On October 7, 2025, the U.S. Fifth Circuit Court of Appeals issued its decision in Hignell-Stark v. City of New Orleans. The three-judge panel — Chief Judge Elrod and Judges Jones and Stewart — upheld most of the New Orleans’ short-term-rental (“STR”) regulatory framework but invalidated the City’s prohibition on corporate or business-entity ownership of STRs under the Equal Protection Clause.¹

Fifth Circuit’s Decision

Writing for the court, Judge Edith Jones concluded that the City’s blanket prohibition on “business entities” obtaining STR permits was not rationally related to the City’s stated goals of neighborhood livability and housing preservation, noting that “we cannot infer that ownership of an STR by natural persons through a business entity will negatively influence a neighborhood’s livability and quality of life.”

The court found the City’s prohibition on “business-entity” ownership of STRs irrational under the Equal Protection Clause, concluding that “there is nothing in the record … to suggest … that having a juridical person as homeowner will adversely affect the operation of the STR” and that “Banning a class of homeowners from the STR market is therefore fundamentally unrelated to the City’s sole expressed concern … —the guests.” ²

At the same time, the Fifth Circuit affirmed nearly all other portions of Judge Zainey’s ruling. The court upheld:

• the City’s authority to regulate STRs under its zoning and police powers;
• the one-per-square-block limitation for Residential STRs;
• the per-building cap for Commercial STRs; and
• the operator-presence and advertising restrictions, so long as interpreted to require host presence only during guest occupancy.⁴

By reading the operator-presence rule narrowly, the panel found no Dormant Commerce Clause violation.⁵ The court remanded for entry of judgment consistent with its opinion.

For more information on Judge Zainey’s ruling, read Federal Court Upholds New Orleans STR Regulations.

Key Takeaway

The Fifth Circuit’s decision preserves the backbone of the City’s STR regulatory scheme but removes a major ownership restriction. Natural-person and entity owners are now on equal footing for STR permitting purposes, subject to the same zoning-based density and licensing constraints. The case has been remanded for further proceedings, and the City may consider a legislative revision in response.

__________

1. Hignell-Stark v. City of New Orleans, No. 24-30160, slip op. at 3 (5th Cir. Oct. 7, 2025).
2. Id. at 12 (“nothing in the record suggests that ownership … will negatively influence a neighborhood’s livability and quality of life”).
3. Id. at 9–12 (upholding density, advertising, and operator-presence rules as rational exercises of zoning power).
4. Id. at 12 (interpreting operator-presence requirement to apply only during guest occupancy to avoid Commerce Clause issue).
5. Id. at 20