In a hotly contested vote on Thursday, March 23, the New Orleans City Council created all new regulations for Non-Commercial Short-Term Rentals (“NCSTRs”). While the new rules had been expected for some time, the vote confirmed some concerning realities for NCSTR owners: a lottery will be held to determine which owners can operate NCSTRs— the regulations state that there can be only one NCSTR per city block. While a proposal for two “special exceptions” per block was later approved, the change is a sea change for NCSTR owners.

Only natural persons (as opposed to corporations) can own properties used for NCSTRs; no person may own more than one NCSTR; and the operator must be responsive to any issues within one hour. NCSTRs will require an on-premise operator who must demonstrate residency through at least three pieces of proof, including a lease, if applicable. An NCSTR may list up to three bedrooms for six guests, with a bedroom set aside for the exclusive use of the operator. SNW represents numerous NCSTR owners, as well as commercial STR owners, and the regulations for both groups are quite stringent.

Prior to Thursday’s vote, STRs had been grouped as either Commercial or one of three different types of Residential STRs. The prior law required that the owner of a Residential STR live in the property and demonstrate that fact by having a homestead exemption on the property. A lawsuit by out-of-state property owners resulted in a decision that the homestead exemption requirement was unconstitutional. The court in that case set a deadline of March 31, 2023 for the City Council to remove the homestead exemption requirement, prompting Thursday’s vote. The new ordinance collapses the three different types of Residential STRs into the Non-Commercial category.

The new law does not prioritize the holders of current Residential licenses, many of whom purchased properties with the expectation that they would be able to conduct STR operations.

However, the law does incorporate the “safety valve” concept first floated by Councilman Freddie King III. The amendment that he and Councilman J.P. Morrell proposed and was passed allows for two “special exceptions” per block. Property owners can apply for an exception, and via the neighborhood participation process, a notice would be sent to properties within 100 feet of the property, but no “neighborhood meeting” will be required as the exemption is less than a city square. After 60 days, the City Planning Commission would prepare a report, and, 60 days following that, the council could vote on the requested exception. This neighborhood participation process is notable in that, unlike the process for other zoning changes, it will not require notice to neighborhood organizations. We believe, as do others, that neighborhood groups will need to ensure property owners are communicating about a notice received in the mail, a process that was normally captained by the neighborhood organization itself.

Many observers are concerned the “special exceptions” process could lead to arbitrary and politically motivated decisions. Many questions persist following Friday’s vote. How will the city conduct a lottery for the hundreds of impacted blocks? Will the lotteries be public? And will there be any factors incorporated into the lottery, including the potential “weighting” of certain claims? Furthermore, while the city is staffing up, it is common knowledge that the Short-Term Rental office at City Hall is woefully understaffed. Overall, NCSTR owners should be monitoring this process—as their income may now be left to a game a chance, and a special exception application that could determine the property’s viability as an STR.

For more information, please contact Graham Williams at graham@snw.law