Late Thursday, August 31, 2023, Judge Ivan Lemelle of the United States District Court for the Eastern District of Louisiana issued an order temporarily restraining enforcement of two key Short-Term Rental ordinances, pending resolution of cross motions for summary judgment.

We have previously discussed the ordinances when they were passed. The ordinances, 29381 M.C.S. and 29382 M.C.S. were aimed at twin objectives of the New Orleans City Council in its attempt to tamp down the proliferation of STRs. They established the controversial Non-Commercial Short-Term rental (NCSTR) category, limiting NCSTRs to one-per-block and implemented a lottery system.

The new ordinances included the language upon which City Hall's STR administration has taken the position that the owner of a Commercial STR (CSTR) cannot, also, own an NCSTR. It further affected the bed and breakfast licenses, making a bed and breakfast a conditional use in every zoning designation in which bed and breakfast had previously been a permitted use--making it harder to operate a bed and breakfast.

In the federal litigation, which was ongoing, the plaintiffs have argued that the City’s STR regime itself is unconstitutional. In August 2022, the Fifth Circuit agreed with the plaintiffs and declared the City's “residency requirement” unconstitutional. The council then passed a flurry of Interim Zoning Districts, or IZD’s while it sought to draft new ordinances, claiming to follow the guidance of the United States Fifth Circuit. The resulting ordinances were the ones restrained in the Court’s Order, after the plaintiffs amended their lawsuit to argue that even the amended ordinances were unconstitutional.

Both the plaintiffs and the City have filed summary judgments, an all-encompassing, fast-track motion that seek to conclude litigation before a full trial. Summary Judgment usually means that one side or the other believes there are no facts for the Judge or Jury to decide, only to apply the law to those undisputed facts. Since both sides filed, they may agree on the facts, meaning they could short-circuit a long discovery and trial process. Those motions have been fully briefed and are now pending before Federal Judge Ivan Lemelle of the Federal Eastern District of Louisiana Court.

In its Order restraining the NCSTR regulations, the Court stated that it will issue another order setting a hearing on the pending Motions for Summary Judgment for a September 2023 hearing date. In the meantime, the City is restrained from enforcing the ordinances until the Court decides those Motions for Summary Judgment. Courts do not always decide contested motions from the bench at the conclusion of a hearing, so it is unclear exactly how long this injunction, or restraining order, will last.

These developments highlight a word used more and more in the STR world: uncertainty. Former hosts without an STR license may be interested in relisting properties, and hosts awaiting issuance of NCSTR licenses may try to open up their listings for previously closed months. However, it is also likely (or at least possible) that the City Council will issue a new IZD as a stopgap during this time of uncertainty. Even more interesting for some: will the City have to process bed and breakfast applications from property owners if their property is now, again, zoned for permitted bed and breakfast use.

Property owners are encouraged to consult with an attorney before making any rash decisions.

Contact Graham Williams for real estate counsel or with questions about your legal and business challenges.