Pros and Cons of Having a Rental Cap in Your Homeowners Association

A major issue that a homeowners association (HOA) and its Board may be faced with is whether to limit rentals in the community. While HOAs can restrict rentals, this issue may be hotly debated. Arguments can be made for and against the adoption of a rental cap.

Know the rules 

As a member of your homeowners association Board you will be thrust directly into the limelight if and when this issue comes up. Before you do anything else make sure you know the rules your HOA has in place regarding the matter. Typically, these would be contained in the Use Restriction section of your CC&Rs or may be contained in a separate amendment to the CC&Rs. Your documents will be the guiding factor in determining what is and is not allowed when it comes to renting in the Association. 

Can the rules be changed?

Of course, the rules regarding rentals in your homeowners association can be changed. This would most likely be a debatable issue with valid points for each side. If your HOA chooses to tackle the issue, be prepared by knowing the pros and cons.

Pros and Cons of limiting Rentals through a Rental Cap

There are differing views on both sides of the issue. Let's take a look at both:

Pros of having a rental cap

• Resident owners can enjoy the community with other resident owners and are less likely to experience the negative aspects of living in a rental dominated community.
• Home values stay higher because of a higher ratio of owner occupied units to rentals.
• Violations of rules and regulations would likely be more frequent with more rentals, as renters are not as invested as homeowners.
• Rental homes may not be maintained as well because renters typically don't have the same reason to keep up a property as an owner would.
• Possible higher costs for insurance with a high ratio of rentals.
• Possible  difficulties in getting funding from lenders or having to settle on a higher loan interest rate because of too many rental units in the community.

Cons of having a rental cap

• Homeowners have more unrestricted use of their properties.
• Renters may turn out to be good community neighbors.
• Owners potentially have a larger market to sell to if they can also sell to investors who intend to rent, whereas they could not do so if a community is at or above the rental cap.  In other words, the pool of potential buyers would be larger.
• Renters often end up buying the homes they are leasing.

Rentals in Your Homeowners Association

As you can see from the pros and cons listed above there are positive and negative reasons that should be considered when contemplating rental caps within your community. If the issue ever comes up in your community you can bet it's going to be an important one. The best thing you can do is be prepared when dealing with the issue. 

It is important to consider the current situation within your homeowners association and what restrictions may or may not be in place. To make a change in the use restrictions or your CC&Rs regarding a rental cap would be a process which would include a vote of the membership for final approval. 

Instituting a rental cap or not is an issue you and your homeowners association Board might have to deal with at some point. Be ready for the differing views, the pros and cons you may face if you choose to tackle the issue. It can be handled with some forethought and preparation and community input should definitely be considered.