Pros and Cons of allowing renting townhomes

Personally, I don't like renting (I also live in a townhouse community) unless it's a homeowner who has a hardship, such as moving out of state and needing some way to cover those expenses until the house is sold (preferably to another owner occupant.).

My sister once told me townhomes and condos often have a tough time with property value because so many people tend to buy them just to rent them out, which hurts those of us who bought a home we could afford and were ok with sharing exterior expenses like snow removal. Your community sounds a lot like mine - some of the homes sold under market value and a lot of them were lost to foreclosure, which sucked up property values even more. It may take some time before they recover, but at the same time, you have to look at your community's demographics.

In our case, we do have a lot of owners who are getting older and may soon have to move in with kids or live in senior housing of some kind, so they wither rent the place out for extra income or have to sell it, which may take some time. You may want to poll your community and see what the homeowners think, as well as talk to some local realtors who are familiar with your community and the overall market for townhomes in your area to see what the trends are. And maybe a few bankers to see if the mortgage issue is still there.

If you change the rules stating only a certain percentage of homes can be rented, you'll need to figure out how that will be enforced because people may say anything to be allowed to rent. Some communities have also changed their rules to require owner occupancy for the first two years after purchase to discourage investors, but again, there may be some creative thinkers who can get around this. And of course, they can also lie and get away with it.

In the end, the best you can do is make sure you have a good handle on the budget, especially reserves and a fair and consistent rules enforcement policy. Ideally, you shouldn't be able to tell the difference between a renter and an owner occupant because everyone behaves responsibly - in fact, you may find the renters are better neighbors than the owners! And make sure your assessments keep up with inflation - investors are cheap as hell and usually don't want to buy into communities where the assessment will put a major crimp in profits. They don't always like consistent rules enforcement either because they have to spend more time and money vetting good tenants, so if you let it be known to everyone what will and will not be tolerated, that can go a long way in keeping the crazies at bay.

We're high rise 200+ condo units in a busy, desirable urban setting. About 30% of our units are rentals. During the recession, we were 42% rentals. Our sales prices rebounded 2-3 years ago.

I do not believe our insurance rates are affected by rentals--agent hasn't asked. Now, FHA-backed loans have a % rental limit, I thin. Look into that.

If you do permit rentals, you want to keep them, I'd think under 20- 30% of your total THs. And you'd want to place limits on a minimum period, say 6 months.

If legal, you'd want, I assume, to limit the # of people per TH sq. ft., and the number and even types of dogs.

As Sheila says, you must be prepared to enforce your rules against all residents and create a tough fining schedule to deter repeat offenders. You must make it very clear to owners that they are responsible for their tenants' conduct. I'd say, in general, you want to assess all of your rules including such issues as parking, which seems to be a problem in many HOAs.

Are you on the Board, First? What size HOA is yours? What are the implications of yur values not rebounding? Lots of vacancies? Lots of delinquencies? Or?

You should consider that all rentals go through a property management agency, AND require the renter purchase renters insurance and make the association a beneficiary. That way if the policy lapses you have a recourse.

This is interesting either way. How woudl I go about researching this for IL?

I recall a poster from IL a few years ago wondering how to get out of the rental limits in his HOA, so maybe they are legal there. With Tim, if your CC&Rs have restrictions you should be OK.

In CA, there's material about rental restrictions in our Civil Code, so you need to look at IL laws, First.

I've yet to see a statute that specifies you have a right to rent your home if your covenants say you can't. Please provide one.


Via contractual agreement. The covenants are, effectively, a contract between the home owner and the other owners within the development. The Association administrates that contract.

Anyone can sign away rights (real or perceived) via contract. It happens all the time.

Years ago, many Associations were putting rental restrictions within their Bylaws or as a policy resolution. Those restrictions were overturned by the courts. However, those Associations that had restrictions within their covenants were upheld by the courts.

Outright banning renting are easier to enforce and withstand legal challenges then capping rentals.


Off topic, but this would also be via contractual agreement.

Every covenant I have read says that prior approval is required prior to making exterior changes.
Hence, that is how the HOA can tell you what you can do with your home outside aesthetics.


As with any covenant enforcement, the ultimate enforcement action is through the courts.
Warning letters and monetary penalties are simply an attempt to achieve compliance and avoid going through the courts.

Yes, you might be able to write off your legal expenses on the rental, but you still have to pay them. If you lose, you might have to pay the Associations legal expenses as well and lose the income.


Again, this depends on where the restrictions are written i.e. the facts of the specific case.

I admire your patience, TimB.

One way, Melissa, to enforce rental limits, e.g., no rentals less than 30 days as we have here, is through heavy fining against, of course, the Owner. Ours is $1,000 for first violation with subsequent violations subject to doubling.

Thanks for FHA info, TimM--I knew something had changed, but couldn't remember what. We are certified for FHA, but it's only used for folks seeking reverse mortgages in my HOA.

So, First.....has oversupply left you with too many vacant THs? I'm truing to understand why you're considering lightening up on your rental restricts as you sounds as if it fits with your depressed market values. What is the relationship?

Many new town-homes are being built that are sold at prices that current owners woudl like to sell their older units. I would expect that the new construction is going to slow down and supply is being reduced again. Like I said before the comps are hurting us as well. Some owners sold short. Either couldn't wait to get out or had corp relo companies. Those low prices seem to be the new bar for now.

Are you saying, First, that loosening your rental restrictions might bring more buyers into your HOA? Put a noter way, that the loosening would make your HOA more competitive? I'm stilling missing the connection between the two topics.

Do the new nearby HOAs have any rental restrictions?

Think it's time to present this idea to the members and take another vote. Opinions may have changes about the rental restrictions since it last past. Simply change the rules if you don't like them or can't live with them.

Over the last 4 years in my HOA of 100 homes, the biggest problems we have had are with renters. Three homes that are leased are the source of most of the complaints that the board hears (rightly or wrongly). We also have 2 other homes that are leased and those tenants are wonderful people that anyone would be happy to have as neighbors. I think it's very hard to make a blanket statement regarding the desirability of renters. Every situation is different and because you will always have "hardship exemptions" to deal with, there's probably no way to practically ban them completely.