A sign sits in the window of a home on Ursulines avenue that is next door to homes with short term rental permits in the Treme neighborhood in New Orleans, Tuesday, March 12, 2019.

New rules that are expected to reduce the number of short-term rentals in residential areas of New Orleans received unanimous support from the City Council on Thursday.

The rules, based on recommendations from the City Planning Commission, will restrict short-term rentals in most neighborhoods to properties with a homestead exemption, meaning that their owner lives there, while banning rentals in most of the French Quarter and all of the Garden District.

While the regulations must still come back before the council for a final vote in the coming months, the council’s action on Thursday indicates that key aspects of the new rules are likely to become law.

However, changes could still be made, and one council member said Thursday that he would be willing to consider "grandfathering in" existing rentals authorized under the more lenient rules adopted by the previous council in 2016 — something that has been vehemently opposed by those seeking to cut down the number of such operations.

The council's vote came after hours of comments from the public.

Critics argued that short-term rentals need to be reined in because they cut into the supply of affordable housing for residents in favor of tourists and lead to problems such as loud parties in neighborhoods.

“They have turned it from a neighborhood into a site for visitors to experience. You say hello to people walking by (but) they don’t even look at you. You’re just part of the woodwork for them to enjoy,” said Mark Gonzalez, a short-term rental opponent who spoke at the meeting.

Short-term rental hosts, and owners of businesses that service the rentals, argued that tightening the rules would punish those who got licenses legally under the old regulations and made plans and spent money on that basis. They also said it would hurt the city’s economy.

Councilwoman Kristin Gisleson Palmer, who has taken the lead on developing the new rules, said, “I believe these rules strike the appropriate balance between a sustainable sharing economy and preserving the fabric of our neighborhoods.” 

The biggest impact from the proposed changes would likely be on rentals of entire homes in residential areas, particularly in neighborhoods close to prime tourist areas where short-term rentals have taken over large chunks of some blocks.

Whole-home rentals were legalized along with other types of short-term rentals under former Mayor Mitch Landrieu, with no restrictions on how many buildings any one person could own and operate.

Under the new rules, residential properties could get a short-term rental license only if the owner lives on the site and has a homestead exemption to prove that the property is their primary residence. Other units on properties with more than one unit could also be rented out.

Whole-home rentals have been the most common type of short-term rentals in New Orleans. At their height, they accounted for more than half the 4,835 licensed short-term rentals in the city.

When the new council members began reviewing the short-term rental rules last year, they stopped the city from issuing new licenses or renewing existing ones for residential properties without a homestead exemption. That has led to a precipitous drop in the number of whole-home rental licenses. Only about 510 such licenses are now active, though it is not clear how many operators have continued to rent out homes illegally.

It’s also not clear how many of the licenses that expired could be renewed under the proposed new rules.

Short-term rental supporters have pushed the city to grandfather in operators that had valid licenses under the old rules, allowing them to keep operating even if they would not be allowed under the new rules. The resistance of most council members to that proposal helped spark a lawsuit from the Alliance for Neighborhood Prosperity, a group of short-term rental owners.

On Thursday, Councilman Jason Williams said he has not ruled out helping “people who followed the rules that were put in place.” Ironically, he said the council was barred from discussing that issue further because of the ongoing suit.

The rules would also prohibit more than one traditional bed-and-breakfast or large-scale short-term rental from operating on each side of a block in residential areas.

The council approved almost a dozen amendments to the City Planning Commission’s recommendations, largely to allow short-term rentals in zoning categories where the commission would have prohibited them. For example, the commission would have barred properties that were formerly corner stores from applying for rental licenses, but an amendment that would allow the council to make exceptions to that rule on a case-by-case basis got unanimous approval.

The council also approved rules that would require commercial short-term rentals — large-scale operations in non-residentially zoned areas that would not require owners to live on the site — to have an on-site operator if they have more than 10 units and to develop plans to mitigate their impact on nearby areas.

Keeping the ban on short-term rentals in most of the French Quarter brought out the most significant disagreements on the council.

Currently, the only place short-term rentals are allowed in the Vieux Carre is on a seven-block stretch of Bourbon Street. Williams, however, argued for also allowing them in the stretch of Decatur Street near the House of Blues. He said much of the street there is already focused on entertainment and tourism.

But Palmer said that could lead other areas of the French Quarter to petition for short-term rentals.

“At some point, folks, you do have the draw a line in the sand, and this is the line,” she said. “We have to protect the French Quarter. We have to protect residential quality.”

The measure restricting short-term rentals in the Quarter to the area of Bourbon Street where they’re now allowed passed 4-3, with Williams, Jared Brossett and Cyndi Nguyen voting against it.

A major part of the new regulations remains in question. The council opted not to discuss how short-term rentals will be handled in commercial areas such as the Central Business District.

The council’s initial proposal would have limited those rentals, which are largely in condominium buildings, to 25 percent of the total units in a building. It also would have imposed affordable housing requirements on those developments.

“Unfortunately, we have not and still do not have the information we need to evaluate and complete this framework in a manner that is not arbitrary or would not disrupt the market,” Palmer said.

The council decided to wait on putting those rules in place until a study on how to use commercial short-term rentals to spur affordable housing development is completed. That could come before the final vote on the regulations or could be added at a later time.

Follow Jeff Adelson on Twitter, @jadelson.​