Options For Renters Declining in Many Towns
- The Bonez

Across the country homeowners' associations are banning tenants from their communities. This can be partially attributed to the tremendous slump in the housing market. When homeowners are required to move or own homes for investment purposes, rent payments can supplement income or prevent having to sell at a loss. Many towns, however, are prohibiting renters, citing the belief that renters lead to deteriorating conditions, vandalism, drugs, and even violent crime. More than 59 million people live in areas under the control of homeowners associations and experts estimate that as many as 41% of those areas prohibit the renting of its properties. In fact, some associations are toughening anti-rental rules, even in areas where the housing crisis is hitting the hardest. In Sacramento recently, a community for active-adults saw a huge battle over rental rules after tenants were blamed for diapers in the community pool as well as other un-toward behavior.

Las Vegas has had so many complaints of crime and vandalism attributed to renters that it recently passed legislation banning homeowners from renting their properties until two years after purchase.

Some communities view rental rules as a method of slowing the fall in home prices such as Madison, Miss. This has not happening in the Marin real estate market, nor have Mill Valley Condos been affected. The irony is that though demand for rental properties is higher than ever before, 17.5 million homes are sitting vacant. Nearly 35% of these are sitting empty by their owners on purpose. This dilemma is being magnified by rental bans. Some areas, however, are lifting restrictions in an attempt to lure buyers. But the majority of subdivisions are leaving rental restrictions in place or tightening them.

The belief that tenants are bad for communities has been around for a while, especially in higher cost areas. A decision in the Indiana Supreme Court in May said that "an owner-occupant is both psychologically and financially invested in the property to a greater extent than the renter." Hence, according to that line of thought, tenants will not be as consistent when it comes to home maintenance and repair. A study back in '87 conducted in California showed that areas where residents were made up of 31% or more renters had lower property values. Even Fannie Mae and Freddie Mac are guilty of the anti-renter bias. They both have rules against financing condos in projects where most of the units are rentals.

When the real estate market was booming, bias toward renters was prevalent due to the simple availability of credit. When just about anybody could qualify for an adjustable rate mortgage, those who failed to qualify for any mortgage were just not deemed safe. Consequently, rental rules were instituted all over the place. Some rules were designed to place a cap on the number of rental units in a community.

Though there are ill effects brought about by renters, it is also very bad for property values to have communities full of vacant homes. More than 7.4 million homeowners owe more on their mortgage than their property is worth. With rental rules rampant, many strapped homeowners may be inclined to send the keys back to the lender (this is known as jingle mail) and lose the property to foreclosure. There have been many studies that demonstrate the negative impact foreclosure have on property values. One such study, conducted by the Georgia Institute of Technology and the Woodcock Institute, concluded that a home's value drops by about 1% for every foreclosure within a 1/8 mile radius. Some neighborhoods have reconsidered their positions in recent months. In Roswell, GA, a gated community called River Falls had a rule in place limiting rentals to 7%. With property values down 11% or more, the community has begun granting "hardship exemptions" to homeowners that are forced to move.

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