New Orleans city officials are resuming the processing of applications for short-term vacation rentals in the city after a federal judge lifted a restraining order and upheld the city’s ban on corporate ownership of such rental units.
Judge Ivan Lemelle of the Eastern District of Louisiana issued the opinion on Feb. 28, dismissing most of the objections argued by property-owner plaintiffs. They have argued that many of the city’s short-term rental restrictions, including the exclusion of corporate ownership of such housing, a lottery system limiting permits to one per block and a live-in operator residency requirement, violate owners’ constitutional and property rights.
Lemelle’s decision to end a preliminary injunction that has blocked enforcement of the regulatory regime led city officials to announce on Feb. 29 they will resume reviewing applications for STR applications. Such vacation rental units are typically advertised on online sites such as platforms like Airbnb and VRBO.
The attorney representing plaintiffs in the case filed a notice of appeal to the Fifth Circuit Court of Appeals this week.
“We find the judge misinterpreted the Fifth Circuit’s earlier ruling as well as controlling (U.S.) Supreme Court and circuit precedents in his ruling,” attorney Dawn Wheelahan told the Louisiana Record in an email. “... We are confident that Judge Lemelle’s ruling will be corrected by the appeals court.”
Both sides in the long-running litigation had filed motions for summary judgment in the case relating to the city’s regulation of home rental agreements spanning less than 30 days. The permitting regime was put in place in April of 2017, but a city review a year later found that the existence of short-term rental in residential neighborhoods had lowered residents’ quality of life, created disruptions and possibly made housing less affordable.
Ultimately, the courts rejected a city regulation barring out-of-state property owners from competing in the city’s STR market but left other efforts to prevent nuisances and preserve neighborhood character in place.
Lemelle did, however, agree with plaintiffs that the current regulations violate the right of trust beneficiaries and usufructuaries – that is, those who have a right to benefit from a property owned by another person.
“Allowing the latter set of natural persons to enter the residential STR arena does not thereby invalidate the entire set of ordinances,” he said in the opinion. “Rather, it merely expands the category of natural persons entitled to participate in the residential STR market.”
Lemelle did conclude that plaintiff Tina Marquardt had shown a violation of her right to retain her short-term rental permits until their expressed expiration dates.
“The city’s Aug. 28, 2023, directive to Marquart to cancel bookings after Aug. 31, 2023, was a violation of the (Constitution’s) takings clause,” the opinion states. “... However, the (courts’) injunction orders issued on Aug. 31 and Sep. 27, 2023, enjoined revocation of all then-existing residential STR permits until resolution of (the filed) motions. The injunction order applies to Marquart’s permits.”
Members of the New Orleans City Council have expressed satisfaction with the decision in statements to the news media.
“We’ve been fighting from the beginning to stop corporations from taking over our residential neighborhoods, and this ruling vindicates our efforts to protect New Orleanians,” Councilmember-at-Large Helena Moreno in a statement. “The ruling upholds and endorses our reasonable regulations on STRs we instituted last year, and I appreciate the court’s careful consideration of this case.”