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New Orleans ready to launch landmark short-term rental ordinance

It’s not an idea that’s new. For centuries, New Orleanians have been taking in lodgers. But technology and a changing culture have transformed the way that house rentals work. AirBnB, VRBO, HomeAway, even couch-surfing sites are all making short-term rentals not only a lot easier, but also vastly more widespread. Recently we sat down with attorney Andrew LeGrand, who worked on the food truck regulations passed a few years ago, to talk about the city’s new short-term rental ordinance, which takes effect April 1, and what it means for locals.

Attorney Andrew Legrand (Photo: Spera Law Group)

Attorney Andrew Legrand (Photo: Spera Law Group)

So, first, give us a quick recap of what the new ordinance does.

The new ordinance creates a licensing and registration scheme for people who want to short-term rent. Basically, similar to Uber, similar to food trucks, what’s happened is, although short-term rentals before the legislation were completely illegal, too many people were doing it. Too many people wanted to rent space when they visited the city, and too many people in the city wanted to rent their space, and share their space. So, the city basically had to do something about it. The laws that it’s replacing are from 1956; they weren’t designed around new technology. Very similar to the food truck legislation that was passed a few years ago, it needed updating. So the city went through and created a new scheme with this new business model created by Airbnb in mind, to license it, to allow it, and to tax it.

Does it pertain only to AirBnB, or to other entities as well?

It applies to anyone who wants to rent their property for less than 30 days. It doesn’t matter what platform you’re on. It could just be that you have a simple website, where you’re not using any sort of platform; it could be where you’re just handing out business cards.

They’re calling this landmark legislation. Is it?

Well, I think why it’s revolutionary is the city has actually gotten Airbnb to play with them in this. To agree to provide some of the data. Other cities have tried to do other things, but it doesn’t seem like any city’s really done a model deal. What makes the city of New Orleans’ approach unique is they’ve actually got an agreement from Airbnb to provide data back to the city so it can enforce it. So, the point is, Renee, if you go and list your house for rent, you’re going to Airbnb, supply that data to them, they’re going to have it, they’re going to send it back to the city of New Orleans by law, and by contract, so the city of New Orleans can say, okay, here’s Renee’s property, here’re the nights she rented. Let’s look to see if she has a license. It makes enforcement of it much easier.

The city is going to be collecting taxes and licensing fees. Will that not pay for enforcement?

To enforce it, you have to have workers, right? So the city, as I understand it, is creating a new division within the Department of Safety and Permits to staff this. From what I’ve seen, it’s anywhere from 4 to 6 people, maybe more. I think they’ve estimated a budget of just under a million dollars a year to actually do this; where that revenue is coming from is the fees from people who are going to do it legally. Pay their permitting fees, to actually set up that enforcement. It’s worth noting, too, that the state is now collecting taxes on it, as well.

The new licensing requirement goes into effect April 1, is that correct?

Yes.

And can you go online to get a license? Tell us a little bit about that process.

I don’t think the process itself is actually out there. The mayor’s office has to go through and set up the administrative process, the mechanics of licensing it. I haven’t seen that that’s actually out yet. Ryan Bernie was quoted in The New York Times as saying they want to make it as easy as possible. The harder the make the licensing process, the less people they’re going to have who actually comply with it, whereas if they make as easy registering your house on Airbnb, fill out a form on your mobile phone, hit submit, and hit go, they’re going to get a lot more enrollment in the program. (Editor's note: Since this interview, the city has announced that short-term rental license applications can be applied for in person or online starting March 1.)

What are the fees going to be?

The fees are anywhere from $150 to $500 per year, based on the type of license that you need and require.

I understand there are three kinds of licenses, the accessory, temporary, and commercial.

If the property is zoned commercial, you can only get the commercial license. If the property is zoned residential, you can either do the A or the T. And the A and the T is where we really get into the weeds. The A license is an accessory license. It’s available to people who want to rent out the other half of their double, or available to people who want to rent out a room in their house. The T type license is available to the whole home, where you can rent out the entire home, not have the owner present during the stay, and you’re limited to 90 days per year.

