Is your HOA allowing multiple or “too many” short-term rentals (STRs) or investor-owned properties?
Many homeowners' associations (HOAs) are facing a growing number of short-term rentals (STRs) in their communities–typically advertised on platforms like Airbnb. While some residents see STRs as a convenient way to generate income, others raise concerns.
AB 2584: Curbing Bulk Purchases of Single-Family Homes
Assembly Bill 2584 prohibits companies that have a financial interest in more than 1,000 single-family residential properties from purchasing, acquiring, or otherwise obtaining an interest in another single-family residential property and subsequently leasing the property.
The bill was introduced to make more homes available for purchase to individual buyers and to stop “bulk purchases” of entire neighborhoods; these purchases are made by investor/institutional corporations.
A Potential Solution...or Overreach?
While it addresses the issue, it's important to note that less than one percent of housing stock has been bulk purchased.
The bill would authorize the Attorney General to bring a civil action for a violation of these provisions and requires a court to levy a penalty of $100,000 for each single home violation. The bill also requires the business entity that bought the houses to sell the property to an independent third party within one year of the date that the court enters judgment.
Already, the California Attorney General has reached a settlement with Invitation Homes for $3.7M for rent cap violations.
Lobbying and Potential Amendments
As I mentioned in April, this measure will likely encounter significant lobbying both for and against it.
Notably, these groups are in opposition: California Apartment Association, California Association of Realtors, National Rental Home Council, Southern California Rental Housing Association, California Building Industry Association, California Chamber of Commerce, and California Business Roundtable.
These organizations argue that the bill could negatively impact the rental market and housing development. In the end, due to opposition, AB 2584 did not advance.
Can HOA Restrict Short-Term Rentals?
You may have seen signs posted in your HOA decrying the growing number of STRs which are typically rented out on a weekend, weekly, or monthly basis and wondered if an HOA can restrict short-term rentals.
News stories have cited instances where renters failed to observe the HOA’s decorum, often stemming from issues like:
Disruption of Community Decorum
STR renters may not be familiar with or choose not to follow HOA rules regarding noise levels, parking, or guest behavior. This can disrupt the peaceful enjoyment of the neighborhood for long-term residents.
Damage to Common Areas
Short-term renters might not feel the same sense of responsibility for maintaining common areas as homeowners do. This can lead to increased wear and tear and higher repair costs for everyone.
Transient Nature of Occupancy
The constant turnover of renters in STRs can create a less stable and familiar environment compared to a community with primarily owner-occupants.
Additional Considerations for HOAs
While AB 2584 primarily targets bulk purchases, HOAs can explore other avenues to address concerns with STRs. These might include:
Reviewing and Updating HOA Covenants
Make sure your HOA's covenants clearly spell out the rules for short-term rentals (STRs), including details like minimum rental periods, guest limits, and noise rules. Also, be sure to outline any fines or penalties for breaking the rules and give examples of what's okay and what's not. Regularly reviewing and updating these covenants will help tackle new challenges and trends in the STR market.
Communication and Enforcement
Keep open and transparent communication with residents about STR regulations so everyone knows the rules and their purpose. Use varied channels like newsletters, community meetings, and emails to share this information. Consistently enforce the regulations and set up an easy process for reporting violations, such as an online form or a dedicated hotline.
Appreciate and reward residents who follow the rules to encourage adherence and create a cooperative community vibe.
Seeking Legal Advice
If your HOA is thinking about making big changes to its STR policies, it's a good idea to chat with a lawyer to make sure everything lines up with state and local rules. Legal experts can help draft policies that work well and can be enforced. They can also help handle any legal issues that might come up from residents or others.
Taking this proactive step helps protect the HOA from potential lawsuits and ensures all changes are legally sound.
HOA Laws: Staying Updated on AB 2584 HOA and Short-Term Rentals
HOALAWS will monitor and report on the bill’s further movement and amendments if any…while two other measures address this issue but limit the prohibition much less drastically. A melding of all three bills may occur before September.