Homeowners groups move to stop investors from buying just to rent

Homeowners associations are emerging as a hedge against wealthy investors snapping up single-family homes to rent, depriving local families of potential housing and economic mobility, reports The Wall Street Journal.

These groups usually spend their time enforcing quality-of-life rules like lawn care and parking. However, they are beginning to see investment purchases of homes in their neighborhoods as a potential issue.

HOAs argue that rising purchase by corporate investors has led to a decline in property maintenance and made their neighborhoods less desirable.

“They’re coming in, and they’re basically bullying people out with cash offers,” said Chase Berrier, the president of a neighborhood HOA near Winston-Salem, who added that it has been difficult to reach the owners of rental homes that fallen behind on maintenance.

Investor purchases have risen during the pandemic, accounting for more than one in five home sales in December. Critics say their tendency to purchase homes outright with cash and record housing prices has edged would-be homebuyers out of the market.

“They’re denying an entire group of individuals an opportunity to build equity in an asset and accrue wealth,” said Scott Fadness, the mayor of Fishes, IN, of corporate investors in his city.

“We have been exploring what are the options to regulate this?”

HOAs are pushing back with rules that discourage investor rentals, such as a cap on the number of homes that can be rented in the neighborhood or requiring that any rental tenants be approved by the association board.

Berrier’s North Carolina association is trying to amend their constitution to require new buyers live in a home or leave it vacant before renting it out.

These efforts have met resistance from landlords groups and housing advocates, who say the new restrictions would harm low-income families who cannot afford to buy.

Another barrier is that any change of HOA rules usually requires approval from a large majority of homeowners. Berrier plans to organize a door-knocking campaign to reach the 80% threshold of his association.