Aug 232016
(Data courtesy of Inside Airbnb)

(Data courtesy of Inside Airbnb)

When Jay Brinkmann retired to New Orleans in 2014, after spending 40 years away focusing on his career as an economist and business executive, he came back with a goal in mind: to renovate and upkeep one of the city’s historic landmarks.

Brinkmann bought a home in the 4500 block of Canal Street, near where Mid-City meets Old Metairie, designed by the architect H. Jordan McKenzie. The house, Brinkmann said, was beautiful, but had a “conglomeration” of different styles — something he was hoping to equalize by hiring an architect to create a more uniform look.

But Brinkmann has since halted the project, wholly because of something he perceives as a looming threat to the stability of the city’s housing market: the infiltration and lack of government enforcement on short-term rentals.

“I said ‘Let me see, because to me the short-term rental situation could be an issue for that part of Canal Street,” he said.

Brinkmann, the retired Chief Economist and Senior Vice President of Research and Education at the Mortgage Bankers Association and now a U.S. representative on the executive committee of the International Union of Housing Finance, shared his story Monday night at a free lecture on AirBNB and other short-term rentals.

The event was held in collaboration with the Louisiana Landmarks Society & Pitot House, which has put forth a “call to action” for New Orleans residents to “protect” the city’s historic neighborhoods from “the intrusion” of short-term rentals.

Among the most egregious of the rentals, according to the Landmarks Society, are the whole house, non-owner occupied rentals, called “principal residential” rentals, and the possibility of unlimited short-term rentals in commercial zones.

Earlier this month, the City Planning Commission voted 8-1 to legalize short-term rentals that are owner-occupied, meaning they can rent out spare rooms in their own homes.

Moreover, the commission decided, owners should be allowed to rent out their whole homes for up to 30 days out of the year, a rule that will likely be utilized during the city’s well-known events like Mardi Gras and the New Orleans Jazz & Heritage Festival.

Should City Council agree with the commission’s recommendation, the time limit would prevent homeowners from renting out their entire houses as vacation spots year-round — a type of short-term rental that makes up the majority of listings on websites like Airbnb.

Still, according to members of the Louisiana Landmarks Society and Brinkmann, the laws aren’t set in stone yet, because they’re pending City Council’s vote later this year. Moreover, those against the proliferation of short-term rentals say the threat of absence of enforcement looms over the entire process, a “fait accompli” that could make the proposed laws meaningless altogether.

Sandra Stokes, president of Louisiana Landmarks Society, points to a well-quoted statistic from the website Inside Airbnb, which attempts to track the number of short-term rentals being occupied with Airbnb in various cities that lack such data elsewhere.

As she wrote in a letter to Robert Rivers, the director of the City Planning Commission, even though short-term rentals are largely illegal already, whole house rentals comprise 72 percent of the ones available in New Orleans, according to InsideAirbnb.com.

“The citizens of New Orleans have an expectation that they will be able to live in the neighborhoods they grew up in, and also live close to where they work,” Stokes wrote. “What we’ve seen over the past few years are investors purchasing available properties and converting them into de facto hotels versus providing homes for residents.”

This is happening, Stokes said, not just in the French Quarter or other historic neighborhoods, but in every area of the city, thereby pushing residents out to New Orleans’ “outer borders.”

This, Stokes said, threatens the local economy as visitors don’t support the same type of businesses locals do, nor do they send their children to schools or attend local churches.

“The diversity and equity of our neighborhoods is in rapid decline,” she added.

During the lecture, Brinkmann agreed, and added another threat he perceived from the proliferation of short-term rentals: rising property taxes.

Because investors are buying properties knowing they can rent them out for a profitable income — in some cases gleaning a return of up to 10 percent annually — it means prices have been going up faster than the local economy can support, based on local incomes needed to support the prices.

This, in turn, means property taxes are going up, all the while creating a false sense of security about the housing market, Brinkmann said.

In his lecture, he compared the real estate market in New Orleans to that in 2008, when markets were dominated by investors in Florida and other states who fled after the cash flow dried up, thereby causing a sharp decline in property value.

Now, the same thing could happen in the Crescent City, he said, as areas change with the influx of short-term rental clientele, which alters the fabric of the neighborhood. Ultimately, he said, the resale value of homes could eventually be driven down, unless homeowners could find a short-term rental operator to buy it.

“We’ve seen that happen,” he added. “That’s the kind of risk I think we’re needlessly injecting into the neighborhoods here.”

In the meantime, Brinkmann said, because rising property taxes is good for the city and the mayor’s office, particularly as the year’s new budget is being formulated, City Council is under “tremendous pressure” to vote in favor of short-term rentals as a whole.

That pressure, Brinkmann said, could explain the “disconnect” he sees between lack of enforcement of short-term rentals seen already, and zealous enforcement of other housing-related laws, including those enacted to protect actual buildings within historic districts.

“Is city enforcement focused more on structures than people?” Brinkmann asked. “The attention paid to structures as opposed to attention paid to integrity of neighborhoods strikes me as a little incongruous.”

Brinkmann’s lecture filled the auditorium of First Grace United Methodist Church on Monday night, attracting familiar faces like City Councilmember Jason Williams, and Meg Lousteau, the executive director of Vieux Carre Property Owners, Residents & Associates.

City residents, including Mid-City homeowners and renters, have largely been divided on this issue of short-term residents, but Monday’s crowd seemed largely to agree with Brinkmann’s assessment.

At least one audience member, who only gave the name Doug, scoffed at Brinkmann, criticizing him for linking the rise in property taxes with short-term rentals. That, he said, was the fault of an assessor who “slapdashes” prices on properties, without doing individualized assessments.

Most audience members who spoke after the lecture, however, agreed that they saw the influx of short-term rentals as being a threat on their neighborhood.

“Why keep spending money on properties when you just don’t know how they are going to value in the future?” said Jeanette Hardy, a Faubourg St. John resident who’s lived in her area for 40 years. “What’s going to happen to the property value?”

An ordinance on short-term rentals is slated to be introduced into City Council in coming weeks. The Council will have 60 days from the receipt of the study to vote and adopt an ordinance, which then is projected to take effect Jan. 1, 2017.

  One Response to “Economist Jay Brinkmann: short-term rentals will ‘fundamentally damage the character of our city’”

  1. One point not mentioned is that when neighbors’ homes are taken over by absentee owners and visitors, we lose the traditional safety provided by resident neighbors reciprocally taking in mail and newspapers, walking dogs, and generally keeping an eye on things. Statistically, many out-of-state license plates and lots of tourist comings and goings attract more crime (according to a law enforcement professional).

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