The New Orleans City Council placed a temporary moratorium on new residential short-term rental permits at a special meeting on Monday, called in response to a federal appeals court ruling last week that could upend key portions of the city’s current short-term rental restrictions.
The council will now work to write and pass new short-term rental rules for the third time since 2016. The temporary moratorium is intended to give the council some breathing room and prevent an influx of new STRs as they craft a new set of regulations.
Along with the freeze on new permits, Monday’s motion also dictates that all current residential STR permits will expire on March 1, 2023, “despite the expiration date on the permit.” That includes existing licenses with earlier expiration dates. Councilman JP Morrell said that provision is to ensure that when the new law is finalized, all the city’s STR permits will be operating under the same rules.
Commercial STR permits, which are only allowed in commercial or mixed-use zoning areas, aren’t affected by the moratorium.
Technically, the vote on Monday only begins the process of creating a citywide “interim zoning district” where new permits are suspended. It does not add the IZD to the city’s Comprehensive Zoning Ordinance. That will require additional votes from the council and the City Planning Commission. But city zoning law instructs city permitting officials to treat all proposed IZDs as effective as soon as that process is initiated.
“Here we go again,” said Allen Johnson, president of The Faubourg Marigny Improvement Association. “The short-term rental rules are a debacle… Thank you for taking the initiative. we look forward to participating in this process and finally getting it right.”
The city’s current short-term rental laws were passed in 2019, replacing the city’s first attempt at creating STR regulations in 2016. The 2016 law, crafted by former-Mayor Mitch Landrieu’s administration, was criticized for being overly permissive and allowing STRs to replace long-term residents, raise home prices and disrupt the fabrics of high-demand neighborhoods.
One of the biggest changes the City Council made in 2019 was only allowing people to operate an STR in a residentially zoned area if it was their full-time residence. Permit holders were required to have a homestead exemption for the property.
That provision was meant to prevent what many people saw as one of the most destructive aspects of the market — investors scooping up numerous homes to operate scattered-site hotels in residential neighborhoods.
The homestead exemption requirement means that people can only have one STR in a residential neighborhood. Council members also hoped that those STR operators would be more invested in the health of their own neighborhoods, and would do more to prevent the negative effects of STRs, such as disruptive, unwanted parties.
But last week, a three-judge panel of the Fifth Circuit Court of Appeals ruled that the homestead exemption provision violated the commerce clause of the US Constitution by discriminating against out-of-state investors. The ruling didn’t immediately overturn the New Orleans law, according to The Times-Picayune. But it does allow plaintiffs in the 2019 lawsuit that led to the ruling to request that a district court judge overturn portions of the current STR law.
The plaintiffs moved for a U.S. District Court judge to issue such a ruling last week. An order hasn’t come down yet, but the council is already starting to rewrite the rules. Even before last week’s ruling, Councilman JP Morrell had already expressed a desire to rewrite the city’s STR rules to make them more stringent and restrictive.
The process will involve numerous public meetings and a study by the City Planning Commission. It took the council just over 14 months to finalize the 2019 rules. At that time, the council also used an interim zoning district to prevent a “land rush” of new STR permit applications that could be grandfathered in before the new rules were set up.
This time around, the council appears to be aiming for a shorter, six-month process. The council plans for the interim zoning district to be in effect for six months, although it has the option to extend that if necessary.
It’s unclear exactly what the new rules will look like, but Morrell said in a press release on Monday that they will be “more restrictive.”
Councilwoman Helena Moreno likewise characterized the process as an attempt to reign in the growth of the STR market.
“The proliferation of short-term rentals in our neighborhoods due to lax regulation and enforcement is drastically affecting our housing affordability,” Moreno said in a press release. “Regardless of the court’s ruling, this council must act to protect our neighborhoods and our people from further displacement.”
Both Moreno and Morrell have butted heads with Mayor LaToya Cantrell’s administration about what they say is the poor enforcement of the current rules. The Cantrell administration has recently made changes to beef up enforcement, including new staff and a new software to scrub the internet for illegal listings.
Morrell said on Monday that the moratorium on new licenses would give the city some time to catch up on enforcement efforts. And an official from the Cantrell administration overseeing STR enforcement told The Times-Picayune last week that the city would continue strengthening enforcement. He said that there were plenty of current violations to pursue that have nothing to do with the homestead exemption rule.