Short-Term Rentals Face Hurdles in New Orleans

By Isaac Koffman

The first time I spoke with Sally Heller was when I met her on February 12, 2020. I was in New Orleans, visiting my girlfriend for Valentine’s Day during my semester abroad and had rented her one-bedroom guesthouse for the weekend. An artist by trade, Sally used the extra income from listing her property on Airbnb as a way to pay the rent for her art studio. Sally’s guesthouse was ideal for the type of short-term rental (STR) made famous by websites like Airbnb and VRBO. The space was entirely separate from the main house and had its own living room, full bathroom, and a mini refrigerator. I enjoyed me time at Sally’s Airbnb immensely.  It was a perfect refuge for any one of the millions of tourists who descend upon New Orleans each year.

The second time I spoke with Sally Heller was this October after I reached out to interview her for this story. Eight months later, we were no longer conversing face to face but connecting through a Zoom call.

“I am worried about the wear and tear on the unit,” Sally told me.

The guesthouse was being rented by a Tulane student for the entirety of the academic year. Although Sally was earning nearly as much money as she had for her STR, the guesthouse was ill-equipped for a long-term renter. Her space had no kitchen, so Sally worried about the renter’s ability to survive and thrive in her one-bedroom. Her concern was so great that Sally had only agreed to rent the guesthouse for three months, before agreeing to a full-year rental once her fears were alleviated.

However, the financial circumstance surrounding her Airbnb listing at the time played a role in the decision to allow a year-long rental. Before her current tenant, Sally had seen no business since March. As an artist reliant on that additional income to pay rent on another property, Sally had few desirable options. The long-term rental contract carried risks to physical property, but it would positively impact her financial situation.

According to the market tracking website AirDNA, the STR occupancy in New Orleans fell from around 60 percent in February to 23 percent in May, before rebounding to its current rate of 47 percent. These figures show the extent of damage done to the STR market by the pandemic. Furthermore, the median monthly revenue for STR hosts has plummeted from a high of nearly $3,500 in February to $2,160 today. These are significant decreases that affect a local landlord’s ability to pay their mortgage, and if this continues, could lead to a significant housing crisis in New Orleans.

Prior to the pandemic, New Orleans was a city of tourists. In 2018, the city welcomed over 18 million visitors. One year later, nearly 20 million people visited the city, marking a 6.7 percent increase from 2018. In comparison, the population of New Orleans in 2019 was estimated at just over 390,000. In 2019 alone, tourists generated over 10 billion dollars, a significant amount for a city that watched its tourism sector get washed away in August of 2005. New Orleans’s rebound from the hurricane was inspiring, but its tourist-dependent economy has once again been damaged by natural causes.

If you talk to certain New Orleanians, the housing crisis is already here, and it was induced by the STR boom in the city. Over the past three years, the number of STR listings has increased by nearly 50 percent. While many of these properties are owned and operated by local homeowners like Sally Heller, many other STRs are run by large, out-of-town companies. Not only do these companies take much-needed tourism funds out of New Orleans, but they also affect the neighborhood dynamics which help to make New Orleans such a unique and special place.

The Jane Place Neighborhood Sustainability Initiative (JPNSI) is an advocacy group focused on keeping New Orleans affordable for New Orleanians. I spoke with JPNSI Executive Director Veronica Reed to find out how Airbnb has affected New Orleans and how Covid-19 will affect the STR market moving forward. A study completed by JPNSI in 2018 found that “the city’s approach to STR regulation accelerated the displacement of residents, many by evictions, and the gentrification of historically black neighborhoods and communities by permitting the removal of thousands of homes from the long-term rental market for conversion into STRs while ignoring the inflation of overall housing costs.” The STRs may have brought millions of tourists to New Orleans, but their effect on the natives has clearly caught city hall’s attention.

New Orleans has taken steps in the last few years to protect its communities from STRs. The first ordinances banned Airbnb rentals in the French Quarter, except on Bourbon Street, and in the Garden District. Furthermore, through JPNSI, all STRs in residential neighborhoods must be owner-occupied properties, like Sally’s guesthouse. The city also put a cap in place on the number of STR units allowed in commercial buildings.

However, these rule changes by the city council were all instituted before the pandemic. According to industry data trackers like AirDNA, the coronavirus has ravaged New Orleans’ tourism industry, causing many STR owners like Sally to struggle. However, while researching STR hosts to interview for this story, I stumbled onto a bizarre trend: STRs close to Tulane’s campus were reporting no discernable impact from pre-pandemic levels. Apparently, the same coronavirus that had devastated the city’s economy and killed thousands of New Orleanians had provided a lifeline to STR operators. The lifeline? Tulane students in isolation.

Lily Rothschild is a sophomore at Tulane. At the beginning of the semester, she chose to quarantine in an Airbnb instead of at the Hyatt before receiving a negative Covid-19 test. Later in the semester, when her roommate tested positive for the coronavirus, Lily once again chose to rent an Airbnb for two weeks instead of using the university’s available housing.

Lily’s rationale was simple. “I would prefer to have an entire house to spread out in over the course of two week,” she told me. “To live alone in a tiny room for two weeks could wreak havoc on my mental health.”

While the choice to rent an entire home instead of utilizing a free hotel room may come across as elitist, as any person who remembers March and April of this year can attest, quarantine is a mentally exhausting activity. Furthermore, Lily is not alone in choosing an Airbnb over a hotel or dorm room. I reached out to several other Tulane students who I knew had rented STRs while quarantining this semester, yet few felt comfortable being interviewed for this story. Positive exposure to the virus is still taboo because it suggests one has not been careful with their actions.

For her part, Lily never tested positive for the virus, and her quarantine was merely precautionary. Lily said that her quarantine was mandated by Tulane after one of her seven suitemates was identified as a close contact to someone who tested positive by the school’s contact tracing program. All eight suitemates were then required to quarantine for 14 days. Some chose to stay at the hotel provided by the school, while others decided to leave New Orleans entirely and travel home. Furthermore, Lily and others who chose to spend their money on STRs have, perhaps unknowingly, helped the city to survive the absence of tourists.

To examine whether the data supported my hypothesis that STR rentals close to Tulane’s campus were operating at pre-pandemic levels, I went back to AirDNA. Focusing on just the uptown neighborhood around Tulane, I examined the average daily rate, occupancy rate, and revenue. Although the revenue and average daily rates were below the February 2020 highs, the occupancy rates were higher now than at any point in 2020. This data supported my hypothesis that Tulane students have provided a significant lifeline to STRs. Moreover, the data aligned with Sally’s experience of attaining no business activity between March and August but finding success in renting long term once Tulane students returned to school. Other STR hosts in the neighborhood who did not wish to be interviewed told me in their refusals that they too were experiencing somewhat normal operating conditions.

While I could not independently confirm that all the STR hosts benefiting from Tulane students in the uptown neighborhoods are local homeowners independent of a larger corporation, local New Orleans ordinances governing the availability of STRs ensures that every STR in uptown New Orleans must have a homeowner living on the property. This information suggests that the STRs benefiting the most from Tulane related business are local homeowners, not out-of-state corporations.

Although she does not expect the complete reversal of the displacement and inflation in residential communities, Veronica has noticed some positive outcomes related to the decline in tourism. “We have seen STR units return to the housing market either as the long-term rentals or for sale,” Veronica said. While these may seem like small shifts, the more locals that live in the community, the easier it will be for New Orleans to hold onto the energy that makes it such a unique and remarkable city.

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