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Subject: New Blanket Rental Restriction Ban in CA Senate Under Consideration
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Author Messages
BobbyL1
(California)

Posts:9


07/10/2020 11:20 PM  
Hi All - There's a new bill under consideration in the CA State Senate (AB 3182) that would nullify any HOA enacted rental restriction, including retroactively, in any Common Interest Developments (CID's) with separate interests. I understand that the HOA itself cannot take a political position. But as a board member and homeowner in a condominium project, I see a ton of negative implications, if passed and signed into law, including:

-Inability to obtain mortgages (new buyers) or refi (existing homeowners) if rental ratio is >50%
-Locking out homebuyers who come in with a bid using a special mortgage programs backed by government agencies (due to reason above -- think first time 0% down mortgages, special mortgages with down payment assistance for teachers and first responders)
-Encouraging corporations/investors to buy into condos and rent out multiple units
-Lowered homeowner engagement in HOA matters due to being off-site

This is just a few negatives that I thought of specific to HOA's in condo buildings. I'm curious to hear about what you think the implications are going be if this is passed and signed into law?

Further, an organization representing CID's says this bill would "jeopardize the opportunity for an association to access financing for critical maintenance and infrastructure issues that would otherwise need to be funded by assessment increases." I'm not quite sure why this would be the case? Could someone help explain this statement to me?

Thanks.

(Bill Text: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB3182)
LetA
(Nevada)

Posts:997


07/11/2020 7:32 AM  
Stop electing these douche canoe politicians.
GeorgeS21
(Florida)

Posts:2902


07/11/2020 7:33 AM  
Let,

What?
CathyA3
(Ohio)

Posts:1120


07/11/2020 7:56 AM  
I think the OP is absolutely correct about the implications of this bill, particularly the loss of financing support and the loss of affordable home ownership. ** adjusts tinfoil hat to a jaunty angle ** I smell big money interests behind this. Many condo properties were snapped up by investors during the Great Recession, and I expect the fallout from the pandemic to be worse.

Some years ago we had a PM who had returned to Ohio from the west coast. Based on things she told us, i got the impression that the courts have been favoring the investor class at the expense of individual home owners for some time. This is one more data point supporting that conclusion.

If I were in California, I'd be looking to organize a lobbying effort, although this may be the worst time possible to get anybody's attention. It would help if you could show how this change could lead to a bad economic outcome for the state.

* Would the loss of affordable housing make it more difficult to attract a young, educated workforce, thus make the state less attractive to businesses?

* I would think that such a change would lead to a more mobile society vs. one that puts down roots for a while - does this have any negative impacts, both economic and societal?

* What do the lenders think about the potential loss of revenue from mortgage lending? Or do they believe that the increase in lending to investors would make up for it? Would this change in the nature of their loan portolios increase the risk for the banks? (With the current ban on evictions due to COVID, I predict that many small investors will go bankrupt --> more loss of tax revenue as well as foreclosures on rental properties.)

I'll give this some more thought...
AugustinD


Posts:3683


07/11/2020 9:51 AM  
Posted By BobbyL1 on 07/10/2020 11:20 PM
There's a new bill under consideration in the CA State Senate (AB 3182) that would nullify any HOA enacted rental restriction,
Thank you for providing a link to the bill under consideration. I think your statement above is not quite correct. If passed, it appears this proposed law would in fact still allow condos to prohibit short term renting (per the bill, 30 days or less).

But I think I understand your other concerns. You do not favor investors turning condo communities into essentially apartment complexes with multiple landlords.

Posted By BobbyL1 on 07/10/2020 11:20 PM
I understand that the HOA itself cannot take a political position.
Unless the Davis-Stirling statute or nonprofit statutes say otherwise, and like CathyA3 suggested, I would encourage your condo's board and the condoship membership to speak out. Below is a link that the board could use to recommend to condo members that they write certain members of the California state senate. (The bill passed the California house in a landslide, 55-17, in June. See http://leginfo.legislature.ca.gov/faces/billVotesClient.xhtml?bill_id=201920200AB3182 .)

Certain nonprofits lose their tax exempt status if they take political stands, but condo associations rarely fall into this category of nonprofits.

Chatter about the bill (AB-3182):

https://www.johnkirkhamlaw.com/new-laws/pending-assembly-bill-3182-taking-the-common-interest-out-of-common-interest-development (law firm opposes the bill)

https://caiclac.com/advocacy-campaigns/ (instructs how to write legislators and tell them to vote "no" on the bill)

AugustinD


Posts:3683


07/11/2020 10:02 AM  
Posted By BobbyL1 on 07/10/2020 11:20 PM

Further, an organization representing CID's says this bill would "jeopardize the opportunity for an association to access financing for critical maintenance and infrastructure issues that would otherwise need to be funded by assessment increases." I'm not quite sure why this would be the case? Could someone help explain this statement to me?
I am pretty sure this translates to lenders, who have an application for a loan from a HOA board or condo board, not liking to see a lot of renters. Some studies show a link between declining property values and the percentage of rentals. (Other studies say the data is inconclusive.)
MarkW18


Posts:1290


07/11/2020 10:50 AM  
I think people need to read the bill as proposed and amended.

