New Orleans officials in “holding pattern” over funds for short-term rental enforcement

Mayor LaToya Cantrell’s administration is reluctant to support a boost to the city’s short-term rental enforcement arm without an accurate projection that it’s something the cash-strapped city can take on.

On Thursday, August 8, the New Orleans City Council will consider an ordinance that will create two categories of rentals (residential and commercial) and another ordinance that will set the rules for permitting as well as fines and fees for noncompliance. Those new categories are likely to significantly limit the amount of STRs allowed in residential areas, following a several-years-long debate among residents and city officials over the aggressive proliferation of STRs that has replaced some neighborhoods with de facto hotels.

The City Council’s Government Affairs Committee met Tuesday, July 30, to discuss next steps for enforcement once those laws are in place. The City Council has requested that a “robust” office be created within the Department of Safety & Permits to crack down on illegal listings and other issues that have overwhelmed the current complaint-based system, and the City Council wants the platforms to share the responsibility of enforcing illegal listings.

But despite recently passed state legislation that dedicates tax revenue to New Orleans exclusively for enforcement, the administration isn’t confident it’s enough to maintain a staff that will enforce the City Council’s new STR laws.

New Orleans CAO Gilbert Montano told the committee that the administration’s approval is in a “holding pattern” until the City Council can provide a multiyear revenue projection for its new legislation that would fund such a staff. Montano also argued that the city charter precludes the creation of a stand-alone STR office.

“We’re at a really tough period in our city and our budget cycle to address these major issues without the comfort or strength of [knowing] how we’re going to pay for them all,” Montano said.

Members of the City Council pushed back against the administration’s pause and feared enforcement issues will persist without a dedicated enforcement wing working in tandem with those new laws.

“We can pass legislation and it can be thoughtful and inclusive and wonderful,” said District C City Councilwoman Kristin Gisleson Palmer. “But if we don’t have enforcement it’s all for naught.”

The City Council estimates 5,000 STRs are listed on hosting platforms like Airbnb without legal permission from the city. Earlier this year, several platforms balked at a memo from the city that criticized their lack of participation in already-existing enforcement efforts.

Helena Moreno, then a member of the state’s House of Representatives, authored legislation in 2017 requiring the state to set aside 3.97 percent of state tax collected on each short-term rental in New Orleans to pay for enforcement. The city anticipates netting $4.3 million from those taxes.

Now city council president, Moreno says there is a “perception that the money is not being used” specifically for that enforcement and is instead trickling down to other City Hall departments that are also strapped for cash. If the administration can’t prove that the money is being used correctly, the dedicated fund could be in jeopardy, Moreno said.

Prior to implementation of an interim zoning district in 2018 that paused new STR permits and licenses until the City Council could restructure the city’s STR policies, there were 4,500 active licenses, according to Jennifer Cecil, who heads the city’s One-Stop Shop under the Department of Safety & Permits. Following the IZD, licenses were down to 3,200. After a year, they dropped to 1,500.

But the state is collecting sales taxes from STRs whether they’re legally listed with the city or not, Cecil said.

Palmer said she’s “at a loss” as to why the administration can’t add at least one or two staff positions to handle enforcement using that money from the state. “It can’t be all or nothing,” she said. “I still think there’s a middle ground.”