My House is Your House

The battle rages on with short-term rentals.

The debate over short-term rentals in New Orleans — while sitting at the intersection of tourism and community — says a lot about where the city hopes to head as it moves past the 10th anniversary of Hurricane Katrina and toward its 300th birthday in 2018.

On the one hand, operating short-term rentals helps New Orleanians bridge the gap between stagnant incomes and rising housing costs by renting everything from a spare bedroom to a vacant half of a double shotgun house.

On the other hand, this proliferation, sometimes exploited by absentee, part-time or simply ambitious property owners, floods neighborhoods with tourists who might take a visitor’s mentality to a place where residents live, work, play and build a community. The result is noisy nights, gobbled-up parking spaces and a growing sense of alienation among residents in their own communities.

Where is this all heading? Stakeholders might get a clearer picture when the New Orleans City Council votes on recommendations recently put forth by the City Planning Commission (CPC). Those recommendations seek, among other things, to permit unlimited owner-occupied rentals in residential neighborhoods (the “rent out part of your place” crowd) but stop short of allowing “principal residential” properties from being rented out — something that surprised short-term rental advocates who’d expected an acceptance of this key provision.
 

COMMUNITY AND COMMERCE

While almost everyone acknowledges the realities of short-term rentals and that their legalization might eventually be a reality as well, they start to part ways when it comes down to details like enforcement. Even in cities where regulation has passed, like San Francisco, enforcement has been minimal at best. It’s high stakes, considering that, according to the CPC report, there are between 2,400 and 4,000 rentals operating in New Orleans, going for about $250 a night — many of them in historic neighborhoods such as Faubourg Marigny.

“They’re making new rules for stuff that already has rules against it, but weren’t enforced for years,” said Lisa Suarez, head of the Faubourg Marigny Improvement Association.

Her frustration is evident, even across the telephone lines.

“They’re gonna do what they’re gonna do regardless of what we say,” she said of the City Council. “I’m expecting [them to] rubber-stamp all the suggestions from the CPC staff, even the ones the CPC removed.

“I feel a responsibility to my neighborhood, but I don’t think my city government really cares. Sadly, I think they’re interested in the quick buck.”

Short-term rental advocates believe that legalization and regulation can help make rentals blend in historic neighborhoods, such as the French Quarter, Faubourg Marigny, Bywater and Treme — the heart of short-term rental operations. Suggesting that the current situation is simply like 1920s-era prohibition — during which everyone’s breaking the law — they’d like to see regulation offset by flexibility.

 “This (the CPC report) represents a positive step toward ensuring that everyone in New Orleans is able to share their home,” said Alison Schumer, a spokeswoman for Airbnb. “We appreciate the Planning Commission’s considerable work on this issue and look forward to connecting our community with policymakers in the weeks and months ahead.”
 



Short-term rental supporters say that while they welcome regulation, they worry it will be too burdensome.

“The residential properties that are not owner-occupied, they want to make that a conditional use,” noted James Uschold, a lawyer for the Alliance for Neighborhood Prosperity, a coalition of short-term advocates. “That means it’s basically like a bar. That is much too onerous a process that people are simply not going to (go through a regulatory process). Most of (the complaints) are anecdotal.

“People say, ‘I don’t know my neighbors anymore.’ Well, you don’t have a right to know your neighbors.”

New Orleanians often have a deep devotion to the neighborhoods in which they were raised, the schools they attended, and close relationships they forged. Maybe it’s not a right, but a sense of community helps define the city’s culture, opponents counter.

Some rentals are only shells of their former selves, argues Meg Lousteau, executive director of the Vieux Carré Property Owners, Residents and Associates. Whether she’s at home in Treme or working at her office on North Rampart Street, Lousteau is always within a few doors of a short-term rental situation.
As she puts it, “A neighborhood without neighbors is no longer a neighborhood.”

The situation has gotten so challenging in the French Quarter that even once-thriving small businesses are suffering. Louis Matassa, owner of Matassa’s Market on Dauphine Street, said that revenue at the market opened by his grandfather in 1924 has dwindled in the past couple years.

“The community is my customer base,” he wrote, “and the community is dying.” He pointed to a steady influx of short-term renters who begin trickling in on Thursdays and come to shop at his market for cigarettes and liquor and not grocery staples. “I can’t afford to stock merchandise that no one buys,” he wrote. “I can’t make a living selling cigarettes.”
 

