Posted on: June 4 2014Story by Robert McClendon and Katherine Sayre
By NOLA.com | The Times-Picayune
Their backgrounds are diverse -- a St. Roch contractor, an Uptown tour guide, a PhD candidate in the West Bank and a young real-estate investor -- but all four have one thing in common. They are breaking the law in New Orleans.
By their own admission, they rent out their houses to tourists for a night or a few days at a time, in violation of the city's ban on unlicensed short-term rentals. Some among them are raking in the cash.
"I can make double renting it on the weekends what I can renting it out full time," said the PhD candidate, who lives on one side of his double-shotgun home on the West Bank and rents out the other half to help pay his mortgage. Like the other three homeowners, he agreed to talk to a reporter on the condition that he not be identified to avoid the ire of code enforcement inspectors or his neighbors.
It's impossible to say exactly how many unlicensed, short-term rentals are leased out to visitors every day in New Orleans, a world-class tourism hub. The unregulated properties can't be easily tracked. But the trend has exploded in recent years, as listing websites like Airbnb, VRBO and Craigslist make it easy for homeowners to find customers. Someone using those three websites this week could browse thousands of New Orleans homes for short-term rental.
But as the trend expands, some residents are lamenting the erosion of their neighborhoods' character, while the established hospitality industry, subject to strict regulations, bemoans the unequal playing field enjoyed by the new, unfettered competition.
In response to vocal critics, the City Council on Thursday is expected to consider tweaking the rules for short-term rentals. It's already illegal to rent out a house for less than 30 days without a license in most neighborhoods, but the proposed changes are aimed at making enforcement easier.
New Orleans, which attracted 9.28 million visitors last year, is among cities and towns worldwide that are being forced to tackle the issue of off-the-books rentals as the practice grows. In doing so, city governments face a dilemma: Should the rentals be embraced as legal, taxable and regulated? Or should they be outright banned?
Mayor Mitch Landrieu's administration, citing lack of enforceability, has shown little appetite for punishing property owners under existing law - and the administration declined to make any officials available for an interview on the issue.
"At this time, we are working with neighborhood groups and the City Council to explore options to strengthen the zoning law and streamline enforcement," City Hall spokesman Tyler Gamble said.
"Illegal short-term rentals, sometimes located in residentially-zoned neighborhoods, represent lost tax revenue to our financially strapped city," the New Orleans Convention and Visitors Bureau and the New Orleans Tourism Marketing Corporation said in a joint statement.
Some in the short-term-rental market fear a crackdown on the horizon. Several landlords spoke to NOLA.com | The Times-Picayune in recent weeks to argue that short-term rental operators add value to neighborhoods and the city as a whole, even if there are a few bad actors in the industry. They said that short-term rentals fill a market void, spread tourism dollars around the city and are, in any case, impossible to eliminate completely.
"I think tourists appetites are changing," said the Uptown the tour guide, who uses two of the four units in her camel-back double for short-term rentals.
"When people travel, they don't just want to check off some sightseeing list and be only around other tourists," said the young real-estate investor, who runs a short-term rental in a historic neighborhood. He asked that his specific neighborhood not be named, because he said his decision to rent his home initially sparked a backlash from neighbors.
For many residents, a steady stream of tourists in and out of their neighborhood is precisely the problem.
"I live in a residential neighborhood for a reason, and this guy is running a hotel right next to me," said Barry Kaiser, a Faubourg Marigny resident and vocal opponent of dozens of unlicensed short-term rentals that have sprung up in his neighborhood.
Unlike some operators, the man who runs the rental next to Kaiser does not live on site. Many residents said they save especially visceral scorn for such absentee operations.
Gary and Laura Tennyson, who also live in Faubourg Marigny, say there are several absentee rentals on their block. Every Thursday or Friday, an ever-changing cast of tourists and partiers descend on the neighborhood to occupy the units, taking up all the parking and disrupting what used to be a quiet street where you knew your neighbors, they said. Come Monday morning, the transients leave.
"It's like a ghost town," Gary Tennyson said.
There's also evidence that the proliferation of short-term rentals is driving up the rates of long-term rentals and displacing longtime residents, said Meg Lousteau, a Treme resident and director of Vieux Carre Property Owners Residents and Associates. Landlords with dollar signs in their eyes are dedicating more and more units in the city's historic core to short-term rentals, she said.
The PhD candidate, who offers his West Bank property for short-term rental, said that's the marketplace at work. "Aren't rising property values a good thing?" he asked.
Airbnb and the 'sharing economy'
Tourists looking for a place to stay almost anywhere in the world can find everything from a shared bedroom to a sprawling mansion on websites like VRBO, Craigslist and Airbnb. They're part of the so-called "sharing economy," where peer-to-peer mobile apps and sites allow people to do business directly, outside of traditional systems.
