As rentals with companies such as Airbnb proliferate in the area, raising rent and property taxes, officials are enacting laws to protect local residents

New Orleans’ Treme is regarded as the nation’s oldest African American neighborhood, but some of its residents, like Darryl Durham, now say that legacy is fading quickly.

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In recent years, short-term rentals with companies such as Airbnb proliferated and now operate on about 45% of the Historic Faubourg Treme District’s parcels. Resulting rent rises and property taxes stemming from that have forced out many black families and residents, said Durham, a musician who has lived there since 2006.

Now Treme moves in an unnatural rhythm. For about half of each week, the number of tourists drops and many blocks are “like a ghost town”, Durham said. Each Thursday, the tourists return, filling hundreds of units. Suddenly, Treme is alive with groups of drunk, mostly white college-aged kids, Durham said. There are loud parties, overflowing garbage cans and countless other issues “grating” on remaining residents, he added.

Treme isn’t an isolated case. Short-term rentals are so concentrated in Bywater, Marigny and other neighborhoods around the French Quarter that some residents and longtime homeowners are finding investors have effectively converted their blocks into hotels.

The number of Airbnbs citywide spiked from 1,905 to 6,508 between 2015 and December 2018, according to the watchdog website Inside Airbnb. Of that figure, 85% are owned by investors, some of whom live as far away as San Francisco or New York City.

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The low housing stock coupled with investor demand has helped send home prices and rents soaring, and exacerbated a housing crisis that’s displacing longtime New Orleanians, said housing advocate Breonne DeDecker, the Jane Place Neighborhood Sustainability Initiative’s program manager.

“We need to be placing the housing needs of residents in front of the property values of speculators,” she said.

DeDecker acknowledged that gentrification and the city’s depleted affordable housing stock also contribute, but called the short-term rentals “jet fuel on the fire”.

Ultimately the issue pits the needs of low- and middle-income residents in the majority black city against the financial interest of mostly white investors. New Orleans is now joining a growing number of cities worldwide that are enacting new laws to protect local residents.

In January, the New Orleans city council unanimously approved a package of regulations that would make it illegal to convert “whole home” investment properties into short-term rentals in residential zones. The laws would require short-term rental operators to hold a homestead exemption verifying they live on site.

“Operating a short-term rental here is a privilege, not a right,” said councilwoman Kristin Palmer, who introduced the legislation.

In a statement to the Guardian, an Airbnb spokesperson said the company will support what it deems “fair, reasonable regulations”, but opposes Palmer’s legislation. “The Palmer ban fails to distinguish between New Orleanians who rely on short-term rentals to support their families and bad actors who may be impacting the availability of long-term housing,” the spokesperson said.

If the rules are ultimately approved, thousands of homes could be forced back to the local housing market, and Airbnb would take a financial hit. But DeDecker said that’s a welcome change for most New Orleanians.

“The reality is there’s not that many people who own short-term rentals in New Orleans, and the only people who really like short-term rentals are the people making money off them,” she said. “They’re a very small minority.”

‘Prohibitively expensive’

Since 2015, neighborhoods with the highest concentrations of short-term rentals saw some of the highest jumps in home prices, according to city data. Real estate listings for homes in those neighborhoods suggest the market is geared toward Airbnb investors, while city tax records show the economic fallout for local residents.

A listing for the 1,000sq ft house at 1133 N Villere St in Treme shows a clean and freshly painted exterior, but its interior is gutted. Still, the property is listed for $300,000 in a neighborhood where black families’ median income is $29,000. The real estate agent calls the home “ideal” for a short-term rental.

The property’s tax records show the home, which is owned by a California investor, sold for about $92,000 in 2015, and $220,000 a year later. Between 2017 and 2018, its tax bill jumped from around $1,500 to more than $3,000.

Neighboring properties saw similar increases, and affordable housing advocates say such drastic changes can force low- or middle-income homeowners to sell, or fall behind on the rising taxes and lose the home. Investors are best positioned to buy them.

“That’s a very real problem that a lot of people are experiencing,” Palmer said. “Imagine what a big tax increase does to a homeowner that’s been living in a neighborhood for 10, 15 years, and all of a sudden they get a tax bill that’s two, three times what they paid in the past.”

Once people realized how much money could be made, you started seeing the corporations Darryl Durham, a resident

Investors are also regularly evicting tenants, DeDecker said, and their motivation is simple: short-term rentals can pull in over $200 a night, while the average tenant pays around $30 a night.

For that reason, more short-term rental operators are scaling up. In 2015, only 31 short-term rental operators owned four or more units, but that number jumped to 182 by early 2018, an increase of 487%, according to Jane Place.

Among that group is Sonder, one of New Orleans’ largest operators, with 209 city licenses as of February, according to city records. Like many of the largest owners in the city, Sonder isn’t from New Orleans. It’s a San Francisco-based corporation with Airbnb units across the globe.

Those are the type of entities Treme residents see running most of the short-term rentals, Durham said.

“It started out being neighbors, but once people realized how much money could be made, you started seeing the corporations,” he said.

Extra income

Still, there are plenty of local short-term rental operators, such as single mom Mary Margaret Kean, who uses the extra income from one Airbnb investment property to help pay for her kids’ school. She’s also president of the pro-Airbnb Neighborhood Alliance For Prosperity, and said short-term rentals “are a scapegoat”.

Airbnb spokeswoman Laura Rillos and Kean also questioned the accuracy of Jane Place’s data, and Rillos pointed to studies that suggests short-term rentals have little impact on the housing market. However, activists also pointed out that Airbnb and the Neighborhood Alliance funded the studies and criticized the latter’s methodology.

Kean blamed gentrification and the affordable housing shortage for New Orleans’ housing problems while adding that the neighborhoods’ recent improvements are a positive change.

“The neighborhoods gentrified before short-term rentals,” Kean said. “I’m really sorry the crack houses went away and the taxes went up. Is that really bad?”

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Officials stressed the proposed rules would allow residents to rent rooms in their homes to earn extra money, and permit whole-home short-term rentals in downtown New Orleans’ central business district and neighborhood commercial districts.

Beyond the prohibition of whole-home short-term rentals, the city is also proposing a tax of about $30 a night that could generate up to $20m for new affordable housing units. The addition of affordable housing and reintroduction of short-term rental units to the market might push down costs.

“Rents won’t totally reverse, and no one thinks Airbnb is responsible for all of the increases,” said Josh Bivens, a research director at the Economic Policy Institute who recently authored a report on Airbnb. “But take that factor out of play maybe you get some relief from higher rents.”

There’s already anecdotal evidence of that in the French Quarter, said Vieux Carre Property Owners Association director Erin Holmes. The city banned Airbnb there in 2016. Before that, it faced similar issues to Treme, but Holmes said it’s returning to normal.

“We see children and young families returning, and we think it’s a strong indication that prices are coming down to where young people can afford them,” Holmes said.