ADDITIONAL INCOME

There’s no question that Airbnb has been a shot in the arm for young and middle-class New Orleanians who want extra income, and can get more money renting out the other side of their double on a weekly or nightly basis rather than having a tenant sign a lease. Missy Wilkinson, a local writer and editor, openly discussed how she’s benefited from renting out one of the bedrooms of her Bywater home (even with the occasional inconvenience). She knows of two other people on her block renting out space through Airbnb.

“I had friends who did it and said it was easy money,” she recalled. “They were pretty lazy, so if they said it was pretty easy, then it had to be for me.”

She rented out her second bedroom 251 nights in 2015 alone, and cleared about $12,000 — tax-free, of course. Since she started renting out her space, she said, she’s made friends and hopes to be able to pay down her mortgage far ahead of schedule.

“It really has (been positive),” she said. “I feel like I have more options.”
 


“I don’t think my city government really cares. I think they’re interested in the quick buck.”– Lisa Suarez, head of the Faubourg Marigny Improvement Association


Only recently did she have a truly negative experience, when she heard guests having loud sex with the bedroom wide open, even though they knew she was there.

“The proximity,” she said, “was unsettling.”

While she says she hasn’t followed the short-term rental debate closely, she insists she’s fine with having the practice regulated and would be happy to pay any licensing fees because the money’s so good — with one caveat: “I am concerned about people buying up all these places and renting them out, but at the same time, if you own your own house, you should be able to rent that out.”
 

Scanning the Airbnb website suggests there are plenty of people like Wilkinson, but there also are those who appear to be scooping up several properties and becoming mini-moguls of rentals, with some even joining forces with other property owners (often working as LLCs) and creating uniform rental agreements to streamline their own processes.

The more entrepreneurs get in the game, opponents argue, the more neighborhoods become mini-hotel districts. Residents may be forced to endure loud, late-night parties, streets lined with out-of-town cars (some left behind while visitors go on week-long cruises), and even extra cleanup.

“We wind up picking up after them,” said Lisa Suarez of the Faubourg Marigny Improvement Association. While she co-exists nicely with a next-door neighbor who rents out, she says, “People all over our neighborhood have genuine issues with noise. They did not bargain to live next to hotels. These properties are not zoned commercial, and these people are running commercial businesses.”

Safety can also be a concern. Recent media reports noted a fire at a Central City residence that appeared to be an Airbnb rental, one that did not feature a working fire alarm.
 

DATA AND BEST PRACTICES

Lauren Galligan Steinhardt, a producer with the insurance/risk-management company Gillis, Ellis & Baker, believes homeowners who rent must be transparent and diligent in how they rent and insure their property to prevent against liability.

“If you’re operating a standard homeowners insurance policy, you can’t be covered for short-term rentals,” she said. “If a claim were to occur, the insurance company could say you’re making a bunch of money on this, so it’s a business.” With this and other legal issues, she says, “That’s when I think it’s important to be on the same page as your homeowner’s insurance.”

Matt Curtis, the director of government relations for HomeAway — which owns the short-term rental service VRBO — believes that with legalization, regulation and best practices, this trend can work well for all involved.

“When you get people to register, you can better enforce those few bad actors,” said Curtis, who has spoken at a gathering sponsored by the Alliance for Neighborhood Prosperity. “Could New Orleans, will New Orleans be able to enforce these regulations if they write them in a way that’s representative of the industry? Yes. If they get people to register their properties with regulations that are fair, they can keep their eye on potential patterns that are outside the parameters of compliance, [and] they’ll be better equipped to enforce.”

Short-term rental supporters base some of their arguments on a recent study the University of New Orleans Hospitality Research Center prepared for the group, which said, among other things, that short-term rentals have generated 100,000 visitors annually, led to $174.8 million in direct and indirect spending, created 2,200 jobs, and generated $10.8 million in local and state tax revenue.
 


 

Opponents dispute these numbers. In comments to the CPC, Emile J. Brinkmann, a New Orleans economist, questioned the study’s interpretation of its own data.
“The actual net economic impact of short-term rentals is either zero or negative,” concluded Brinkmann, who otherwise believes the city of New Orleans is losing millions in hotel and motel tax dollars — an amount so significant that the state Legislature might get involved.

