New Orleans attempts again to regulate vacation rentals

Tourism-dependent New Orleans has adopted new regulations on Airbnb-style short term rentals, including a limit on licenses to one property per block and a requirement that the licensee live on the property.

Adopted after hours of emotional debate on Thursday, the new rules were necessitated by an August federal appeals court ruling that obliterated a regulation designed to stop "whole house" vacation rentals by absentee homeowners. It also reignited arguments that have roiled the city since short-term rentals gained a foothold in the mid-2010s.

"The neighborhoods are split on this. Neighbors are split on this," New Orleans city council member Freddie King said.

That debate is unlikely to end soon. And Dawn Wheelahan, an attorney for short term rental interests, said Friday that court challenges will continue. Her clients include a Portland, Oregon, woman who has residences there and in New Orleans, and a company that manages short-term rentals in multiple cities.

Opponents of increased regulation say short-term rentals broaden the tourism market and provide many homeowners with necessary supplemental income. Supporters say a proliferation of vacation rentals, driven by outside investors and absentee residence owners, has inflated property costs and taxes while filling once quiet and charming areas with hordes of partiers.

The old regulation limited short-term rental licenses to the license-holder's primary residence — a residence for which they claim a Louisiana homestead property tax exemption. That shut out out-of-state property owners. And a panel of three judges at the 5th U.S. Circuit Court of Appeals unanimously ruled that it unconstitutionally restricted interstate commerce.

That led to the new regulation limiting licenses to one person per block. It also says the person who holds the license must live on the property, whether its the owner or someone — perhaps a renter — allowed to reside there.

The result is that some people already holding licenses are worried about their future income. Existing license holders who want a renewal will have to win a lottery involving any other license applicants on their block.

"You might put me in a lotto and, just like that, I could lose my retirement income," said one woman, adding that renting part of her house to vacation guests is more lucrative than having long-term tenants. With rising taxes and insurance, she told the council Thursday, "If I have to go back to long-term rental, I will have to sell my house."

But vehement opposition to vacation rentals was also on display from people who said the proliferation of short term rentals — and lax city enforcement of regulations — has driven away home owners due to noise from unruly guests, or inflated home-owning costs.

One New Orleans native said he's witnessed the "hollowing out" of his neighborhood.

"It's been taken over by wealthy investors," he said. "It's become a playground for tourists and for those wealthy investors. ... We’re becoming a smaller, whiter tourist resort. Less like the city I grew up in with every passing year."

Council member Eugene Green cast the one-per-block limit as a compromise with people who want vacation rentals eliminated.

"I’ve seen the signs saying, ‘My STR is my retirement,’" Green said. "But for the people that I’ve spoken to, their homes and their neighborhoods are their retirement."

Council members included an amendment from King that somewhat diluted the density limit by allowing a property owner to apply for an increase in the limit for a given area. There would be bureaucratic review, public comment from affected neighbors and a vote by the council on such an application.

Wheelahan said the new rules still have multiple legal and constitutional problems. Among them is a requirement that only a "natural person" and not a corporation can hold a license.

"The prohibition against corporate entities holding permits violates the Supreme Court's 2010 Citizens United decision holding that corporate entities have the same First Amendment rights as natural persons," she said in an email.