Here’s How New Orleans Is Dealing With Short-Term Rentals

For those of you trying to figure out what city I was going to profile when I said, “One of my favourite cities in the world,” you will be excused for suggesting Victor, Idaho, population 1,928.  It would be my favourite city, except it’s really just a town in the middle of absolutely nowhere…

New Orleans is one of the largest tourist destinations in North America, and their French Quarter is probably, based on density, the largest.

A couple of years ago, the city started to look at the problem of short-term rentals, and last December, they finally figured out how they were going to handle it.

The result: “a model for the nation,” according to their city staff…

CityOfNewOrleans

Have you ever been to New Orleans?

I have.

Twice.

I’m a huge New Orleans Saints fan (long story…) and in 2014, my wife and I decided to take a fall trip down to The Big Easy, and attend an NFL football game, among other things.

We were a huge hit, as a matter of fact.

We were completely decked out in Saints gear, with knee-socks, wrist-bands, stick-on tattoos, and most importantly – home-made, matching t-shirts, aimed at catching Jimmy Graham’s attention.

Why Jimmy Graham?  Well, as my wife so eloquently put it, “I love you, but I would totally marry Jimmy Graham.”

So what the heck, why not have some fun with it?

My wife’s shirt said, “Jimmy, will you marry me?”

My shirt said, “Jimmy, will you marry my wife?”

Oh what the hell, I may as well share a photo…

D&JNO

We splurged for 2nd row tickets behind the Saints bench, so Jimmy took notice of our shirts and nodded in approval.  He gave us the thumb’s up, which I think meant that he would marry my wife, but he never followed up on it…

New Orleans gets a bad rap sometimes.  I know everybody automatically thinks “Mardi-Gras,” and pictures naked college students with beads around their necks, drunken morons puking on Bourbon Street, and just an absolute mess of a city.

But that’s a few days per year, and Bourbon Street can be a pleasant distraction for just about anybody.

As you know from reading this blog and watching Pick5 videos, I’m not a big partier, nor is my wife.  But drop us in New Orleans for a 3-day getaway, and we’ll take in just about anything the city has to offer.  And I promise you, it’s not just about Bourbon Street.

New Orleans has some of the most beautiful homes I’ve ever seen in North America.  The architecture down there is so unique, and while it might be an occupational hazard for a real estate agent, I just fell in love with the Garden District.  We walked for hours and hours from West Riverside, through the Irish Channel, and into the Garden District, before taking St. Charles Avenue all the way back to the French Quarter.

I did my research, however, and concluded that you do not want to stay IN the French Quarter.  You do want to visit the French Quarter, eat there, party there, and absorb everything the area has to offer, but you don’t want to stay in the area.  God forbid you want to turn in for the night, and alas, you can’t, since the party goes until 6am.

We went to New Orleans in both 2014 and 2015, and stayed at The International House on Camp Street, two city blocks south of Canal Street, which is the southern boundary of the French Quarter.

If I had more time, I’d regale you with stories about driving a black Camero with tinted-windows (the only car that Budget Car Rental had left…) from New Orleans to Baton Rouge to attend an LSU college football game, and what it was like to be 35-years-old, surrounded by 17-year-old kids doing things that I only thought happened in movies.  But I think it’s time I get to my long-winded point…

We loved New Orleans so much, that we thought about purchasing an investment property down there.

Around the corner from where we stayed on Camp Street, there was a hard-loft condo, converted from an old telephone warehouse, that had some unbelievably gorgeous units – all of them being sold furnished.

There was a 1-bed, 1-bath, about 585 square feet, for $219,000 US that caught my eye.  A unit like this would rent out for $250 per night (on average, rather conservative estimate), and you’d almost never have a vacancy.  Being conservative, and assuming 280 out of 365 nights, at $250/night, would bring in $70,000 in income.

Management fees would be 10% of gross revenue, which still leaves $63,000.

Maintenance fees on the unit were a lean $240 per month, all-inclusive, and property taxes were $190.  That’s $5,160 per year – a pittance!

The unit nets around $58,000, again, being conservative with both the rental price, and number of days rented.

Putting down 50%, or $109,500, and the return is a joke: 53% return on investment.

And yes, there’s foreign ownership taxation to be considered, as well as maintenance, and another Katrina.

But all in all, you don’t find anything like this in Toronto.  Not even close.

