Reported / Citable
Background
New Orleans adopted a short-term-rental licensing system after concluding that the rapid growth of rentals through platforms such as Airbnb had harmed residents’ quality of life, eroded neighborhood character, and potentially reduced affordable housing. After earlier versions of the City’s restrictions were successfully challenged, the City enacted a 2023 ordinance limiting residential short-term-rental licenses to one property per block, generally distributing licenses by lottery and prohibiting a person from operating more than one short-term rental.
A 2024 ordinance separately prohibited platforms from collecting fees for facilitating transactions involving unlicensed rentals. It also required platforms to verify a rental’s eligibility through the City’s electronic system before facilitating a transaction and to reverify eligibility periodically. Prospective hosts and Airbnb challenged the ordinances on constitutional and statutory grounds. The district court dismissed the claims at issue under Rule 12(b)(6), and the plaintiffs appealed.
The Court’s Holding
The Fifth Circuit affirmed. It held that the 2023 ordinance did not effect a per se taking because it neither physically appropriated the hosts’ property nor interfered with their right to exclude others. The court rejected the argument that restricting the ability to admit short-term tenants is equivalent to infringing the constitutionally protected right to exclude.
The ordinance also did not effect a regulatory taking under the Penn Central framework. Assuming the economic-impact and investment-backed-expectations factors favored the hosts, the court found that they did so only slightly: the alleged lost rental income was not severe, long-term rentals remained available, and owners could not reasonably expect residential property to remain free from new zoning restrictions. The ordinance’s character as a reasonable land-use regulation addressing neighborhood harms weighed heavily—and dispositively—in the City’s favor.
The court further held that Section 230 of the Communications Decency Act did not preempt the 2024 ordinance. The booking rule regulated Airbnb’s participation in and profit from transactions involving unlicensed rentals, not its publication of third-party listings. The verification rule likewise did not require Airbnb to monitor public listing content because hosts could provide license information through distinct, internal, nonpublic disclosures. The court also found no error in dismissal of the plaintiffs’ remaining dismissed claims.
Key Takeaways
- A restriction on short-term leasing is not a per se taking when it neither physically appropriates property nor interferes with an owner’s right to exclude.
- Limited lost profits and frustrated plans to operate short-term rentals carried little weight under Penn Central where other rental uses remained available and the regulation reasonably addressed neighborhood harms.
- Section 230 does not preempt transaction and license-verification duties that do not necessarily require a platform to monitor, alter, or remove third-party content.
Why It Matters
The decision gives municipalities substantial room to control the density of short-term rentals through zoning and licensing rules without necessarily incurring takings liability. It also underscores that property owners operating in regulated residential markets should anticipate reasonable changes to land-use restrictions.
For online platforms, the ruling distinguishes regulation of transactions and internal compliance data from regulation of publishing decisions. A city may prevent a platform from facilitating unlicensed rentals and require verification without triggering Section 230 preemption, so long as compliance does not necessarily depend on monitoring or removing users’ public content.