and will submit its report by Sept. 21.

Following Palmer’s announcement of the motions earlier this week, STR platforms and operators fired off their opposition.

In a letter to the City Council, Airbnb Policy Director Laura Spanjian criticized the motions a “drastic actions … with no input or transparency” and warned of “detrimental effects on the city and the law-abiding residents of New Orleans who host to make ends meet.”

Spanjian urged the Council to vote down the motions and “continue working with [Airbnb] to ensure that New Orleans and its host community can continue to receive the economic benefits” of short-term rentals.

HomeAway (which, along with VRBO, shares Expedia as a parent company) also pressed the Council to delay action this week.

Ashley Hodgini, HomeAway’s Government Affairs Manager for New Orleans, urged the Council to defer the measures and “instead take the necessary time to consider all the data, facts and information before you implement any new policies,” including working with “subject matter experts, residents and real estate professionals in a collaborative discussion about this issue.”

In a statement, HomeAway’s Director of Policy Communications Philip Minardi said “fair and effective short-term rental policies are rarely — if ever — found through contentious bans or moratoria.” By prohibiting both new listings and renewals, Minardi said the rules effectively “punish existing homeowners who have complied with the law.”

"The path forward for New Orleans and for locals on both sides of this issue is discussion, data, and compromise,” he said. “There is a solution to be had that addresses the concerns of community members while also recognizing the long-standing value of whole-home rentals in New Orleans. HomeAway welcomes the opportunity for a community-wide dialogue in the weeks to come to help find that solution.”

Following the vote, Spanjian said it “flies in the face of the collaborative spirit with which we’ve approached our work with the City.”

But the motions follow councilmembers’ monthslong campaign pledges to address shortcomings in STR laws and enforcement. They also were glimpsed at a Mid-City Neighborhood Organization meeting last week where Brossett floated the idea of an incoming “moratorium” on listings “until we can figure all this stuff out as it relates to the effect it’s having."

Before the new members entered office, the City Council charged the CPC with looking at those effects, and the new Council now has asked the CPC to study those effects more broadly, including looking at stricter policies in similarly sized cities, the fee structures that STRs pay into the city’s affordable housing funds.

Those rules created three types of rentals: accessory rentals (owner-occupied buildings renting out a room or half of a double); temporary rentals (entire units to be rented out for up to 90 days a year); and commercial rentals, (unlimited rentals a year for an entire unit in a non-residentially zoned area).

The city has issued more than 5,000 STR licenses since those laws took effect; nearly three-quarters of all STRs are for whole homes or apartments. Palmer's office says there have been more than 10,000 applications submitted.

Housing advocacy organization Jane Place Neighborhood Sustainability Initiative, which released an extensive report on the state of STRs in New Orleans and their likely impacts, argued STRs aren’t solely contributing to the city’s looming housing crisis but are “driving a housing market that is already in crisis further and deeper into crisis” with the dominance of whole-home rentals, single operators with multiple units, and inadequate fees toward the city’s affordable housing fund, said program manager Breonne Dedecker.

In its recent scrape of data, Jane Place counted 5,215 listings on Airbnb; 4,319 are for whole homes or apartments. Dedecker said that Airbnb disputes its data but “refuses to submit data that shows otherwise.”

Though there are nearly 500 operators with more than one permit, neighborhood concentration also is driven by local landlords using properties for tourist housing. Dedecker also pulled up real estate listings with STR permits as a selling point. “We all know what happens when a house on a block goes for $400,000,” she said.

Dedecker also emphasized the city’s inability to track multiple operators across STR platforms — among one of the enforcement issues the City Council has tasked the CPC to look into, but one that has become difficult for housing advocacy groups and policy makers to address because of what they say is the lack of cooperation from platforms.

In December 2017, Jane Place counted 471 temporary STR permits had exceeded their 90-day limits, but the city brought action against only 21 cases. And in Mach 2018, Jane Place counted 2,744 listings without a permit on Airbnb, renting out for a combined 56,113 nights.

Jane Place recommends stronger enforcement measures for data sharing, requiring platforms to have a license to do business in the city, force platforms to remove illegal listings, adopt a “one host, one home” policy, and expand the fees tacked to each booking for affordable housing to 15 percent.

HomeAway’s Minardi, meanwhile, says Jane Place’s report “leaves us with critical questions as to how some conclusions were reached.”

STR operators spoke out against the motions, which they said could cause a significant financial burden on both the operators — for many, it’s their only source of income, they said — and the city, which they argue will lose significant tax dollars from both fees applied to rentals and from tourists.

“This ordinance is not a push pause,” said STR operator Robert Ripley. “It is putting sugar in the gas tank of a vital economic engine.”

Eric Bay with STR advocacy group Alliance for Neighborhood Prosperity argued that policies around STRs should be crafted with “fact-based, empirical data,” and warned that thousands of people employed by or operating STRs are likely to be impacted by their loss.

Other proponents warned of a looming real estate crisis, in which STR operators are forced to flood the market with homes they can no longer rent.

Others balked at the idea that the decision falls between operating “a mini motel or nothing. It’s not true,” one speaker sad. "You can make good money renting to people who live here."

Maxwell Ciardullo with the Greater New Orleans Fair Housing Action Center said STR operators can’t speak for a majority of New Orleanians, most of which don’t own their home or an investment property (more than half the city rents). It’s more likely, he said, that they’ll face pressure from STRs in their neighborhood than be able to operate one.

"These national and sometimes international corporations are artificially driving up the cost to buy a home or rent a home in our city," City Council President Jason Williams said in a statement. "That is patently unfair to people of New Orleans. I have a serious problem with that. There was not effective enforcement from the previous administration or voluntary compliance on the part of these companies and platforms."

HousingNOLA director Andreanecia Morris warned New Orleans is “in the grip of what will likely be worst housing crisis in city’s history,” headed toward a “severe market crash,” largely compelled by artificially high housing costs from STRs as housing is marketed toward a tourist economy.

“Short-term rentals can be a solution, but as currently designed, it’s the problem,” she said. “This market is broken.”