On Tuesday October 7, 2025, the United States Court of Appeals for the Fifth Circuit further cabined the ability of the City of New Orleans to govern short-term rentals (“STRs”). In an appeal in the ongoing Hignell-Stark suit regarding the regulation of Non-Commercial STRs, the Fifth Circuit affirmed the ruling of the Eastern District in several respects. However, the Court made three rulings against the City of New Orleans that change the landscape significantly. First, the Court held that ordinances that limited licenses for STRs to natural persons (thereby excluding corporations and limited liability companies) violate the Equal Protection Clause. The ordinances had required that STR licenses and operator’s licenses be held by “natural persons.” The Court held that natural persons and corporations were similarly situated for purposes of the Equal Protection Clause and then found that discrimination did not bear rational basis scrutiny. “Nothing…identifies a plausible connection between an STR homeowner’s juridical status and the behavior of STR guests.” Next, the Court identified several claims that sections of the city ordinances governing advertising violated the First Amendment. The Court disagreed with the appellants on all points, save for one hot-button issue. The Court held that the code’s requirement that “’each short-term rental listing advertises only one dwelling unit’ lacks the justification necessary to survive First Amendment scrutiny.” At first blush, this might not seem like a meaningful ruling; however, property owners have long sought to cross-list properties to prospective guests, advertising, for example that two properties were next door to one another, thereby allowing multiple parties to book together. This ruling is likely the most frustrating aspect of the judgment for those seeking to limit large bookings at STRs. Finally, the Court rejected the argument that the City's resident-operator requirement violated the Dormant Commerce Clause. However, the Court held that the City’s interpretation (and judicial admission) that the law “only requires the operator to be present at the property while guests are present” survived the Dormant Commerce Clause analysis. Under the Court’s analysis the resident-operator requirement only survives under the interpretation that “the Code’s language requires that an operator reside on the STR property only while it is actively occupied by guests.” With new STR ordinances expected in the coming months, it is possible that the City starts from scratch, or it may try to take the case to the United States Supreme Court. Contact Graham Williams if you have further questions.

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