So when we headed down to New Orleans in 2015, I was all set to check out some condos with a guy from Sotheby’s, until, silly me, I mentioned AirBnB.  He emailed me back with “AirBnB????”  And count them, yes, four consecutive question marks in his response.

I knew as soon as I got that email that I was on a fool’s errand.  I didn’t even need his reply, which came eventually, and told me that the city of New Orleans had banned all short-term rentals, AirBnB, VRBO’s, and the like.

It seems that New Orleans, specifically the French Quarter, runs on the engine fueled by hotel-dollars.  Take away all that hotel money and put it in the pockets of individual investors, and the entire house of cards comes crumbling down.

I did a little more digging, and talked to a few folks down there, and realized that there were hundreds of illegal AirBnB rentals throughout the city, and in prime French Quarter territory.  In fact, I got multiple accounts, of multiple regulations, and it seemed that nobody could really tell me what the rules were.

I was told by some that short-term rentals were illegal in the French Quarter.

I was told by others that short-term rentals were illegal anywhere in New Orleans.

Ultimately, I decided that it just wasn’t for me.  Owning and managing a property from afar is never easy, but can be worthwhile if the return is high enough.  In this case, the uncertainty regarding the regulations, as well as future regulations, just wasn’t worth the risk.

Since then I’ve been following the trials and tribulations of both the city of New Orleans and their desperate attempt to crack down on nightly-rentals, as well as the investors who refuse to go away.

It’s been an absolute disaster.

From what I understand, there were no short-term rentals allowed anywhere in New Orleans, and now licenses are being granted (all governments seem to love money!), but not in the French Quarter where tourism and hotel-dollars are of the utmost importance.

From the official city website, www.nola.gov:

On December 1, 2016, the City Council adopted a series of ordinances which amended both the City’s Comprehensive Zoning Ordinance and the City Code to define and permit “Short Term Rentals” in zoning districts throughout the city and to create a licensing process for these uses. These ordinances will take effect on April 1, 2017.

A complete summary of the regulations can be found here, and a table of what types of rentals are allowed in which zoning districts can be found here. To find out what your property is zoned, please use our lookup tool at property.nola.gov

Amazingly, the website also contains a registry of approved short-term rentals, complete with an interactive mapping tool of ALL licensed short term rentals in New Orleans!

Seriously, a mapping tool.

You can see every single approved short-term rental, as an icon on a map.

More from the NOLA website:

This site is updated nightly with the addresses and permit numbers of approved Short Term Rentals.

This information can also be found at onestopapp.nola.gov by searching for the address of the property being researched.

The map below features all rentals allowed in New Orleans on a short term (less than 30 day) basis. This includes all applications for Short Term Rental Licenses regardless of status as well as Hotels, Motels, and Bed and Breakfasts. 

Nightly, folks.

The site is updated nightly.

Can you imagine this happening anywhere else in the world?

NIGHTLY!

The response has been mixed among NOLA’ers, as you might expect, in the same way as the short-term rental war pits people against each other in every other major city in the world.

NOLA.com, not to be confused with NOLA.gov, is the major news source down in the city.

HERE is a must-read article from NOLA.com, posted on December 2nd, 2016, after the city council passed short-term rental regulations.

For those who are really interested in how major cities across the North America are, or one day will be, dealing with short-term rentals, click on the link, and read it in full.

But if you don’t have the wherewithal, here’s the nuts and bolts:

The New Orleans City Council on Thursday (Dec. 1) passed a series of ordinances that amount to a landmark regulatory framework for short-term rentals unlike any other city in the nation.

The regulations include establishing a dedicated enforcement unit, limiting whole-home rentals to 90 days, allowing unfettered short-term rentals in owner-occupied housing, and an outright ban on short-term rentals in most of the French Quarter. The regulations also allow uncapped short-term rentals in certain commercial districts.

Mayor Mitch Landrieu’s administration and representatives of Airbnb said they expect the regulations to become a model for other cities because no other local government has passed an ordinance that includes a deal with Airbnb that includes what’s known as a “pass-through” registration system. The deal means Airbnb will share certain data with the city to enforce the 90-day limit, as well as enforce  safety regulations.

As of June 29th, 2017, 4,747 residents had applied for a short-term renters permit. The Safety and Permitting Department had issued 2,435 so far and was waiting for payment on another 507 approvals. (Source HERE)

But as for the French Quarter, it’s still a no go.

And the stories are piling in faster than frat boys onto Bourbon Street.

HERE is a really interesting story about a creative and innovative AirBnB’er who tried to work around the ban on short-term rentals in the French Quarter.