You were involved in the food truck legislation that was passed a few years ago. Is that comparable to this?

Yeah, I think so. Basically, what happened with that and what happened here is that the market forces have demanded it. The buyers and the sellers of the particular service have said, we like this, we enjoy this. The public itself has said, let’s do this. And the legislation was just simply behind. Same thing with food trucks, right? Back in 1956 when the food truck laws were drafted, they didn’t have the technology to have hot water and gas stoves and all these different things in a moving truck. How do we create that? So, technology created that. Technology’s now creating the proliferation of Airbnb, of short-term rentals. It’s the same thing. Hey, this is happening, let’s create a regulation scheme for it.

Talk about the cultural and lifestyle changes that have created this phenomenon. Is is technology; is the fact we’re a more mobile society and we’re traveling more; is it the bachelor party mentality? What is causing this industry to boom?

I think it’s the ease of someone being able to rent their property on Airbnb. Take away the technology of doing it. Let’s go back 20 years, pre-internet. How do you rent your spot to someone who wants to come and rent? You’ve got to take out an ad in the paper, you have to somehow advertise that, you have to arrange for payment, you have to arrange for a calendar to figure out when people are coming. It used to be very hard. It got a little easier, and people have been doing it on Craigslist for much longer than Airbnb’s been around. But still, that was pretty hard, too, because you don’t know who is contacting you to rent your space. You had to have your own way of accepting payment. You had to have a clean up.

Now anyone can take some pictures with their smart phone, enter in a few details, describe the place, how much they want to charge, give Airbnb their bank account, and Airbnb is managing your calendar, making sure you’re not double booked. I think the biggest part is they’re managing credibility. Both the landlord and the tenant are now screened. They’re connecting their Facebook accounts, there’s reviews behind them, so people are more comfortable with the idea that, OK, I see Renee, I see her picture, I see who she is, we actually have a couple Facebook friends in common, so now I’m much more comfortable renting my house to her when I go out of town for the weekend. So I think it’s technology. It’s made people much more comfortable with the idea of renting to a stranger, because they kind of know who that stranger is through social media.

Part of the controversy around short term rentals lies in behavioral issues, quality of life issues for neighborhoods, and how do you monitor that? How do we keep renters from disrespecting the neighborhood?

I think at least one of the big issues that you see discussed on the internet is, I can do whatever I want with my property. Saying you can do whatever you want with your property is simply not true. We have zoning laws. I can’t buy a house in a residential area, tear it down, and build a nuclear power plant, or a poultry plant. So, no, saying you can do anything is just not true.

Then you move into residential use. I have my house in a residential area, and you move in next door, now you’re renting it on a nightly rental, instead of month to month. The question becomes, month to month is a residential use, but what is a weekend rental? Is that starting to look more like a commercial use? Are you moving away from renting to someone who’s going to be renting it for a year, and moving to somebody who’s just going to be renting it for three or four nights at a time? When does that switch from a residential use of a property to a commercial use of a property? And I think that’s where the argument comes: People who have bought houses in residential areas are now being exposed to commercial opportunities. So I think that’s kind of the big crux of the issue right there. You’re running a business. You’re no longer just a landlord renting to somebody who lives here. You’re running something that looks a lot more like a hotel than a traditional, year-long lease to a resident.

So there are a lot of objective requirements in the law. You have to submit a floor plan and a site plan to the city. You have to have a half million dollars of liability insurance. Those are pretty clear, right? There are a couple of what I like to call subjective requirements in the law, too. Where the property cannot affect the character of the neighborhood. It can’t be a nuisance to the neighborhood. So the city’s built in these kind of subjective requirements, basically giving them the ability to say, you’re being a bad actor, and we’re going to take this away from you, because you’re taking away from the character of the neighborhood, or you’re being a nuisance, you’re violating noise laws. We’re going to enforce these laws on you.

