Commercial Short-Term Rentals To Increase Housing Stock in New Orleans

The rise of short-term rentals (STR) in the city of New Orleans has stirred up a lot of controversy amongst local government officials, the hospitality industry, housing activists and residents who question their impact on the community.

Not all STRs have the same effect on the community, which is why STRs are regulated differently depending on where they operate. The city currently offers three short-term rental licenses - accessory, temporary and commercial. While accessory and temporary operators continue to multiply in residential areas throughout the city of New Orleans, commercial operators only operate in established commercial zones and avoid having adverse affects on local communities.

With the support of local citizens and city officials, commercial operators are already having a positive impact on the New Orleans housing market. Many commercial operators work with developers to reassure lenders and secure financing opportunities to provide a new avenue of restoration to abandoned properties throughout the city. As a result, blighted sights are renovated and provide more housing inventory for New Orleans residents while revitalizing local communities.

According to a report from the U.S. Department of Housing and Urban Development, vacant and abandoned properties can be linked to increased rates of crime and declining property values. The maintenance or demolition of vacant properties can also create an extensive expense for most cities.

The recent $38 million dollar commercial redevelopment of the historic Pythian building at 234 Loyola Ave is a good example of how partnerships between the city, local investors, and commercial operators can create additional housing stock for the city of New Orleans. In 2017, the investors partnered with Sonder, a local commercial STR operator, to mitigate the lease-up risk for the historic structure that had been blighted for decades by pre-leasing less than a tenth of the building for STR use.

Today, the Pythian hosts 69 units and targets middle-income workers in the Central Business District who may not qualify for discounted housing and are unable to pay full-market rates. Only 6 of the 69 units which are listed as penthouse suites are used as short-term rentals. In addition to the STR and affordable housing units, the building also houses a street-level, food service, a restaurant, shared working space for small businesses and nonprofits, and healthcare offices.