Indeed, Rep. Helena Moreno, whose New Orleans district includes several historic neighborhoods, has introduced House Bill 59 (backed by Mayor Mitch Landrieu) that would require short-term rental operators not only to tax themselves but also to share their data — something they’ve resisted in the past but may still consider. After all, you can’t regulate what you can’t identify.

“In order for the City to effectively enforce short-term rentals, there needs to be a legalization and enforcement policy that is balanced and makes sense,” Mayor Mitch Landrieu said in an official statement. “But we can only effectively regulate short-term rentals once the legislature gives the City the authority to collect revenue necessary to fund enforcement and manage the impact of visitors in our neighborhoods. Right now, we are closely monitoring the special legislative session. Further actions in the legislature may be necessary later this year.”

B&B operators, it should be noted, have expressed support for the measure.

The city council for Austin, Texas — coincidentally the corporate home for HomeAway — has voted for stricter regulations of short-term rentals that could lead to a complete elimination of the practice as resident increasingly complain of packed “party houses” in their neighborhood.

James Uschold, the attorney for the Alliance for Neighborhood Prosperity, believes there’s a simpler solution: “Not speaking for Airbnb, but they don’t want to give their data to the city, and it’s not the city’s business. Our proposal is everyone (should be required) to have some short-term rental license. The issue is: Do I have a valid permit number? If I have a valid permit number, then post my ad. … The process has to be simple.”
 

REALITIES OF THE NEW, NEW ORLEANS

How New Orleans moves forward with the way it allows rentals to exist, especially in its historic neighborhoods, might give an indication about how it views tourism in particular but also the way it sees itself as a city. Each year, there’s a push to bring more visitors to New Orleans, with no end in sight, leading some to wonder if anyone is ever going to ask how much is too much? Indeed, the New Orleans Convention and Visitors Bureau, looking at a 2014 that saw 9.5 million visitors to the city, wants even more — with projections of as many as 13 million in 2018, the city’s tricentennial.
But with revenues running at around $7 billion, that’s a tough question to ask.
 


“I feel like I have more options.” – Missy Wilkinson, writer and editor


Opponents of unchecked tourism compare New Orleans’ situation to that of another historic city: Venice, Italy. In “Overbooked,” an exhaustive critique of the world of tourism, author Elizabeth Becker quoted an Italian expert (Matteo Gabbrielli) who believes the city is dying — not because of its rising tides but because of the relentless onslaught of visitors. “The crowds of tourists gathering all around us, crowds descending from enormous cruise ships whose wakes often cause more damage to the city’s foundations than the famous ‘aqua alta’ following heavy rains,” Becker wrote.

Comparing the two cities, Venice has 60,000 residents and hosted 20 million visitors in one year. The French Quarter, with roughly 4,000 residents, hosted 9 million visitors. This in-migration of tourists crowds and prices out the locals. “As they disappear, so too do the clinics, schools and other services necessary for a city in a seemingly endless chain of cause and effect,” Becker wrote.

Uschold, however, doesn’t believe there will be an endless onslaught of rentals.

“There are a lot of people who started doing it who’ve stopped,” he said. “There also is a ceiling. It’s a supply-and-demand thing. There are a lot of people who are running short-term rentals that are vacant right now, I’m hearing. We know there’s a ceiling. It’s not going to turn into a parade of horribles.”

Long-time New Orleans real estate consultant, Wade Ragas, believes short-term rentals can work in the city, but there must be balance, and that includes regulation, rules to insure fire and safety, enough parking, compliance with paying hotel-motel taxes, and a more clear definition of zoning issues so the city can decide where are the best places for this business to continue. Owner-occupied spaces are key as well.

“I think this is a good thing for New Orleans in terms of market demand,” he said. “But I think it needs to be done in a way that preserves the residential character of many neighborhoods.”
 


Annual visitors: Venice, Italy vs. The French Quarter
 

Venice

60,000 residents + 20 million visitors.
 

The French Quarter

4,000 residents + 9 million visitors. (six times more visitors per resident than Venice)

 

 

 


Categories: Real Estate, The Magazine

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