Cohousing-L Mailing List: Re: limits on rentals and absentee landlords?

[Sharon Villines (sharon]

> On Jun 30, 2023, at 11:23 AM, Diana Carroll <dianaecarroll [at] gmail.com> 
> wrote:

> I am sort of confused by the policies that specifically discourage long
> term rentals in particular. I would think long-term whole-home renters
> would be the ideal way to build a community that includes people who are
> really looking to settle down and be involved in community but can't/don't
> want to buy.

The primary concern in condos of all kinds is the lack of care that absentee 
landlords give their units. It lowers the value of the whole community because 
it makes it harder to get mortgages. Although banks seem to have a wide range 
of tolerance about rented units it seems to be a consistent concern.

According this website that does FHA Reviews for condos the limits for the FHA 
are: 65% renters, 15% delinquent accounts, 50% FHA Loans. 10% of budget must go 
to reserves. AND a list of other requirements that relate to the HOA’s ability 
to restrict leases. 

There are other requirements for leases that are not acceptable that I think we 
don’t want to know about including that a unit owner must own a unit for a 
certain amount of time before being able to lease it or have the power to void 
leases. Some of these are stated in terms that seem to be double negatives so 
it’s hard to tell which direction they go.

This one is interesting: Must not require credit references, criminal 
background, or sex offender checks – The Unit Owner may require these, but not 
the HOA. "Many of the condominiums that we review in Florida do not qualify for 
FHA Condo approval for this reason."

https://fhareview.com/fhacondoapprovalguidelines/

This is a list of the documents the “Board” or management company must provide 
to apply for HOA approval.
https://fhareview.com/fha-condo-approval-required-document-list/

The concern with condos is that the legal entity was created to give unit 
owners the freedoms of single-household owners as opposed to coops in which the 
Board is literally the owner of the whole enterprise. Those occupying coop 
units only have percentage interests and the right to occupy a unit. They 
cannot, for example, decide who will buy their interest or occupy the unit. 

In the cohousing context, the coop form would be more desirable because the 
community could directly control the  residents but it is much more complicated 
interpersonally and much harder to finance.

And in terms of development, developers only want to develop properties they 
can sell. The condo unit has to be easily transferable. Banks also think of 
resale before they agree to a mortgage — will the unit still have market value 
in 2, 5,10 years.

So the questions are more complex than preferring those who can afford to “own” 
over those who can only afford to “rent” because of the downpayment and 
employment requirements.

The restrictions on rentals may be closer to 10% for some banks but in general, 
these seem to have loosened up after the housing crisis of 2008. 50% seems very 
high. It might mean a transient population and that would be hard for cohousing 
to maintain itself — constant education of new residents.

Personally, I think everyone should have the opportunity to own property 
because that is what our economy is set up to favor. If you don’t own, you 
don’t have the same ability to accumulate wealth. There are exceptions like 
very wealthy people who have rent-controlled apartments for which they pay a 
few hundred dollars for 10 rooms — but those are not common.

"Renter = Transient" is the relationship that causes problems in the US. In 
Europe there are other forms of residence in which people in a building are all 
still there 2 generations later. (I don’t know what these are.)

Sharon
----
Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org