Imagine that you're a bit older than you are right now. You have some lovely grandchildren who come over and visit you several times a week. They look forward to coming to Grandma's House, the same house you've been living in for the last 40 years, the place where your kids grew up, rich with memories and still an emotional center for your family.
Two years previously, the house next door sold, along with two right across the street on your cul-de-sac. Nice 60's ranch-style homes with basements, they were all bought by investors, who converted them to student rentals. Easy conversions - throw some bedrooms and a bath in the basement, and with 5 bedrooms at a going rate of $350 - $400 per bedroom, even being several miles from campus, it's a cash flow machine.
Of course, with about 20 new residents on the street, that's also about 20 cars that need to be parked, and the lawns will only hold a few, so the cul-de-sac is now all choked up with cars all the time. It's not safe for the grandkids to play out there anymore - too much traffic. It seems like there are loud parties until the wee hours every night, and there's trash everywhere now.
It's just not the same neighborhood anymore. As painful as it is, it's time to think about selling Grandma's House.
The above scenario was pretty common in Fort Collins in the early 00's, at least until the city passed an occupancy limit ordinance and got serious about enforcing it. The ordinance basically prohibits more than 3 unrelated individuals, excluding dependents, from living in the same dwelling unit. It did make allowances for rooming house situations within a constrained area close to campus, available by permit if necessary conditions relating to safety were met.
As you may imagine, this was a very controversial bit of law-making, and pitted family neighborhood residents against the investor and real estate community. The local Board of Realtors came out against it, of course - a knee-jerk reaction to anything that might affect a potential sale. .
It wasn't real estate's finest hour - there was a lot of concern about the sanctity of property rights, with not much acknowledgment given to the huge impact that was occurring in neighborhoods all across the city. It seemed that only some property rights were important. The stance was seen as crass and insensitive, a typical single issue, pocketbook interest trumping one of the things that makes the city a special place to live.
The ordinance passed, and has been in place for a while now. It has done what it was designed to do - protect the character and quality of family neighborhoods. There is very little incentive for investors to convert these homes at this point - at $400 per bedroom, these investments are now borderline or worse. There is still a bit of kiddie condo action - parents buying a place for their kids while they are in school, renting to a couple of roommates, and selling after graduation - but that's a different spreadsheet and a much smaller portion of the market. And it tends to comply with the ordinance.
In retrospect, the ordinance probably didn't cost the real estate community much in lost revenue. With the housing crisis and a lessening of available easy funding, this portion of the market would have suffered anyway. The demand for student rental housing hasn't diminished, but private investment to meet this demand has moved to more socially responsible solutions and the University has responded by developing new student housing projects.
Most importantly, the re-sale market in these neighborhoods has remained solid - they have retained their character as nice places to live and home values have been protected.
The real estate community got this one wrong. It's certainly okay to lobby for our interests, but sometimes it's difficult to understand exactly what those interests might be, especially in the long run.
Mary & Dick Greenberg
Elevations Real Estate LLC
106 East Oak St.
Fort Collins, CO 80524