Draft recommendations released Tuesday by the New Orleans City Planning Commission’s staff would effectively ban “whole-home” short-term rentals — as the city’s current laws define them — in residential districts.
The recommendations came as part of a hotly anticipated report on the city’s short-term rental law, which went into effect last year. The study was commissioned this year by the New Orleans City Council.
The report would also expand licenses in the French Quarter, where they are now mostly prohibited.
Under the recommendations in the 155-page study, whole-home residential licenses — which appear to be intended for doubles and small apartment buildings — would require hosts to prove that they own and live on the same lot as the short-term rental unit with a homestead exemption. Rentals would be limited to one other dwelling unit on the property. And hosts would have to stay in their own homes while short-term rental guests are there. Those licenses would be limited to lots with four or fewer dwelling units.
Current laws, enacted last year and backed by former Mayor Mitch Landrieu, allow whole-home rentals in residential areas for up to 90 days per year under the city’s “temporary” license, one of three current types of licenses. Temporary licenses do not require license holders to prove ownership or be on site during guests’ stays.
Whole-home rentals in residential areas were the most controversial type of rental prior to the passage of the Landrieu-backed law in 2016. But since it’s gone into effect, they have become the most popular. In April, prior to a freeze on temporary licenses in some neighborhoods, they accounted for more than 50 percent of about 4,500 active licenses in the city.
The study also recommends new regulations for hosting platforms like Airbnb and Homeaway, stricter enforcement and increased nightly fees to pay for affordable housing projects.
Overall, the planners said that current law, which has been criticized as too lax, has caused problems for long-term residents in the city.
“With relatively lenient STR regulations currently in place, the City Planning Commission staff recognizes the need to strengthen regulations, protecting New Orleans’ housing stock, ensuring New Orleans remains a place first and foremost for its citizens, and protecting the character of New Orleans’ unique neighborhoods,” the study says.
Within hours of the report’s release, however, there was already pushback from the industry.
“These policies would jeopardize thousands of local jobs and the $900 million in economic activity spurred by short-term rentals each year, while doing nothing to increase compliance or address affordable housing challenges,” HomeAway spokesman Philip Minardi said in a Tuesday evening statement, citing figures from a recent economic impact report commissioned by the Alliance for Neighborhood Prosperity, a local pro-short-term rental group.
Short-term rentals were legalized in New Orleans in April 2017, after the City Council passed an ordinance that was partially crafted through consultations between the Landrieu administration and Airbnb. Some hailed it as a model for the country, while others said the city was giving up neighborhoods to corporate speculators.
Seven months after the law took effect, The Lens and HuffPost published a report showing that short-term rentals — which are often more lucrative than traditional long-term rentals — accounted for as much as 10 percent of all residential properties in some neighborhoods. Most of them had licenses that allowed for entire homes or apartments to be rented to tourists.
“New Orleans is in the midst of an affordable housing shortage making every housing unit essential,” the commission’s study says. “There is sufficient anecdotal evidence that STRs have exacerbated an already difficult market,” particularly in historic neighborhoods near the city’s core.
In spite of claims from platforms like Airbnb that the industry primarily caters to neighborhood residents reaping extra income to pay living expenses, a small number of high-volume operators — some from out of town — appeared to control a disproportionate share of the local market.
A March study by The Jane Place Sustainable Housing Initiative found that 18 percent of people who held short-term rental licenses or managed them for others controlled about 45 percent of listings in the city. The study also found that the 10 largest operators controlled 568 Airbnb listings in New Orleans.
“I don’t think the city can afford to continue to let this problem fester,” said Breonne DeDecker, program manager for Jane Place.
Even short-term rental proponents have recently begun calling for changes to the law. The Alliance for Neighborhood Prosperity, a group of New Orleans short-term rental operators that promotes the industry, partnered with HomeAway, a popular rental platform, to suggest a list of reforms.
“Some areas are 14 percent [short-term rentals],” said HomeAway’s governmental affairs manager Ashley Hodgini at a community meeting last month. “I think we can all recognize that’s inappropriate.”
The 2017 law created three types of short-term rental permits: temporary, accessory, and commercial.
Accessory licenses were designed for homeowners who want to rent out spare bedrooms or unoccupied half-doubles. Accessory license holders are required to live on site and must provide the city with proof of a homestead exemption before their applications are accepted.
“There is general consensus that the Accessory Short Term Rental is the least problematic type since there is a requirement for a Homestead Exemption and the property owner is present during the time of the rental,” the study says.
Commercial licenses, as the name suggests, are for short-term rentals in mixed-use and commercially zoned districts. There is currently no density cap on these permits.
“With an unlimited percentage of the building allowed as STRs, some buildings have become entirely STRs,” the study says.
And the law allows for commercial licenses in neighborhood business and low-density mixed use districts. The study notes that this wide net poses a problem because these zoning districts “can be found on corners surrounded by residences or small nodes and corridors within the hearts of neighborhoods.”
But perhaps the study’s most significant concern was how the law regulated temporary licenses — whole-home licenses in residential neighborhoods.
“The Temporary Short Term Rental license was intended to be a minimally impactful short term rental type that is only utilized during major events, such as Mardi Gras, or Jazz Fest for permanent residents,” the study says. “[It] has become a de-facto whole-home rental, with no permanent resident or owner present. This has led to quality of life issues, such as noise, loss of neighborhood character, and other impacts discussed further in this report.”
