New Orleans prepared to ban STRs following court ruling

New Orleans will halt enforcement of its new short-term rental (STR) law after a judge granted a temporary restraining order to plaintiffs suing the city over rules for STRs in residential areas. 

U.S. District Judge Ivan Lemelle could make a decision about the constitutionality of the ordinance by September 14, according to Dawn Wheelahan, the attorney for the plaintiffs. The City Council is preparing to ban STRs completely if the judge throws out the latest regulations, according to Council President JP Morrell.

The City Council approved the new regulations in March, after a federal appeals court invalidated key parts of the city’s previous ordinance. A group of short-term rental operators filed a lawsuit against the city in May challenging the constitutionality of the new law. 

The new residential rules require all STR operators to have a city-issued permit. The judge made his ruling August 31, the day all previous residential STR permits were set to expire under the ordinance. On September 1, the city suspended all applications for residential and commercial STRs and canceled a second lottery that was scheduled for October 2.

During the application period for new STR permits in July, the city received more than 1,800 applications. 

The law limits STRs to one property owner per square block. In cases where the number of applicants exceed the limits, the rules call for a lottery to determine which owners would be eligible for a permit. The first drawing for the lottery was held August 14, with the city selecting 229 property owners out of 532 who entered. Prior to the judge’s ruling, the new permits were to become effective September 1.

Other provisions of the residential STR law include:

• Each operator can have only one STR permit.
• Permits are limited to “natural persons,” not corporate entities.
• Operators must live on the same lot as the STR unit.
• Up to two more STR permits per city square may be issued to operators who individually apply for a special exemption, requiring neighbor notification and comment as well as City Council approval.
• Short-term rental platforms such as Airbnb and Vrbo cannot post listings that don’t have a valid permit number from the city. 

Operators who violate the rules can be fined a minimum of $500 per offense — with each day considered a separate offense — and their permits can be revoked. Hosts with “sustained violations” can be banned from operating a short-term rental for four years.

Earlier this summer, the city also banned new short-term rental permits in the Central Business District, and other areas zoned for commercial use, for one year. The City Planning Commission expects to release a report with recommendations for the council on further action for commercial STRs. Almost 1,200 short-term rentals are currently permitted to operate in the city’s commercial areas, with 560 pending applications.

New Orleans vacation rentals are also subject to lodging taxes that include Louisiana state sales tax and several city taxes, including sales tax, a short-term rental occupancy fee, occupancy privilege tax, and a short-term rental equalization occupancy tax. STR operators in New Orleans are required to register and file lodging tax returns with city and state tax authorities.

Airbnb collects both city and state taxes on behalf of its hosts. Vrbo also collects city taxes for hosts in New Orleans, but does not collect Louisiana state taxes. Hosts are required to collect and pay taxes that are not collected by their platform, and they must register and file lodging tax returns even if taxes are being collected on their behalf.

MyLodgeTax can help short-term rental hosts in New Orleans simplify and automate lodging tax compliance. See our Louisiana Vacation Rental Tax Guide for more on short-term rental taxes in the state. If you have tax questions related to properties in New Orleans, drop us a line and we’ll get back to you with answers.