The owner was offering up a special “catering deal,” where if you bought 20 Po-Boys (if you’re not familiar with Po-Boys, then that’s reason enough to visit New Orleans) for $595, you got a free night’s stay in a Vieux Carre house.

You and I know that this is a work-around the rules, as intended.

But the owner is suing the City of New Orleans, arguing that he is the owner of Melba’s Po-Boys on Elysian Fields Avenue, and has a 5-year lease on the property where the store is located, thus it should be up to his discretion to advertise the property as he sees fit, and offer food and hospitality to friends, family, and colleagues of the company.

That sounds like a decent legal argument.

Except that the property still shows up on VRBO’s website, po-boys be damned.

The city of New Orleans is working around the clock to shut down illegal short-term rentals in the French Quarter, and sanction those outside the French Quarter who are not complying with the ordinance to properly apply for a permit for short-term rentals.

When the new rules passed in December of 2016, the city hired seven full-time city staffers to oversee the new rules regarding short-term rentals.  Everything from proper permits, to discipline for infractions.  As of early June, over 400 fines had been levied against those trying to bend the rules, or completely break them.

And because the City of New Orleans has a deal with AirBnB, the city staff can directly instruct AirBnB to remove illegal postings, ie. those in the French Quarter, or those without proper permits.

These people are no joke!  Listen to this quote from the director of the city’s Office of Safety & Permits:

“We have inspection staff in the field making observations. We’re looking for places that seem to have indicators there may be short-term rentals going on, and we’re also patrolling the websites,” Munster said. “The code places a maximum, under any circumstances, a maximum of 10 (occupants), so does your listing have a capacity of more than 10? Do you have your license number on the listing as required?”

“What we’re working on here is actually becoming the model for the nation … so we’re ahead of the curve on how we’re regulating this.” 

These city staffers are on a mission.

And if I were running an illegal AirBnB or VRBO, I’d be scared they’re about to show up at my door.

So what do you think, folks?

Is this truly “a model for the nation,” or is this bureaucracy at its finest?

Have your say below, and let us know if you think Toronto should follow this model, or some version of it.

7 Comments

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  1. Libertarian says:

    Continuing my comments from the other day, I’m in favour of some sort of regulation and it seems that Toronto is following this model. Our society is based on needing a licence to operate a business. David needs a licence to call himself a Realtor. Restaurants have to pass food inspections. Bars need liquor licences, etc. All of these measures were put in place to protect the public. Yes, maybe it’s gone too far the other way, but you could probably blame lawyers for that seeing as they like to sue anything that moves.

    So if somebody wants to run a one-room hotel, get a licence for it. If that’s too much hassle for you, invest in something else. Nobody’s holding a gun to your head to own real estate.

  2. Geoff says:

    oh an a post-script to these – we had used airbnb in the French Quarter in both 2015 and 2016 and loved the place we stayed at. So once that no longer became an option, we decided we didn’t want to go. So the restaurants, taxis, shops all lost my tourism dollars.

    1. @ Geoff

      Did you see a Saints game???

      How many po-boys did you consume?

  3. Geoff says:

    Nailed it! I should get a prize.

  4. Kyle says:

    I’m not convinced any of these NOLA rules help address the core “issues” people have with short term rentals, but i am convinced that it will result in more fees, taxes and civil servants.

    Most people’s issues revolve around the bad behavior of the guests, a host having a permit/license doesn’t necessarily curtail bad guest behaviour, unless guests are crossing a line into something illegal, where the permit/license can be revoked. People puking in your hallway, making noise or laying around the common areas of a building as if it were a hotel lobby will likely not change. The other issue people have is that short term rentals remove long term rental stock. To me, forcing short term rentals to operate outside of the tourist area and in the more residential neighbourhoods, seems counterproductive. And limiting whole home short term rentals to 90 days, is not going to mean that unit will be be occupied or available to a long term renter for the other 275 days.

    These rules feel very compromised, where no one is happy except for the tax man.

  5. J says:

    “Putting down 50%, or $109,500, and the return is a joke: 53% return on investment.”

    Why not put down just a $9.99 Po-Boy to boost your ROI to 580,000%?

    Estimating utilities, insurance (in New Orleans!), Airbnb fees, maintenance beyond the condo fee, US taxes, Canadian taxes, closing costs, and currency conversion at $0 would make Brad Lamb proud.

    1. J says:

      Oops forgot about the non-existent mortgage interest cost.

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