New Orleans finalizes restrictive new short-term rental law

The New Orleans City Council has passed a new law that places stricter limits on short-term rentals and raises fees that guests must pay, starting December 1. The rules were initially passed in late May, but the council was required to formally adopt them within 90 days in order for the measure to become law.

The new ordinance requires vacation rental owners in residential neighborhoods to have a “homestead exemption,” meaning that they live there and claim the property as their primary residence.

Under the new rules, short-term rentals may take up no more than 25 percent of commercial or mixed-use property. However, owners with commercial licenses that are granted by December 1 will be able to continue operating such units even if they exceed the new 25 percent cap, under the city’s “legal conforming use” law. This allows businesses to continue doing business after zoning changes, as long as there is no more than a six-month break in operations.

There will be no such grandfathering for residential licenses if operators do not have a homestead exemption.

The new rules allow owners to operate up to three vacation rental units on properties with homestead exemptions. Short-term rentals will remain illegal in most of the French Quarter, and a new ban will be placed on vacation rentals in the Garden District.

The current rules were passed in 2016, and the City Council voted to suspend new short-term rental permits last year for whole-home rentals while it studied the issue.

The council also took action on short-term rental taxes, approving a ballot measure that will ask residents to vote on a 6.75 percent tax increase on short-term rentals. Voters will decide on November 16. The city would get 75 percent of the funds generated from the tax, and tourism marketing organization New Orleans & Co. would receive the rest.

Council members also raised an existing fee on short-term rentals from $1 per night to $5 for residential rentals and $12 for commercial properties.

Vacation rental hosts are required to collect the new higher fees from guests, along with existing lodging taxes that include city hotel-motel sales tax, city hotel occupancy privilege tax, and Louisiana state sales tax.

Airbnb collects both the city and state taxes for hosts listing on its platform. Vrbo also started collecting city taxes for New Orleans hosts on April 1, but doesn’t collect state sales tax.

Hosts must collect lodging taxes directly from guests if their platform doesn’t collect it for them, and they’re required to register and file lodging tax returns with the city even if tax is being collected for them.

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