If I have a bad neighbor who’s renting and I have these problems, if I report that person to the enforcement agency, does it take three strikes and you’re out?

What’s interesting about this is, starting April 1, Airbnb is reporting that information back to the city, right? So now Airbnb is taking the property names, the property owner, the licensee, all that information. Once it gets back to the city, it’s public information. It’s subject to the Freedom of Information Act. Anyone can get it. And the city’s actually said, if you do a short-term rental, we’re going to basically list you as a business owner. The city already lists publicly every business owner in the city. All the permits are accessible online. Kind of hard to find, but you can dig around and find them. So, if I run an Airbnb, my neighbors are going to be able to go to the city website, and type in an address and confirm that I’m actually doing it. So, your question about how tough are they going to enforce it? I’m not really sure. I imagine that early on, they’re going to be pretty stiff on it, but you never really know how they’re going to enforce it.

How is Europe dealing with this, and are we behind the curve?

I don’t think any city has really figured it out, as far as what I’ve read. I think the big part of it is Airbnb’s willingness to play. I think they’re now realizing, we’re going to have to play nice with these big cities, and provide them with the data so they can enforce it, so the locals can have the rules the way they want them, but that we can also have the permits and registration and make this a legitimate business.

It’s fitting that it’s happening in New Orleans because we have, since Katrina, become a very entrepreneurial city, and this is a very entrepreneurial phenomenon. Maybe it being a tourist city and an entrepreneurial city, maybe it’s a good place for this to happen.

Right. We’re high up there in terms of how many tourists come to our city per year, and how small we are. That’s a very high ratio for us. The flip side of that, last study I looked at, is we have a very high number of Airbnb’s per person in this city as well. Which makes sense. We’re a place where people want to come. I think that’s kind of made this problem in New Orleans unique -- the combination of low number of residents, very high number of tourists, and a very high number of Airbnb’s. That’s just simple supply and demand.

It’s a whole new business line. Something that’s very interesting with the new short-term rental ordinance is that whatever permit you have, you’re going to be kept at an occupancy of 10 people per night. That bachelor or bachelorette party that comes into town with 14 people is going to have a hard time finding a place to stay because the legal occupancy limit for any short-term rental is going to be 10. It’s 6 for the accessory and C level licenses. It’s only 10 if you do the whole-home rental.

Have you ever rented your house on Airbnb?

No, I haven’t. But I am in the process of buying a double in the Treme neighborhood right now, and it’s something I’m thinking about. There are advantages and disadvantages. It’s way more work, from what I understand. But at the same time it’d be nice, maybe, to just have people stay for the weekend.

I think people are looking for authenticity in New Orleans. The short-term rental phenomenon works in tandem with that attitude as well.

Not just in New Orleans, but throughout the world. I was in Chicago this summer, and went on Airbnb and rented a boat. I stayed on a boat in a marina. I mean, how cool of an experience was that?

We’re a very grass roots city, and a lot of this, at its best, is a very grass roots part of the culture. People doing things with other people on a face-to-face basis.

Yeah. You see somebody at the second line, and he’s dragging a cooler with waters and liquor, and he’s selling drinks, and it kind of goes to the food trucks, where everyone is trying to have their little side hustle. And it’s hard to blame people, and it seems good. You have this extra resource, share it, and you deserve to be compensated for having that extra resource.

And now the city will get some money out of it to regulate it.

The city will get some money; the state will get money. And now there’ll be hopefully some enforcement and regulation of it to keep the bad actors out of there.

People also are worried about long-distance owners. We’re a very parochial town and love our community.

If you don’t have a homestead exemption, you can’t do the type A license (allowing you to rent out a room or other parts of your home). You have to get the type T license, where you’re limited to renting 90 days per year. So if you’re renting only 90 days per year, instead of 365, your whole financial model changes. I think there are going to be people who are much less interested in doing that (being long-distance owners), because they can make more money from a full-time renter rather than dealing with people for only one-fourth of the year.

Renee Peck is editor of NolaVie. Email her at renee@nolavie.com.