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Homeowner Associations Clamp Down on Rentals

California Suburbs
Allan Ferguson
California Suburbs

Neighborhoods across the country are hiding the welcome mat from renters in a bid to protect property values, a trend that has put a strain on renters and homeowners alike.

Some homeowners complain local laws and neighborhood association covenants are becoming too restrictive on renting in an economy that already makes it tough to sell a home.

"It's really bad here in Florida, and I've talked to a lot of property managers all across the country," says Jayci Grana, president of the National Association of Residential Property Managers. "Some areas have more associations than others, but for those that do, they're just tightening down ridiculously hard on tenants."

The rise in restrictions comes at a time when renters already are being squeezed. With apartment vacancies at a 10-year low, according to real estate research firm Reis, the cost of renting has been on a steady incline since 2010 as more families choose renting over buying a home.

Nearly a year has passed since Tiana Patterson put her three-bedroom home in Madison, Miss., on the market, but even after a $30,000 price cut, there's still a "for sale" sign in the yard. She and her husband can't rent their home because of strict rental prohibitions, so instead they spend $36,000 a year to maintain it and pay their mortgage and property taxes.

Patterson thinks fewer restrictions might make it easier to find a buyer, too. "If covenants are too restrictive it's so difficult," she said.

Madison, an affluent suburb of Jackson, Miss., has some of the strictest restrictions in the state, but the broader trend is not confined to the city's limits. The trend is nationwide, says Madison lawyer Mike MacInnis, who draws up covenants for homeowners associations. "Studies show that when you have a lot of rental properties, people are more transient and don't care about upkeep. That makes property values go down."

In 2009 in the midst of the housing crisis, the Madison neighborhood of Brisage saw four of its 57 houses go into foreclosure. One was rented out, and the people didn't even move in furniture, said Carl Crawford, president of the Brisage Homeowners Association.

They slept on mattresses they plopped on the floors. Crawford said the neighbors ended up paying another $3,000 into the association to cover the maintenance costs on that rental property.

Consequently, the neighborhood amended its covenants in 2009 "to prohibit leasing unless it was to the immediate family and for a limited amount of time," Crawford said.

Grana acknowledges those concerns, but says restrictions go too far.

"You know, it's kind of a Catch-22," she said. "If you make it difficult for homeowners to rent out their properties, they're not going to have the income to keep up with their mortgage; it's going to go into foreclosure, and that's also going to drive down property values."

Others complain that it's unfair for all renters to be branded as neglectful or unwilling to maintain their properties. Barbara Van Poole, who operates a real estate firm in the Dallas/Fort Worth area, said she's worried that the trend is flourishing in an economy that has left many people unable to buy a home.

She said Plano, a Dallas suburb, is considering not only inspections before occupancy but periodic checks afterward for as long as someone rents one. That's something Madison already does. Grana said other cash-strapped municipalities are trying to monetize the rise in renters by charging property managers for new permits and other fees.

"Most of the covenants for brand new neighborhoods within the last few years have leasing restrictions," MacInnis says. He says neighborhood associations are just trying to protect homeowners. "That's what covenants are all about."

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