New Orleans puts new short-term rental permits on hold in response to ruling

The New Orleans City Council has placed new short-term rental applications in residential areas on hold for six months. The move comes in response to a federal appeals court decision that the city’s vacation rental law discriminates against out-of-town owners.

New Orleans’ short-term rental ordinance, which went into effect in 2019, requires vacation rental hosts in residential neighborhoods to have a “homestead exemption,” meaning that they live there and claim the property as their primary residence in order to qualify for a short-term rental license.

A group of short-term rental owners sued the city over the law, and a three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans ruled on August 22 that the city’s regulations violate the commerce clause of the U.S. Constitution. The ruling didn’t strike the law down. However, it did allow plaintiffs in the case to request that portions of the ordinance be nullified by a district judge.

Under the City Council’s latest action, existing permits and those pending approval will remain valid through March 1. The council plans to draft a new law by then that complies with the ruling.

On August 29, an out-of-state plaintiff filed a new lawsuit asking for a temporary restraining order against the current permit process.

“They have been told by the court these things violate people's civil rights, constitutional rights, and they're seeking to continue doing them,” said lawyer Dawn Wheelahan, who filed the lawsuit on behalf of Denver resident Kurt Klebe.

Under New Orleans’ law, vacation rentals are prohibited in residential areas of the Garden District as well as in most of the French Quarter, and they may take up no more than 25% of commercial or mixed-use property. The City Council has also outlawed vacation rentals in newly permitted fourplexes.

The rules are designed to address an influx of short-term rentals in residential areas and a lack of affordable housing. The city recently announced plans to step up enforcement of the city’s vacation rental law in the face of public criticism.

Short-term rental hosts in New Orleans are also required to register and file lodging tax returns with city and state tax authorities. Vacation rentals are 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.

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.