Proposed short-term rental ban could spur gentrification in some Lafayette neighborhoods

An expected prohibition from single-family neighborhoods could push short-term rentals into lower-income areas. Photo by Travis Gauthier

After three years of back-and-forth, Lafayette’s City Council is expected to vote Tuesday on the city’s first set of regulations for short-term rentals. The plan from Councilman Andy Naquin would ban most STRs from single-family residential neighborhoods, where approximately 40% of them operate in Lafayette.

But critics say a blanket ban will have unforeseen consequences, among them driving STR operations into Lafayette’s lower-income neighborhoods and disrupting their already fragile housing markets, like Freetown.

Freetown is uniquely vulnerable among areas where STRs have concentrated in Lafayette because there isn’t an inch of single-family zoning in the neighborhood. That could make it a clear target for future STR operators exiled from the single-family areas dominating the Saint Streets/Oaklawn and McComb-Veazey neighborhoods should Naquin’s ban pass Tuesday.

“I think it’s just premature. They’ve not done enough outreach to the community to really understand the impact and get residents who are affected to weigh in on what would effectively solve problems,” says Freetown resident Tonya Walton, who lives next door to one STR and across the street from another.

Walton operated an STR for corporate travelers in Austin and used short-term rentals for years to visit her mother in Lafayette before moving back after 25 years working out of state. She says the city should develop a plan to license and regularly inspect STRs, but she worries that a ban in single-family neighborhoods would have consequences for other residential areas like Freetown.

Roughly 75% of Lafayette’s residential areas are zoned exclusively for single-family homes. A ban in those areas could push STRs into permitted parts of the city, creating an incentive for landlords to opt for the more lucrative cash flows they provide. Researchers call the difference in earning potential between short- and long-term rental properties a “rent gap.” The wider the gap, the more vulnerable a neighborhood is to tourism-driven gentrification.

Rent gaps in New Orleans, for example, caused its STR market to “disproportionately affect poorer, working class communities of color” since property owners could make significantly more money by converting long-term rentals to STRs in lower-income neighborhoods near tourist destinations, according to a 2020 study co-authored by Tulane University Professor Christopher Oliver.

Oliver says that while New Orleans is unique in the challenges it has faced with STRs, rent gaps can identify the parts of cities that are more vulnerable to investment that could displace existing residents.

Communities can sometimes keep up with the competition that new investments bring, he says, “but at some threshold it does become less and less affordable for the average investor and certainly for individuals.”

That could be problematic in Lafayette’s urban core neighborhoods, where rates of rentership are disproportionately high.

While Lafayette’s STR market pales in comparison to New Orleans, the expected prohibition of STRs in Lafayette’s single-family zones threatens to exacerbate the concentration of STRs in neighborhoods like Freetown-Port Rico, where landlords can expect significantly more revenue from short-term rental operations than from traditional long-term rentals.

The median long-term rent in the Freetown area was $647 a month — or $7,764 a year — in 2021, according to the U.S. Census Bureau. Meanwhile, the average STR operation in Freetown, Downtown and across north Lafayette collects about $19,000 a year, according to AirDNA.co, which analyzes STR markets around the world.

Average STR revenues outpace the median long-term rentals in every part of the city, but the rent gap is most pronounced in lower-income neighborhoods near Downtown, like Freetown, La Place and McComb-Veazey, making them attractive to STR operators who would be ousted from more expensive neighborhoods like the Saint Streets under Naquin’s ban.

Straight News Online estimates that Freetown is already home to about 40 short-term rentals, giving it a higher concentration of STRs than other neighborhoods near Downtown because of its smaller footprint. The nearby Saint Streets/Oaklawn area, for example, similarly has about 40 STR properties, but those are spread out across 690 acres while Freetown is less than half that size.

Walton says she’s concerned that as the ban pushes more operators into the older, smaller and more affordable homes in Freetown, the historic neighborhood’s character will be threatened. She notes that developments in Austin have put limits on the share of properties that can be used for short-term rentals, a potential solution that is missing from Naquin’s proposal.

“They did that because of the nature of what short-term rentals do to the character of the community,” Walton says. “That’s the main thing that I want to maintain in Freetown, having neighbors and knowing my neighbors and feeling like these are homes and not a business district.”