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Protestors stand with signs during a rally to oppose the Short Term Rental ban in front of City Hall in New Orleans, Thursday, Jan. 10, 2019.

A group representing short-term rental operators in New Orleans has filed a lawsuit against the city over rules it says encroach on their rights as property owners.

The lawsuit was filed Thursday by the Alliance for Neighborhood Prosperity in Civil District Court and was timed to coincide with the introduction in the City Council of new rules that would sharply restrict short-term rentals across New Orleans.

The ANP, a well-known group representing smaller rental operators, filed for a temporary restraining order and a permanent injunction, contending that a moratorium imposed by the council in May 2018 prevented its members from renewing legally obtained short-term rental licenses.

It also argued that new short-term rental rules expected to be adopted by the council next week would place unreasonable restrictions on rental operators and are designed to favor hotels and motels over smaller operators.

The lawsuit contends that these restrictions amount to a deprivation of the rental owners' property and due process rights under the Louisiana and U.S. constitutions, as well as the city's Home Rule Charter.

Eric Bay, chairman of the ANP, said the point of the lawsuit is not to obtain damages but to try to persuade the city to make sure that short-term rental operators who had legally obtained licenses before last year's moratorium are "grandfathered" in and will be able to continue to operate legally.

The lawsuit argues that the city's zoning ordinance provides for this continuing use.

"This is an opportunity for us to say politely to the city that we'll take this as far as we need to but that it is very unnecessary because (adopting the new restrictions as currently written) will violate your own law," Bay said, adding that his group wants to avoid "lengthy and costly legal proceedings."

New Orleans officials and residents have been debating for years how to regulate short-term rentals, which allow property owners to offer their homes to tourists through sites like Airbnb.

A 2017 law passed by the City Council allowed property owners to rent out rooms and whole homes throughout almost the entire city outside of the French Quarter.

As regulations were relaxed, short-term rental properties soared from just over 1,900 in 2015 to more than 6,500 by the end of 2018, according to the watchdog website Inside Airbnb.

Activists opposed to the growth complained not only that the rentals often resulted in noisy, inconsiderate visitors disturbing residential areas, but also that they pushed out thousands of long-term residents and changed the character of neighborhoods as property prices and rents increased.

When new council members took office last year, they kicked off a process aimed at reining in the practice that included a moratorium on most licenses for renting entire homes and an effort generally to tighten regulations.

The most restrictive proposed new rule would restrict short-term rentals in residential areas to owner-occupied homes — a rule aimed at preventing investors from buying up multiple houses or apartments in neighborhoods solely for short-term rentals. The rule would also restrict rentals to one unit per property.

The Jane Place Neighborhood Sustainability Initiative, a group that has lobbied for tighter short-term rental rules, tweeted on Thursday that lawsuits like the ANP's have failed elsewhere.

"Regulations like the one New Orleans is trying to pass have been upheld in other jurisdictions, so all (the operators) are doing is wasting the city’s money," said Breonne DeDecker, Jane Place's program director, in an interview.

She acknowledged that similar disputes across the nation have escalated in some cases to political fights pitting libertarian groups, like the Goldwater Institute, against municipal authorities.

Bay said the ANP will initiate a federal property rights lawsuit if it is unsuccessful in the state court, and he expects that such a suit would attract backing from a wide range of property rights advocates.

Property rights law generally allows the owner of a property to continue using it for a "commercial use" even if land-use regulations change, said John Lovett, a professor at Loyola University's College of Law and a property law expert.

But the way New Orleans structured the rules "signaled to the property owners that their right to engage in whole home rentals was contingent on annual renewal of the licenses," though it is uncertain how courts might view the regulation, Lovett said. 

If the ANP's bid to secure its members' licenses is successful, it could end up locking in monopoly status for current operators, Lovett added. "This is the problem with non-conforming use," he said. "If you get a non-conforming use status confirmed, you are really in the catbird seat because other property owners can’t compete against you."

The ANP said it represents the typical smaller operators in New Orleans and has not been opposed to new rules. In fact, Bay said, his group proposed stricter rules in 2016 than the rules that were eventually adopted the following year.

The group said its membership is 78 percent female and 50 percent minority, with many having invested in rental properties as part of their retirement plans.

"Our group is speaking up for those afraid to come forward and those whose voices have not been heard and whose legal rights are being threatened,” said ANP Vice President Janice Burrell, a retired computer science professor who is African-American.

"As a minority female and New Orleans resident, we were promised a chance to build personal wealth, and share in our city’s hospitality industry under a legal taxable operating framework," she added. "Through no cause of our own, this new set of guidelines seeks to take that opportunity away."

The ANP also argues that the new restrictive rules run counter to Mayor LaToya Cantrell's efforts to raise additional taxes from the short-term rentals sector, budgeted for around $8 million in the coming fiscal year.

“We support fair and sensible regulations, increased taxes and licensing fees, and much-needed continued and increased funding to the Neighborhood Housing Improvement Fund," said Mary Margaret Kean, the ANP's president.

Neither the city nor council spokespeople responded to requests for comment on the lawsuit.

Staff writer Jeff Adelson contributed to this article.


Follow Anthony McAuley on Twitter, @AnthonyMcAuley2.