HOA Governance: The Pros and Cons of an HOA Rental Cap

The policies of any HOA are sometimes a touchy subject because, at any one time, homeowners are simultaneously responsible for and subject to the rules set out by their homeowner's association. There are a number of perfectly normal policies that are put into place like a stylistic agreement to keep the neighborhood looking nice and everyone's property values going in the right direction. However, problems sometimes arise when a particular policy favors the homeowners who moved in (and began voting) first and limits the actions of those who joined the neighborhood and HOA later on. One of these common but highly contested policies is the HOA Rental Cap.

Understanding Your HOA's Rental Cap Policy

A rental cap is a set limitation on how many homes in the neighborhood can be rental properties. Not all HOAs have rental caps and those that don't always have the exact same policies. That said, it's important to know your HOA's rental policies, if any, before either buying a home in the neighborhood or choosing to renovate a former home into a rental property in the neighborhood. The reason rental caps are a highly contested policy is that, with a static limit, only the first few homeowners who decide to rent out their properties will be able to.

Pros and Cons of a Rental Cap

Of course, there are some good reasons for a rental cap which is why they're enacted in the first place, along with strong arguments against them. Before you decide on your position in the matter, it helps to understand how a rental cap might help or harm a neighborhood.

Rental Cap Pros

• A higher percentage of residents who are homeowners and members of the HOA
• Higher home values with a lower rental ratio
• Lower chance of disrespectful renters
• Lower chance of poorly maintained rental homes with distant landlords
• Lower potential interest rates with lower rental ratios

Rental Cap Cons

• Only the first few owners can choose to rent out properties
• Fewer potential buyers because homes can't be investment properties
• Less power in the hands of the homeowners
• Excluded renters could have been great community members
• Renters often love the houses they lease and eventually buy.

Can You Change Your Neighborhood Rental Cap?

If you find yourself in an HOA that has already reached its rental cap but wants to rent out your property, the good news is that no HOA policies are written in stone. These are agreements between the owner-members themselves and going through the correct procedure can always enact change.

The most peaceful way to change your local rental cap policy would be to get involved in the HOA, build support for the change, and ask the board to amend the policy so that better policies can be adopted that please the current collection of neighborhoods homeowners. If your HOA and/or neighbors don't want to change, your association board can also potentially hire an HOA attorney to investigate the original amendment process that made the policy in the first place. 

In most neighborhoods that have this policy, a rental cap is put into place to protect the local home values and ratio of homeowners and renters in residence. However, as times change, it may be more appropriate to raise or abolish the policy so that the neighborhood can continue to thrive with owners able to buy, sell, and lease their houses as they choose to. In other neighborhoods, the population may have changed considerably since the policy was put into place and attitudes have since changed. No matter where your local HOA stands on the issue, make sure to check the rules before planning a rental property in the neighborhood. For more helpful tips on HOA policy, please contact us today!