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Median single family home prices in the Indianapolis metropolitan area are increasing at an annualized double digit rate. The effect (besides making current homeowners wealthier) is to price more people out of the detached single family home market thereby increasing one of two populations in the community: (a) renters or (b) the homeless. There is little evidence to support the argument that renters are any less inclined to maintain the residence they occupy than are, for example, homeowners who have very little equity in their home thanks to low down payment purchases financed with VA or FHA loans. Moreover, institutional investors are not well known for allowing their assets to depreciate through lack of maintenance. The concerns of homeowners reflected in the article are understandable, but someone needs to consider the long-term effect of rental restrictions on housing opportunities, particularly for young singles or families who can not scrape together a large down payment on homes that are ineligible for VA or FHA financing. If maintenance of rental homes is the true concern, HOAs could more directly address that issue if they focused on covenant changes that make it easier for them to enforce the maintenance requirements specified in their subdivision covenants. The most persuasive and non-discriminatory argument in support of rental limitations is that by buying homes in a subdivision, a large institutional investor obtains the same HOA voting rights that an occupying homeowner would have. There are a number of issues unrelated to home maintenance that are important to occupying owners that investors could be inclined to oppose if they entailed an increase in HOA dues. This is, however, a problem that could be addressed by amendment of the voting rights provisions of the declaration of covenants and restrictions rather than through a restriction on leasing. There is another issue lurking in the shadows relevant to the institutional investor “problem” and that is the likelihood that government at some level (most likely the federal one) will adopt laws or regulations that not only make rental restrictions unlawful, but also invalidate detached single family residential zoning. Regulations effecting what amounts to the federalization of residential zoning are currently working their way through the rule-making process of the Biden administration. The reporter has done a good job here of identifying some of the critical issues related to the rental restriction issue. There is, however, more to the story.
In clause (b) of the second sentence, I intended “renters” to be those renting apartments in multifamily housing projects which will likely have the effect of driving up apartment rents and/or the development of more such multifamily projects to meet rental demand.
https://www.indy.gov/activity/landlord-registration-program was passed so neighbors always know who to contact for rented properties.
Anyone living in a neighborhood with a lot of rentals ought to be concerned, specifically short term rentals. It’s a major problem here in California that cities are trying to get a grip on. Large parties happen in many of these properties, often resulting in vandalism and violence. It also drives housing costs through the roof because big money investors operate them like a hotel. It may not be a problem in Indiana yet, but it could be soon if Indy keeps growing.
I lived in a building where only long-term (1-year+) rentals were allowed when I signed the lease. They got rid of that requirement 4 months before the end of my lease. The “luxury” high-rise building I moved in turned into a college dorm within a couple months. I was 23 at the time and didn’t really mind, but dealing with drunk people in the elevators when I went to work at 6am was annoying. Thank God I rented, but many people who owned condos could not sell or rent them (long-term) anymore. I think they’re still suing the management company. They were basically forced to move into apartments elsewhere to avoid the problems, and rent out their condo units to Airbnb to make money on their investments.
Once out of state investors start buying properties to rent short-term permanently, your property value is in trouble. People staying for 3 days generally don’t care about how they maintain the property, or respect the neighbors. It’s good that HOA’s are on top of this. Local government’s should follow with regulations before you end up with the disaster many cities in California have.
I don’t think there’s a problem with renting out houses for 1 year or more. Those of us that rent those properties maintain them for the most part. The problem is when you start operating a house or a condo like a hotel. It shouldn’t be banned, but it needs to be heavily regulated to not decrease property values of your neighbor’s property.
All of the comments regarding this issue here are sound. Like all other issues, there are two or more sides to the story. What is needed in addressing these issues is good old-fashioned common sense and a strong concern for protecting the constitutional rights of citizens. One of my main concerns with the HOA’s is their tendency to overreach and micromanage residents and to also charge excessive fees for the limited services they provide. I have many years of experience working in this field. The right of an individual to own private property and to enjoy it is threatened when heavy-handed management results from associations who have an excessive amount of rules for members of the association. It used to be that folks looking to buy a home in central Indiana were often attracted to neighborhoods with strong HOA’s as many felt this would be a good way to protect property values. That did not prove to be all that effective during the great recession and market downturn when nationally and locally there was a large number of vacant homes due to the foreclosure process that was rampant at the time. Nowadays, there is a trend developing that people want a home in an area without HOA’s and that is advertised in the listing information by sellers and their agents to appeal to those who do not want to live with the restrictions that they have witnessed or heard about from others, that they do not agree with. So it has been interesting to see that piece of the issue evolve in a different direction. Some HOA’s do a great job for the communities they manage but many do not and seem to be more interested in lining their pockets from the dues of the residents than actually doing anything of value for the residents. So there is a lot to consider in this issue and one would be wise to do their due diligence in the home search process.
The assumption that the existence of rental properties would result in a decrease in property values is highly flawed and not back by data. I would contend that, over the long term, having such a restriction would actually result in a decrease in property values compared to allowing buy and sell transactions to operate based on normal economic conditions.
If you restrict homes from being rented, that will eliminate investors from the pool of potential buyers on a given property. Therefore, there will be less competition and fewer bidders when a property is offered for sale. These restrictions result in an artificially induced decrease in demand. Basic economics would suggest that a decrease in demand (will all other factors remaining constant) will result in decrease in prices.
In the short term, this will not likely be an issue, given that the current economic conditions consist of demand which is far in excess of supply. However, the long term implications are that prices will be negatively impacted by such restrictions.
Furthermore, the general thought that a rental house would not be as maintained as an owner occupied house is not necessarily true. For a rental house, you have two separate parties who have ability to maintain and/or improve the property. Many renters are very motivated to keep their residences looking nice. The owners are also responsible to keep the houses in proper condition. In many cases, having both an owner and a renter involved in keeping the house in good condition can result in the rental property to be well maintained.
Additionally, each time the rental property is turned over to a new renter, the owners will likely perform certain repairs and maintenance to make the house marketable to a new renter. Often times, this includes things such as repainting of the interior and sometimes replacing carpet, or repairing other mechanically items that do not function properly. How many homeowners are doing a full repaint of their house every 3-5 years or replacing carpet in 5-7 years, etc?
Many neighborhoods that have no known problem of rental properties not being properly maintained, have explored these type of restrictions. Adding such restrictions can ultimately create the opposite result from what the homeowners are attempting to do.
@BradM “Additionally, each time the rental property is turned over to a new renter, the owners will likely perform certain repairs and maintenance to make the house marketable to a new renter. Often times, this includes things such as repainting of the interior and sometimes replacing carpet, or repairing other mechanically items that do not function properly.”
This is a giant leap. “likely”?