New Orleans city council upends residential short-term rentals

By: Graham Williams, Attorney

On Monday, August 29, 2022 the New Orleans City Council unanimously placed a moratorium on new residential short-term rentals (“STRs”) and said that all residential STR permits will expire on March 1, 2023. 

In short, the Council upended the way that residential STRs were licensed. No new residential STR licenses can be issued for six months. If you have a residential STR  — this change may signal the end of that business. All existing licenses are now set to expire on March 1, 2023.

Before this vote, STRs could be licensed either as commercial or residential, depending on the property’s underlying zoning.

A residential STR (“RSTR”) is one where the owner has their primary residential dwelling onsite. As many New Orleanians are familiar, primary residence, for STR purposes, is established by the homeowner’s submission of proof of a homestead exemption on the STR property. A residential STR can fall into one of three categories, subject to varying limitations on the number of rooms and guests.

A commercial STR (“CSTR”) is one offering an entire dwelling unit, with a limit of five guest bedrooms and no more than ten occupants. These properties are often referred to as the “whole home” rentals and are only available for properties in specific zoning classifications.

On August 29, 2022, the Council directed the City Planning Commission to establish an Interim Zoning District (“IZD”) that will last for six months to list all types of RSTRs as prohibited uses, such that property owners will no longer be allowed to apply for them. The vote also put an expiration on all RSTR licenses, which are now deemed to expire March 1, 2023. The IZD will further prohibit City agencies from accepting new RSTR applications or issuing new RSTR licenses during its existence. The IZD is subject to renewal of up to 180 days.

The vote was in response to a decision of the United States Court of Appeals for the Fifth Circuit issued on August 22, in which the Court held that the City’s residency requirement for RSTRs was unconstitutional.

Prior to that decision, the City had used the residency requirement as a way to limit STRs in neighborhoods zoned residential by requiring that the owner actually reside on premises.

Hundreds of property owners throughout the City hold RSTR licenses that will be obsolete effective March 1, 2023, subject to permanent revision of the Comprehensive Zoning Ordinance. Councilman At-Large JP Morrell, the sponsor of the new rule, stated at the meeting that the intention of the council was to have a new legal regime to govern RSTRs by the March 2023 expiration date.

Please contact Graham Williams if you have questions or need advice about the impacts of this vote and likely paths forward for the industry.