Condo Communities: The Impacts of Investors and Short-term Rentals
by rcpmanagemedev, August, 15 2022
The ongoing housing crisis is making homes more expensive and rent to skyrocket. In Gallup’s 2022 Economy and Personal Finance Poll, 69% of those surveyed said that now is not a good time to buy a house—the first time in the poll’s 44-year history where most Americans have had this opinion.
A recent housing market trend among investors is buying single-family homes and units in condominium buildings with the intention of renting them out on a short-term basis. Rather than signing year-long leases, investors are finding they can make more money by renting on a per-night basis. This is having a major effect on affordability, especially for first-time homebuyers.
Concerns About Investors and Short-Term Rentals
62% of respondents from the Foundation for Community Association Research’s recent survey are afraid that the investor will not take care of the home or unit to match the community’s standards.
Furthermore, 64% of municipalities prohibit rentals less than 30 days. Almost 20% have zero rules limiting rentals or leasing in the community. As more people are voicing their concerns, municipalities are starting to take action by creating stricter regulations on short-term rentals.
When it comes to amending covenants and rental restrictions, the majority of respondents (53-67%) said that approval from 67% of homeowners is required. Only 2% said that approval from 100% of homeowners is necessary—an almost impossible task.
According to Dawn M. Bauman, the CAI’s senior vice president for government and public affairs and executive director for the Foundation for Community Association Research, “community association boards should look at their documents to review their current rental restrictions, as well as current state law, to see if they are limited to the type of rental regulations they can impose.”
Impacts on Federally Backed Mortgages
If associations can’t regulate the percentage of rentals, they could see a decrease in resale value and homebuyers might have more difficulty securing mortgages backed by the government. Additionally, it would create difficulties for boards when trying to enforce rules, manage property damage, and handle increased maintenance.
On this, Dawn says “boards should review their covenants to see what current rental restrictions are implemented. Contingent on current regulations, boards should review their declaration’s amendment provision to see the steps necessary to take if they want to implement a rental restriction covenant.”
RCP’s team of management professionals have extensive experience and industry knowledge when it comes to managing everything from high-rise condominium communities to HOA’s and beyond. Contact us today and learn how we can help.