We've got the opposite problem in a condo association here in Gainesville.  The investors are the only ones who can buy because of the delinquency rates of dues and as such, it's about to throw the investor ratio out of whack so that FHA and VA loans can't be funded in the community.  

There are certainly consequences on each side of this issue.  Either way is not pretty, but restricting rentals all together is a bad policy.

This topic is a sore spot with me.  I live in an HOA that is trying to just this same thing!  We are renting the home we live in, and as I sit in on the HOA monthly meetings, I sometimes have to bite my tongue.  They start talking about the rentals increasing, and fearful of how it will affect the community.  Personally, I will match my home to theirs any day.  Being a tenant is not a curse.  Life is all about how a person lives their life.  So, with all that said.....lol......I get what you are saying.

Our lawmakers never look to far in front of what they try and pass.  We are having some major issue coming up with some new laws.

Lyn, you're right about over-zealous HOA boards.  Here it's condos and cats.

GOOD MORNING LYN!  Tucson has several of these that do not allow HOAs - they are nearly impossible to sell - and with the prices so low - it defeats the purpose that HOAs are going after in the first place.

Hey, Lyn! I included this post in Last Week’s Favorites.  Enjoy the rest of your weekend.

Hello Lyn:  rarely do more laws, rules, and regulations improve things.  You story is a great example of this very phenomenon. 

I was on a condo board when we passed with 75% of the homeonwers approval a lease cap.  The building had so many investors that it was not eligible for VA or FHA financing.  Values plummetted when the investors bailed on their units and stopped paying their condo fees pushing the condo to the brink of financial ruin. The rental restriction started a turn around in the building.   Exclusions in the lease cap were provided for active duty military to rent their units even if the current rentals were above the limit.  The building is almost back to being able to qualify for FHA & VA financing again.  

Lyn

It seems some rules are made without much forethought about possible consequences, and maybe no thought about the greater good rather than pleasing the Board.

The issue we have in many condo communities is that occupancy rates for owners are dropping as a result of the distress sales - lenders will not lend because of high HOA deliquency rates and as more investors buy the lower the owner occ rate. A vicous cycle that will take a long time to correct.

I have no issue with restricting rentals - I have some - particularly if it kee the place from feeling like a hotel, but not allowing at all seems unreasonable.

Jeff

Hi Lyn,

There are always unintended consequences. In NYC we have both coop and condo boards and they are now facing unintended consequences from banks. Coops boards have total control over the building, "quality of life" and the owners with their many rules and restrictions.

Buyers that don't want all the rules and restrictions would buy condos so they could do what ever they like with their unit. Today many Manhattan condo boards have "coop envy".

Because of all the new Fannie Mae rules such as only 10% of the building can be rentals, one entity can not own more than 10% of building (a few years ago when the market turned investors were buying bulk apartments), no more than 10% in arrears and many other rules are now affecting buildings that never had any issues with financing before have now discovered that buyers can not get mortgages in their buildings.

Lyn, that is an excellent point.  This is one of those areas where I always encourage caution when some group is considering more restrictions.  That goes for our government as well.  Regulations and restrictions are a two-edged sword, and unfortunately, they have often done major damage before anyone has the frame of mind to stop them. 

Good morning Lynn,

I came over from Pat's post on last week's favorites and am so glad I saw this. Some HOA Boards just don't get it. Not everything can be set in stone and needs to change as our world changes around us. Excellent point! Mike says it well..restrictions are a two-edged sword and have done major damage before anyone could stop it!

Lynn-- I also came over from Pat's post.  I was going to point out the FHA/VA/Freddie/Fannie issues, but looks like previous commenter beat me to it.  Hope you are having a great Presidents' Day!

I think one consideration of the HOA is keeping homes eligible for FHA lending so first time and underfunded buyers can buy them and live there.

Couldn't agree with you more. Great post. Maks sooooo much sense.