New Orleans Latest City to Grapple with Airbnb

INSIGHTS :  Nov. 17, 2016 HOUSING

The Crescent City moved to both legalize and regulate the short-term rental industry amid a housing shortage.

Colorful New Orleans homes

The Crescent City moved to both legalize and regulate the short-term rental industry amid a housing shortage.

Flickr user Owen Allen. Flickr | Owen Allen

Short-term rentals are big business in New Orleans. Last year, the city's hosts on Airbnb, the popular rental listing site, brought in $316 million in revenue, according to an estimate from the company.

But until recently, these rentals weren’t exactly legal. In late October, amid heated debate about rising rents, affordability and neighborhood integrity, the city council both legitimized and attempted to manage the growth of short-term rentals in a preliminary 6-1 vote.

At the heart of the discussion was whether sites like Airbnb and HomeAway, which allow residents to rent out a single room or an entire house online, help drive up housing costs by essentially taking properties off the market and shrink the pool of owner-occupied housing. It’s been a fierce debate across the country, and Airbnb is involved in lawsuits in several places dealing with that same issue, including New York City, its hometown of San Francisco and Santa Monica.

In New Orleans, where recovery after Hurricane Katrina has been uneven, and rents are steadily rising, the debate has helped expose deeper issues around housing costs. More than half of renters in the city spend at least one-third of their incomes on housing, and a third or renters spend more than half their income on housing. Critics argue housing costs are rising, in part, because homeowners may profit more by renting homes out a few days at a time, rather than selling them or renting them to long-term residents. The city's own study estimated that 70 percent of short term rentals were whole-house and put the average nightly rate at $250. But Airbnb argues the short-term rental properties have had no significant impact on rental prices, pointing to a study it commissioned of local zip codes. Housing advocates are pushing for more regulations as well as measures that will link the debate around short-term rentals to more systemic issues in the long-term market.

“Most of us agree that full-time rentals in non-owner-occupied homes in residential districts are impacting neighborhoods so we must limit and enforce it,” said Mayor Mitch Landrieu, in a statement. Notable among the new regulations is an agreement with the rental platforms to restrict the number of days any single whole-house, non-owner-occupied rental can operate to 90 per year. New Orleans officials hailed it as the first time a city has negotiated such limits with listing sites.

The regulations, expected to be codified later this year, also ban short-term rentals in most of the popular French Quarter, and institute a tax on the rentals, which would go toward enforcement of the rule, as well as a housing improvement fund. The rental websites also agreed to regularly share data with the city. Notably, the regulations did not include a limit on how many units can be listed as short-term rentals on a given block.

Airbnb saw the vote as a win. “We’re excited that New Orleans will be joining a growing number of cities that have recognized the economic benefits home [renting] brings to residents and neighborhood businesses,” said Laura Spanjian, Airbnb's public policy manager for New Orleans, who previously served in Houston as Mayor Annise Parker's chief sustainability officer. “Airbnb is a lifeline for many of New Orleans’ creatives, seniors and working families.”

Opponents of the rentals, who held “Homes For People Not For Profits” signs at an October City Council meeting, were unimpressed with the approved measures, according to The Times-Picayune.

The debate unfolded within a larger conversation about the urgent need for more and better-quality long-term rentals for residents. For the city’s renters, who have a median income of $24,000, staying in the city is often increasingly expensive. Nearly 49 percent of occupied units in the city are rentals, according to the most recent estimates from the census, higher than places like Charlotte, N.C. or Jacksonville, Fla. but lower than San Diego, Calif. or Austin, Texas.

In 2013, the inventory of rental units finally surpassed the number of units available before Hurricane Katrina. Few of those were new construction, according to the city; instead, they're rehabbed structures that have finally been repaired and former owner-occupied homes that have converted to rentals. In the meantime, rents have also increased 20 to 25 percent since 2012. The city has committed to building or preserving 7,500 affordable housing units by 2021 as part of its Housing for a Resilient New Orleans initiative.

But even affordable housing advocates say the debate about Airbnb isn't as significant as broader issues around affordable housing.

“Short-term rentals are one piece of the affordability problem. We’re really more focused on much larger systemic issues," said Monika Gerhart-Hambrick, director of policy and communications at the Greater New Orleans Fair Housing Action Center.

Roughly one-third of renters are receiving some form of government assistance, and Gerhart-Hambrick said it’s important to protect and expand that, whether the subsidy is attached to the unit or to the person renting. But since most renters aren’t receiving assistance, she said, there’s a need to improve the choices for those renters. “That market is completely unregulated,” she said. Her group and others are pushing for a rental registry to help enforce safety and health standards. And the city has responded, selecting a California company to run the program, that would inspect and monitor rental properties for compliance with those rules.

In the meantime, housing advocates would like to see the restrictions on short-term rentals move a step further, limiting whole-house rentals to 45 days per year, for example, instead of 90, which can still include almost ever weekend day. And enforcement, urged the Greater New Orleans Housing Alliance, should be the responsibility of the listing companies -- not the city, which has limited resources to also address substandard housing in the long-term rental market.

"Even if short-term rentals were completely eliminated from New Orleans’ housing market," read a statement from the housing alliance on the proposed regulations, "residents would still face a housing affordability and housing quality crisis. The recommendation to regulate short-term rentals alone will not fix these problems for New Orleanians – instead, they only help to ensure that a bad situation doesn't get worse."

Following a ruling from an appeals court in San Antonio that found in favor of a homeowners association seeking to stop short-term rentals arguing it violated deed restrictions, the fate of short-term rentals is up in the air in Texas as well, just in time for the Super Bowl in Houston in 2017.

Mailing Address

6100 Main St. MS-208
Houston, TX 77005-1892


Physical Address

Rice University
Kraft Hall
6100 Main Street, Suite 305
Houston, TX 77005-1892

Featured Sponsor

Support the Kinder Institute