By Deborah Goonan, Independent American Communities
Today I share several articles from across the country, all of which provide a Big Picture view of disruptions to the HOA industry.
For starters, the rental market is quite robust, because many consumers are choosing to rent rather than buy. Some housing markets have become so unaffordable that a home purchase is out of the question, even for middle class homebuyers.
But even consumers who can afford to buy, and those who could qualify for a mortgage, are opting to rent rather than being tied down to a home.
After all, tenants can more easily relocate for career opportunities, can avoid unexpected maintenance and repair bills, and are more free to travel, whether for work or leisure.
No doubt, some former homeowners have lived through a home foreclosure or have had a negative experience with a dysfunctional HOA, preferring to avoid more of the same.
In Chicago, as in other big cities, older condo associations are terminating and undergoing a “deconversion” to rental apartments. In most cases, the condo associations are struggling financially, and the majority of units are already leased to tenants.
As long-term housing, the condo is quickly becoming obsolete.
Condos out, apartments in
High assessments, changing demographics drive condo deconversions
November 21st, 2017 2:05 PM
By Timothy Inklebarger
It was a golden age for condo conversions in the Chicago area in the 1980s and 90s, but the financial crash of 2008, changing demographics and a hot market for rental units has sent the pendulum swinging in the other direction.
The real estate trend is now toward condo deconversions or bulk sales – where condo buildings are being converted back into rentals – also is taking place in Oak Park.
Across the nation, the single family home is becoming the preferred choice for renters who are tired of cramped and crowded apartment living, but are not willing or able to buy a home.
Since many, or perhaps most, suburban single family home neighborhoods also happen to be governed by HOAs, millions of existing homeowners can expect a shift in the renter-to-owner ratio in their communities. As that shift takes place, know that the balance of voting power in the HOA may very well shift to non-resident investor owners.
Renters are often assumed to be less concerned about maintaining their properties. Although this may be an unfair generalization, expect new HOA procedures for enforcing rules involving tenant-occupied properties.
Lenders may begin to shy away from mortgage financing of homes in HOAs with a high percentage of investor-owned properties.
Renting homes is overtaking the housing market. Here’s why
Bob Sullivan, Credit.com Published 11:00 a.m. ET Nov. 11, 2017 | Updated 1:23 p.m. ET Nov. 11, 2017
Single-family rentals — either detached homes or townhomes — are developing faster than any other portion of the housing market. These rentals outpace both single-family home purchases and apartment-style living, according to the Urban Institute.
“Almost all the housing demand in recent years has been filled by rental units,” says Sara Strochak, a research assistant with the Urban Institute. She also states that single-family rentals have gone up 30% within the last three years.
This change is unique to newer generations. But when did rentals become so popular? And why are people more inclined to rent than to buy? Below, we’ll further discuss the rise in rentals and how it affects the housing market.
In some real estate markets that cater to young adults, investors are buying up 3-bedroom condos that are shared by 6 roommates. Landlords reap higher rents, often in defiance of local ordinances that dictate maximum occupancy standards.
In addition to overcrowding, the transition results in a huge culture clash of lively single adults vs. families with children. Families are migrating elsewhere to find quieter neighborhoods, and some schools are losing students, while others struggle to accommodate an influx of new students.
Provo, Utah, is one example. Now city officials are seeking better ways to enforce maximum occupancy ordinances, in an attempt to prevent overcrowding of investor-owned rental properties.
Southeast Provo single professionals face a housing conundrum
From the Utah County’s Housing Dilemma series
Genelle Pugmire Daily Herald Sep 2, 2017
With two universities and higher-paying jobs in the immediate vicinity, young adults are moving to Provo. Or they are finishing school and never leaving.
They like it here. And what’s not to like. There are lots of things to do, from Rooftop Concerts and other entertainment venues, to the more than 50 eateries downtown. There is snow skiing, water skiing, hiking, climbing and other outdoor adventures.
In a nutshell, landlords have purchased and continue to purchase investment properties in southeast Provo. Where families may pay a monthly rate of $1,250 for a three-bedroom, two-bathroom condo, singles will pay $400 to share a room.
Why settle for $1,200 when you can get $2,400?
That gives the landlords/homeowners incentive to have more tenants than the law allows. In some cases they are encouraging singles to move in because, without a complaint, the city doesn’t check zoning compliance.
Typically, if those three-bedroom units have a young family, there will be only two cars. With singles, there might be six — that’s another problem.
Meanwhile, some condo associations are fighting desperately to keep their communities owner-occupied. In Atlanta, one condo association has banned rentals entirely. Unfortunately, one investor didn’t read the HOA rules before renting one of the units he owns. The tenant was forced to move out, and the landlord agreed to pay moving expenses and return her deposit.
Better Call Harry: Illegal renter
Posted: Sep 26, 2017 4:15 PM EDT Updated: Sep 26, 2017 10:12 PM EDT
Read more: (Video)
Note – Pacific Holdings is a real estate investment company that specializes in acquiring and managing a real estate portfolio of rental properties.
All in all, several very interesting real estate trends in the U.S. that are bound to have an impact on demand for housing in association governed, common interest communities.