Phone:
by Steve Struck
Background:
At the 2017 annual meeting, some owners expressed concern about problems caused by tenants of rental units in the HOA. The Board also received comments after the meeting. Concerns revolved around parking problems (lots of street parking), maintenance issues, and tenants not following HOA rules. Also, concerns were expressed about the density of rentals when many of them exist in a small area.
The concerns expressed above were specific to individual rentals in SMVE but they also suggested the need for a more in depth understanding of HOA rental issues in general. For example, what other issues are common? What percentage of rentals in an HOA becomes problematic in terms of mortgage availability, insurance rates, and home values?
A rental policy committee was appointed (Joe Cybulsky, Kathy Mitton and Steve Struck) that began meeting in April of 2017. Its goals were to:
- Understand the current rental restrictions
- Determine the current number of rentals
- Identify issues associated with rental units
- Recommend possible policy changes
Existing Rental Restrictions
Article 8.I.i of the CC & Rs permits rentals of an entire lot/building. The same article specifies that no rentals of less than 30 days are permitted, no single room or any portion of a unit may be rented, and that units may only be rented to families (as defined in the Pima County Zoning Code). No renting for business use is permitted.
Number of Rental Units
As of early 2017, the HOA believes the following are use demographics of SMVE homes:
| Occupancy Type | # | % | Description |
| Owner occupied | 164 | 69% | Primary home of owner |
| Second home | 47 | 20% | Vacation home |
| Rental | 24 | 10% | Declared a rental by owner, or advertised as rental |
| Other | 3 | 1% | Occupancy by friend, relative or other than above |
| Total | 238 | 100% |
Issues Relating to Rental Units
The committee assembled the following list of issues often associated with rental units. These issues represent both complaints made about SMVE HOA rental units, and issues that have occurred in HOAs and planned communities in general. It should be noted that this list does not attempt to judge validity of the issues. Rather, it is a compilation of complaints that are typical for planned communities where rentals are permitted.
- Parking violations/excessive number of cars
- Noise
- Substandard landscape maintenance
- Substandard building maintenance
- Multiple family occupancy/over crowding
- Owners of rentals have less of a stake in preserving the sense of community
- Higher rental percentages can make obtaining mortgages more difficult (Fannie Mae and Freddie Mac won’t underwrite mortgages when rentals exceed 30%)*
- Common ownership of multiple units greater than 10% also are ineligible for Fannie Mae/Freddie Mac underwriting
- Higher liability and casualty insurance rates
- Renters tend to be shorter term residents with limited interest in the welfare of the community
- The more renters, the more difficult it is to get volunteers for HOA board and committee positions.
- Higher rental percentages make the HOA less attractive and lower prices
- Density or saturation (multiple rental units in a small area) impact small areas disproportionately
*This is an example. Policies can change, and individual mortgage sources can have different standards.
Items 1 through 5 are primarily issues relating to enforcement of current HOA rules and regulations.
Issues 6 through 11 are cited in many articles on rentals in planned communities. There is little disagreement in the literature that these are valid concerns.
Item 12 regarding the impact of rentals on property value is more problematic. One argument is that a high percentage of rental units leads to lower prices due to the issues cited above. The flip side of that view is that higher levels of maintenance, an improved sense of community and wider participation in HOA management raises prices. Others would argue that rental restrictions may reduce the number of potential buyers, thus lowering prices. This issue is a complex one.
Current Status and Conclusions
The SMVE Board is sympathetic to the concerns raised by some residents. The research done by the committee validates many of the concerns. After consultation with legal counsel, the Board chose to first address those concerns that may be handled by improved enforcement of existing policies (items 1 through 5 on the list of concerns). To that end, the Board revised enforcement procedures and clarified potential fines that can result from violations of existing rules such as parking, noise, and maintenance of yards. A lot of progress was made in the area of landscaping maintenance this year.
The next step could be to modify the HOA’s current rental regulations. However, making any change to the CC & Rs requires a 51% approval of all owners (not just owners who attend an HOA meeting). Acquiring the necessary 51% approval would not be a casual effort; it would require a lot of time and effort to solicit input from owners and then to publicize the proposed changes, as well as to get buy-in before a vote.
The Board decided not to pursue this course of action at this time. The directors would like to see if improved enforcement policies can address at least some of the issues. The Board will monitor this situation and consider further action as results merit them.