For short-term rentals, the website that has drawn the most attention -- and scrutiny from municipalities -- is Airbnb, which offers up to 550,000 listings worldwide.
Airbnb was recently valued at $10 billion, which would make it one of the priciest startup companies in the world, valued higher even than established hotel giants Hyatt and Wyndham, The Wall Street Journal reported earlier this year.
But as Airbnb's prospects grow, controversy over off-the-books and unlicensed short-term rentals has grown heated in many cities, driven by concerns over noise, safety, the future of residential neighborhoods and lost tax revenues.
Some cities have cracked down with citations and evictions. Others have searched for ways to incorporate short-term rentals and regulate them. In Amsterdam, the city council created a "private rentals" category that lets homeowners rent their properties for up to 60 days each year, as long as they pay tourist taxes and comply with fire safety regulations and public nuisance laws.
In San Francisco, city leaders are considering legislation that would allow short-term rentals only for owners' primary residences, on a limited basis, while imposing requirements such as insurance. In New York, the state Attorney General's Office has subpoenaed Airbnb records as part of an ongoing investigation. Airbnb has said the investigation is focused on "large, corporate property managers and hosts who take apartments off the market and disrupt communities." The company says it has already removed 2,000 listings in New York.
Responding to such measures around the globe, Airbnb has launched a PR campaign, rolling out estimates on its impact in local economies: $61 million in Portland, $824 million across the United Kingdom, $175 million in Barcelona, the company said. Airbnb has also recently agreed to start collecting hotel taxes in San Francisco, Portland and New York.
The company has not estimated the value of rentals in New Orleans. In a statement to NOLA.com | The Times-Picayune, it said that "Airbnb hosts in New Orleans share their homes with visitors from around the world and use the money they earn to pay their bills and afford their rents or mortgages. And because Airbnb listings are in many neighborhoods, travelers get to see parts of the city and support local businesses they would have missed if they stayed in traditional tourist areas.
"We have reached out to officials in New Orleans to discuss how we can work together, and we look forward to working with local leaders to make the city stronger for everyone," the company said.
An Airbnb spokeswoman also pointed to stats on the company's website: 82 percent of users worldwide are sharing only the home where they live; nearly half said the extra income helped them stay in their homes; half are "moderate to low income" owners and three out of four are "outside the main hotel districts" of cities. The site didn't have similar figures for the New Orleans market alone.
Tulane University economics professor Toni Weiss, who studies the economic impact of Carnival, said websites like Airbnb are likely bringing people to town who would not otherwise visit. With hotel occupancy rates high during special events, New Orleans is close to full capacity, she said.
"The hotel industry can complain, but if they don't have the rooms available, then the people who are staying in these other sites aren't bypassing the hotels to the hotels' detriment," Weiss said.
'Breaking the law'
The established tourism sector in New Orleans is not embracing the home-sharing trend.
Mavis Early, executive director of the Greater New Orleans Hotel and Lodging Association, said it's difficult to quantify the extent to which the industry is impacted by unlicensed short-term rentals. But given the number of private residences booked online, and anecdotal evidence in talking with visitors, it's clear unlicensed rentals represent a growing problem locally and across the country, Early said.
Licensed hotels and bed-and-breakfasts pay hotel taxes and follow stringent health and safety measures, such as inspections, locks on doors and fire sprinkler systems, she said. Unlicensed rentals don't have to answer to any of those requirements.
"If they're breaking the law, they're breaking the law," Early said. "How does one condone breaking law? You're cheating the city, and God knows we need the money to repair our streets and do other infrastructure in this almost 300-year-old city. It's not fair to the people who are paying taxes and paying for their licenses and complying with all of the regulations."
The short-term landlords interviewed for this story said that they would happily submit to taxes and regulation if only the city would amend its rules to make them legal. The PhD candidate bristled at the argument that he should stop renting his home just because it's technically illegal. If there is a market demand for short-term rentals, then it's the laws that should change, not him.
Most of the New Orleans region's hotel rooms - 22,000 of the region's 38,000 rooms -- are clustered within one mile of the Ernest N. Morial Convention Center, Early said. She dismissed the notion that the illegal rentals have a role in fulfilling demand.
"If there are more rooms needed, more hotels will be built, and there are more hotels being built now as we speak," Early said.
Many of the tourists who benefit from the short-term rentals, however, give them glowing reviews on the websites that market them. In interviews, some of those visitors said they'd use short-term rentals again.
Dorothy Pugh, of Stillwater, Okla., said she loves New Orleans and usually stays in a short-term rental when she visits, once a year at least, because they are cheaper and let her and her husband get to know different neighborhoods.
"Frankly, a lack of informal B&Bs would make my trips pricier and therefore even less frequent, as well as less enjoyable," she said. "While there may be something to be said for professional hospitality, we've found the charm and personality of the city is often personified by the informality of our hosts."