The Fifth Circuit Court of Appeals recently upheld two key ordinances aimed at regulating short-term rentals in New Orleans. This ruling affects property owners looking to rent out their homes on platforms like Airbnb and Vrbo. The court's decision is significant as it reinforces the city's efforts to manage the impact of short-term rentals on local communities.
The case, Bodin v. New Orleans, was filed under docket number 25-30524 and involved several plaintiffs, including Bret Bodin, Brad Newell, Darian Morgan, Michael Rosas, Mid-City Mike Rentals, L.L.C., and Airbnb, Incorporated. The plaintiffs challenged two ordinances: one that limits short-term rental licenses to one property per block and another that regulates rental platforms to ensure they do not process transactions for unlicensed rentals.
The background of this case is rooted in New Orleans' ongoing struggle with short-term rentals. Over the past decade, the city has enacted various laws to mitigate the negative effects of these rentals on neighborhoods, including noise, trash, and the loss of affordable housing. In 2017, the city introduced a short-term rental licensing system, which led to an increase in rentals but also complaints from residents about the decline in their quality of life.
As short-term rentals became more common, residents voiced their concerns, prompting the city to impose stricter regulations. The 2023 Ordinance limits short-term rental licenses to one per residential block and distributes licenses through a lottery system. The 2024 Ordinance requires rental platforms to verify the licensing status of properties before facilitating transactions and mandates monthly re-verification.
The plaintiffs argued that these ordinances violated their constitutional rights, including claims related to the Takings Clause and Section 230 of the Communications Decency Act. However, the district court dismissed most of their claims, allowing only Airbnb's challenge regarding the 2024 Ordinance's monthly reporting requirement to proceed.
In its ruling, the Fifth Circuit upheld both ordinances. The court stated, "The 2023 Ordinance does not effect a per se taking" and clarified that the government has broad authority to regulate property rights in the public interest. The judges emphasized that the ordinances were reasonable measures taken by the city to address the challenges posed by short-term rentals.
Judge James E. Graves, Jr. wrote the opinion for the court, which included Judges Wiener and Haynes. The court found that the first two factors of the Penn Central test, which assesses regulatory takings, favored the plaintiffs only slightly. However, the third factor, which examines the character of the governmental action, weighed heavily in favor of the city, leading to the conclusion that the ordinances did not constitute a taking.
Furthermore, the court ruled that Section 230 did not preempt the 2024 Ordinance. The judges explained that the booking requirement and verification requirement did not treat Airbnb as a publisher or speaker of third-party content, which is crucial for Section 230 immunity. The court affirmed the district court's dismissal of the plaintiffs' claims, stating, "We affirm dismissal of the other dismissed claims."
The impact of this ruling is significant for both property owners and rental platforms operating in New Orleans. By upholding these ordinances, the court reinforces the city's ability to regulate short-term rentals, which may lead to a decrease in the number of such rentals in residential neighborhoods. This decision may also serve as a precedent for other cities facing similar challenges with short-term rental regulations.
Moving forward, property owners in New Orleans must adhere to these new regulations if they wish to operate short-term rentals. The ruling may deter some from entering the short-term rental market, while others may seek to adapt their business models to comply with the new laws. Additionally, the decision may inspire other cities to implement similar regulations to manage the impact of short-term rentals on their communities.
As for the possibility of an appeal, the court's ruling may be final unless the plaintiffs seek further review from the U.S. Supreme Court. Details were not available in the court filing regarding any related cases pending in the lower courts.