When stricter rules on short-term rentals take effect in New Orleans on Sunday, thousands of unlicensed listings in the city could disappear from the top platforms that facilitate renting out homes to tourists.
Both of the major listing services for short-term rentals, Airbnb and Expedia, have agreed to follow the new regulations, which aim to stamp out illegal units by starving them of new customers.
But, even if that crackdown succeeds, it could be years before it becomes clear how many short-term rentals will be a long-term presence in New Orleans and how the efforts to license and regulate them will work out.
“The first year of this will be somewhat transitional,” said Ashley Becnel, the city’s chief zoning official.
The total number of short-term rentals, legal or otherwise, operating in New Orleans has never been clear. Officials have said they believe the number is between 8,000 and 8,500, based on estimates from analysts who monitor the industry and advocacy organizations that oppose it.
Airbnb and Expedia declined to say how many New Orleans listings were active on their platforms this week.
As of Wednesday, there were more than 3,400 active short-term rental licenses in New Orleans. That’s about 71 percent of the peak of more than 4,800 licenses reached last year, before a ban on the most popular type of licenses went into effect.
The final number of legal rentals could end up being significantly higher by the end of the process, however.
There’s a backlog of more than 1,000 applications that have yet to be processed, and unbuilt projects that could contain another 1,000 commercial units are still on the drawing boards and could come online years down the road.
In both cases, “they were legally allowed (at the time they applied) and will continue to be legal,” said Zach Smith, director of the Department of Safety and Permits.
The imminent approach of the new rules has brought a surge in applications. The city has issued nearly 620 licenses to residential properties since the beginning of September, and nearly 390 more applications are waiting to be reviewed.
All residential units allowed under the new rules would also have been legal under the previous framework, which has led officials to suspect that many of the licenses being issued are going to owners who ignored the rules in the past but felt they no longer could do so.
Nearly 750 applications have been filed for rentals in commercial properties, in some cases in an effort to get licenses grandfathered in before the new regulations limit the rental units to 25% of a commercial property.
On top of that, the city has received a significant number of requests for building permits that list short-term rentals as a use for the projects. Because those permit requests were filed before the new regulations went into effect, they will be allowed to operate once the developments are completed, Smith said.
New Orleans has long struggled with what to do about the short-term rentals boom fed by the millions of travelers who visit each year. Though they were technically illegal for decades, the city never effectively enforced those rules, and the rental of homes to tourists exploded with the rise of websites connecting property owners with tourists, who were far more lucrative than long-term tenants.
Former Mayor Mitch Landrieu’s administration took a stab at regulating the industry in 2017, but the rules it developed in negotiations with Airbnb proved difficult to enforce and allowed a significant increase in people buying up investment properties solely to be used as short-term rentals.
When a new City Council took office in 2018, one of its first acts was to reopen the discussion. It quickly barred the city from issuing new licenses for short-term rentals of residential properties that were not owner-occupied.
That practice had earned the particular ire of affordable-housing advocates, who argued that it took homes away from long-term residents as rents and property values surged. It also drew complaints from neighborhood residents, who said it led to wild parties and disrupted their lives.
The new rules weren’t finalized until a year later and ended up limiting short-term rentals to owner-occupied residential properties and to commercial properties, which must cap them at 25% of their units.
The key to the new regulations is a rule that allows platforms to list properties in the city as long as those websites are licensed and remove illegal listings.
Representatives of both Airbnb and Expedia have said all listings will be required to have a city license number in order to remain on their platforms. They also said this week that they will remove listings with invalid or fraudulent license numbers as the city makes them aware of those listings.
Smith, the Safety and Permits Department director, said he expects the first round of notifications of unlicensed properties will go out to the websites in mid-December, with the aim of getting a sense of how well the platforms are complying.
The ability to delist units is a departure from the past two years, when city has largely used the threat of fines to deter people from operating illegally. But those efforts have done little to stem the spread of the lucrative practice.
With the ability to have listings taken down, however, the city anticipates shifting from going after illegal operators one by one to going after their advertisements in bulk, Smith said. Officials hope that strategy will essentially cut off customers for those who do not have licenses, forcing them to either come into compliance or get out of the business.
Individual fines will be focused on owners whose guests are unruly or who violate other “quality of life” provisions in the new ordinances, Smith said. The penalties could include revoking licenses in addition to fines.
Whether the city has enough staff to ferret out illegal listings has become a source of debate. At the beginning of the year, officials estimated it would take a dozen new inspectors, lawyers and other staffers to properly crack down on illegal listings.
But that number has been curtailed. The Department of Safety and Permits is currently in the process of hiring two attorneys, and Smith said he believes that will be sufficient staff for the task.
That claim has raised eyebrows among council members and short-term rental opponents, who have pointed to the difficulty the city has had ending illegal rentals in the past. Some also note that the city continues to collect sales taxes on unlicensed rentals, perhaps giving officials an incentive not to be aggressive about enforcement.
Smith said this week that, if the platforms abide by the rules, he doesn’t believe a significant number of employees will be necessary.
“If we are unable to meet our own expectations, I’ll be the first one to say we need additional staff in 60 days,” he said.