In May, at its first meeting as a newly elected body, the City Council voted to place a moratorium on new or renewed temporary licenses in many of the city’s historic neighborhoods where short term rentals were most densely located. It also directed the City Planning Commission to complete an updated study on the effects of short term rentals.
The commission’s task was to recommend amendments to the existing law to alleviate the unintended secondary effects of short-term rentals and protect the social fabric of the city.
Significant changes to current law
The staff recommendations represent a major overhaul of current rules. Essentially, the report advocates for ending whole home residential rentals by eliminating the temporary licenses.
The new regulatory system being offered would only have two types of licenses: commercial and residential. Residential licenses would be split in two categories: partial-unit and whole-unit.
The current accessory license would become the new residential whole-unit category. This new classification would apply to “owner-occupied lots” that have up to four units. The hosts would have to prove they are permanent residents of one of those units with a homestead exemption. Currently, accessory licenses are used for spare rooms and half-doubles. This new category would expand it to allow three- and four-plexes, but only allow one unit per lot to be licensed for vacation stays.
Partial-unit residential rentals would apply to permanent residents — owners or long-term renters — who want to rent out spare rooms in their home. The study did not recommend a homestead requirement for this category.
“The CPC staff is concerned about the loss of opportunity for long-term renters to also benefit from STRs,” the report says.
Instead, partial-unit hosts would have to prove their residency with a Louisiana state-issued ID and a secondary form of identification. This, the report argues, would allow renters to offer up spare bedrooms with the permission of their landlord.
For both residential categories, hosts would be required to stay on site when they have guests.
The study also lays out an option to create a “special event” short-term rental, similar to current temporary licenses. License holders would be able to rent out full housing units and would not have to be on site during guest stays. However, instead of 90 days, the permits would be good for only 14 days per year. And in the special event permit application, residents would need to specify the exact dates they were planning to host guests. Residents would be eligible for two of these permits each year.
The study doesn’t explicitly endorse this license category, but rather offers it as an option for the City Council to consider “if so desired.” It warns that these licenses could be difficult to enforce.
Planners also recommend new restrictions on commercial permits, which are allowed in commercial and mixed-use districts, in order “to preserve long-term housing units and prevent the conversion of multifamily buildings to commercial uses.”
Current law allows an unlimited number of commercial licenses at buildings in nearly all of those districts. They allow whole-home rentals, do not require proof of residency and are good year-round. City planners would not change those provisions, but they would eliminate commercial licenses in some of the “least intensive neighborhood business districts,” including some commercial zones in the city’s most popular areas for short-term rentals, like Bywater and Faubourg Marigny.
In other areas, commercial permits would be restricted to one unit or 25% of all units per lot, whichever is greater. Short-term rentals would also be banned on the first floor of residential multi-story buildings in many commercial districts.
Both residential and commercial licenses would be expanded in the French Quarter, where — outside of a stretch of Bourbon Street — short-term rentals are now banned.
The planning staff also cautions against “spot zoning,” the practice of changing the zoning status of individual lots. The study notes that there have been a number of zoning change requests from landowners with the express purpose of establishing commercial short-term rentals.
“The CPC has long had a policy against ‘spot zoning,’” the report says.
It says that rare exceptions that allow spot zoning should only apply to low intensity neighborhood business districts. Since the report recommends a complete ban in these districts, the study concludes that its recommendations should preclude spot zoning.
The report also recommends a host of new reporting and enforcement requirements that will help the city manage short term rentals more effectively. Hosting platforms would have to be registered with and licensed by the city and share more information about bookings, including hosts’ license numbers. Now, the platforms are required to submit monthly reports on New Orleans bookings, but identifying information is scrubbed from them.
And planners are calling for an ordinance requiring platforms to collect sales and hotel taxes on booking transactions and remit the funds to the city. It would require online listings on sites like Airbnb to include license numbers.
The study also recommends increasing nightly fees paid to the city’s affordable housing fund. Currently, short term rentals include a $1 per night fee that goes into the city’s Neighborhood Housing Improvement Fund. The study recommends that the fee increase to $8 per night.
The study will be discussed at the City Planning Commission’s next meeting on Sept. 25. And the commission will vote on whether to endorse the full study, reject it or modify it, before sending its findings to the City Council.
Councilwoman Kristin Palmer released a statement on Tuesday noting the release of the report. She did not comment on it, saying only she looked forward to reviewing it.
But Minardi, the HomeAway spokesman, criticized it within hours of its release.
“Unfortunately, the CPC staff has taken a step in the wrong direction,” Minardi said in his statement. “This plan will only harm New Orleanians who have played by the rules and invested in their community.”
Laura Spanjian, Airbnb’s policy director, was more guarded in her response.
“By all platforms partnering with the City, we are confident we can get to a compromise that works,” Spanjian said.
The big question is whether the City Council will listen to the commission’s recommendations.
“The City Council made a number of modifications to what was initially recommended by the City Planning Commission,” notes the 2018 study.
In 2016, the commission came out with it’s first short-term rental study and policy recommendations. It recommended limiting whole-home rentals in residential zoning districts to 30 days per year.
“Perhaps more significantly, the Temporary Short Term Rental was no longer required to be someone’s occupied dwelling unit,” the report says, “which allowed every dwelling unit to potentially become a short term rental without any limits on density.”