The rental market will always have a place in society because not everyone can or wants to purchase a home. However, the question is whether or not rental properties have a place in every community, especially those governed by an HOA.
Numerous HOA communities debate this very topic. While some HOAs have allowed long-term rentals, with the caveat that renters abide by the same rules to help maintain the community and property values. Now, the addition of short-term rentals has intensified the debate. From regular-term rentals to short-term rentals, here are some pros and cons to consider when it comes to allowing them within an HOA community. Let’s look at long-term rentals first.
Pros and Cons of Long-Term Rentals
The pros are that homeowners can find a way to create additional income for themselves. In doing so, they can cover their mortgage, maintenance and repairs, and assessment costs. There may also be the benefit of turning those renters into buyers if they love the community and would potentially be interested in buying one of the other homes for sale in the area.
However, there are also some cons. The first con is the fact that tenants do not necessarily have any compelling reason to be committed to the rules of the association. Instead, they can cause complaints and disputes that lead to tension within the community. If they choose to not take care of the property they are renting, then this could also negatively impact the community aesthetic.
Pros and Cons of Short-Term Rentals
The pros for short-term rentals through services like VRBO and Airbnb are solely about additional income for the homeowner. The local area can receive tax benefits and attract more people who are likely to spend money there. Those using short-term rentals also enjoy the convenience of home amenities while they are on vacation or waiting to move into a home they bought.
However, the number of cons rise considerably beyond the benefits. On top of not being committed to the rules of the association, short-term rentals mean more noise pollution in the form of guest activities and traffic, a larger amount of trash, and security risks. There is also greater liability for the association and a higher potential for illegal acts by tenants.
In many areas, short-term rentals have garnered a bad reputation, especially as places that turn into sites for large parties that lead to property damage at the rental and throughout the community, including the amenities. For that reason, many homeowners do not want short-term rentals in their neighborhoods. As part of an HOA, many homeowners feel that these types of rentals should be banned.
Making a Decision About Rentals
Before making any decision as you manage your business, there are a number of steps to take. The first one starts with understanding the current state and local statutes about rentals and what HOAs can and cannot do when it comes to rental restrictions. HOAs have not been the only organization that has been challenged by the topic, so the laws have changed in the wake of ongoing debates with citizens that see more cons than pros, especially with short-term rentals.
Another area that shapes decisions on this matter is a community’s HOA governing documents. However, some of these governing documents might only refer to long-term rentals and not been updated to reflect the community’s preference to allow or restrict short-term rentals. This may be the time to consult with an attorney and revise those governing documents to specifically address the association’s decision about each type of rental.
It helps to establish a rental policy for your community that provides specifics on what the association permits, including the type of rental and rental duration. Other actions include developing an application and approval process for rentals that is similar to the architectural requests homeowners have to complete if they want to change anything about their home. Another option is to implement a rental cap to place a maximum on the number of rentals allowed within the community to ensure there are not more rentals than owners, which often adversely impact property values.
A Partner For Strategic Guidance
From setting a rental policy to addressing violations, handling rental properties can be a challenging aspect of self-managing HOAs. That’s where it helps to have the experience and knowledge of a community management partner like Innovia and its cooperative model and membership. Contact us to learn more to see how we can help you with rental decisions and address your business challenges.
