16
Oct
2019

Do renters hurt property values?

If you live in any suburban neighborhood — particularly one with a homeowner’s association — you’ve probably figured out that most of the homeowners are concerned about the number of rental houses in the subdivision.

The prevailing view among property owners for years has been that too many renters in the neighborhood will drive down property values. Many homeowners hold to a belief that renters don’t have any skin in the game and won’t maintain the property because they don’t own it.

But, do renters really drive down property values?

As it turns out, we don’t have a clear answer to the over-arching question, but there is a current trend that may change the common knowledge on this issue.

First, studies on the link between renters and a decline in property values have been inconclusive. There are studies that say more renters mean less home value and there are studies that say renters don’t have any impact on home values. There are too many variables at play to actually link rental property to overall property value.

However, regardless of what may have been believed — or even true — in the past, the housing market crash of 2008 and the increase in the number of people renting homes today vs. buying homes has created a trend that may change the perception what renters do to property value.

In neighborhoods that have banned renters or capped the number of renters allowed, a growing number of homeowners are walking away from their mortgages after being unable to sell their homes. Since they can’t rent and can’t sell, they simply go into foreclosure, leaving the property vacant and unmaintained.

As the demand to own homes decreases, neighborhoods that are trying to keep out renters are finding themselves with a growing number of vacant houses, which is far worse for home values than renters.

This trend may not last, but for now, it would be wise for homeowners and HOAs to think about the potential consequences of limiting the number of rental properties in an economy with a high demand for renting and a lower demand for owning a home.

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