New Orleans City Council Bans Some Commercial Short-Term Rentals (STRs)

By Graham Williams

On Thursday, February 2, 2023, the New Orleans City Council voted 5-0 to create an Interim Zoning District (“IZD”) that prohibits the use of a Commercial Short-Term Rental (“CSTR”) in certain neighborhoods and certain zoning.

The measure, authored by District B Councilmember Lesli Harris, focuses on mixed use designations popular among real estate developers; HU-MU, MU-1, and MU-2, banning the issuance of new CSTR permits in those zoning designations, where CSTRs were previously a permitted use.

The IZD in which the ban applies covers much of Central City and is designed to include Tchoupitoulas running uptown to Dufossat Street, and notably excludes the Convention Center Neighborhood, wherein CSTR’s will remain available to some of the City’s largest development plans. The borders of the IZD are complex and are roughly represented in the graphic accompanying this article.

An IZD is meant to be a temporary measure and has been used frequently in recent years by the council. Use of an IZD has historically been disfavored, as it changes the use of land and undermines predictability in the real estate market. In recent years, they have grown in popularity; last year the council used one to stop the issuance of new Residential STR permits.

The ostensible purpose of the IZD was to protect the historic character of the neighborhood, after the rise of CSTRs was linked by some to the City’s housing shortage. While this IZD likely does not impact existing CSTRs, which have a vested property right in their permits, those properties within the IZD that are zoned HU-MU, MU-1, and MU-2 are still susceptible of dozens of commercial and institutional uses, including use as a hotel.

Critics of the council’s decision argue that the vote was an instance of the council picking winners and losers and undermining predictability in property rights.

During the same meeting, the council also approved a motion by Councilmembers Harris and Giarusso to create another IZD–for the entire City of New Orleans. Under the new IZD, any property for which a Bed and Breakfast was previously a permitted use has now become a conditional use, requiring approval by the City Planning Commission and City Council. This change was largely seen as an attempt to foreclose an alternative STR development avenue.

With the New Orleans real estate market in flux, these changes provide further regulatory hurdles for STRs. The council must adopt a new framework for Residential STR’s by the court-ordered deadline of March 31, 2023, so uncertainty is the only certainty. 

To discuss personalized advice and representation, contact SNW Partner Graham Williams.