It would not be unreasonable to restrict if the current lending guidelines from FHA and VA have specific rental guidelines. If the rentals cause a burden to the financial well-being of the HOA, the lender can build that into the rate. Generally, if the investor is financing the property, they will pay from .50 to .75 higher in rate than owner occupied.

It will not affect the provisions in CCR's not allowing short term rentals.

It would require contact information on the tenant or their representative, something HOA don't have now. If not provided, I am sure a fine can be levied.

95% of HOA's in California don't have rental restrictions in their CCRs, so really, this is a nothing burger.

When this passes and gets signed into law, and it will, HOA's will need to try and amended their Bylaws requiring owners living on site to be on boards and adding an Assignment of Rent clause.
AugustinD


Posts:3683


07/11/2020 11:00 AM  
Posted By MarkW18 on 07/11/2020 10:50 AM
95% of HOA's in California don't have rental restrictions in their CCRs
Provide a citation for this, for condominiums in particular, and it might be believable.
MarkW18


Posts:1290


07/11/2020 11:18 AM  
Posted By AugustinD on 07/11/2020 11:00 AM
Posted By MarkW18 on 07/11/2020 10:50 AM
95% of HOA's in California don't have rental restrictions in their CCRs
Provide a citation for this, for condominiums in particular, and it might be believable.



I have about 210 CCRs from California which have at tops, 2-3 with rental restrictions that would be affected by this bill. Do you have something that can disprove my estimate?
AugustinD


Posts:3683


07/11/2020 11:27 AM  
Posted By MarkW18 on 07/11/2020 11:18 AM
Posted By AugustinD on 07/11/2020 11:00 AM
Posted By MarkW18 on 07/11/2020 10:50 AM
95% of HOA's in California don't have rental restrictions in their CCRs
Provide a citation for this, for condominiums in particular, and it might be believable.

I have about 210 CCRs from California which have at tops, 2-3 with rental restrictions that would be affected by this bill. Do you have something that can disprove my estimate?
Readers here can judge your credibility for themselves. I for one am not persuaded that 95% of California condominiums have zero rental restrictions. Furthermore, the absence of explicit wording about "rentals," "renting," "rent" and the like in the CC&Rs does not preclude a board from enacting lawful rules restricting renting.
LetA
(Nevada)

Posts:997


07/11/2020 11:40 AM  
Posted By CathyA3 on 07/11/2020 7:56 AM
I think the OP is absolutely correct about the implications of this bill, particularly the loss of financing support and the loss of affordable home ownership. ** adjusts tinfoil hat to a jaunty angle ** I smell big money interests behind this. Many condo properties were snapped up by investors during the Great Recession, and I expect the fallout from the pandemic to be worse.

Some years ago we had a PM who had returned to Ohio from the west coast. Based on things she told us, i got the impression that the courts have been favoring the investor class at the expense of individual home owners for some time. This is one more data point supporting that conclusion.

If I were in California, I'd be looking to organize a lobbying effort, although this may be the worst time possible to get anybody's attention. It would help if you could show how this change could lead to a bad economic outcome for the state.

* Would the loss of affordable housing make it more difficult to attract a young, educated workforce, thus make the state less attractive to businesses?

* I would think that such a change would lead to a more mobile society vs. one that puts down roots for a while - does this have any negative impacts, both economic and societal?

* What do the lenders think about the potential loss of revenue from mortgage lending? Or do they believe that the increase in lending to investors would make up for it? Would this change in the nature of their loan portolios increase the risk for the banks? (With the current ban on evictions due to COVID, I predict that many small investors will go bankrupt --> more loss of tax revenue as well as foreclosures on rental properties.)

I'll give this some more thought...




Totally Agree Cathy

This legislation if passed has disasterous consequences.. having worked security at a high-rise condo here in Vegas, people treat private residences like party city in a hotel.
That is just one part of it, and YES if there are an overabundance of renters in a CIC, buyers will find a hard time finding mortgage lenders willing to lend to them.
MarkW18


Posts:1290


07/11/2020 11:47 AM  
My credentials and experience speak for themselves. You might make a good research assistant, but for your lack of experience that's the best I can come up with.

California has a set of rules for both condos and planned unit developments. Within these groups they are called homeowner, community and maintenance associations. We use the Davis-Stirling Act within Civil Code and Corporation Codes for all types of associations.

I have twice asked if you have ever lived in an association, been a board member or even managed a property or two. Without that, what credibility is one supposed to derive from a non response except that you would make a damn good research assistant.
AugustinD


Posts:3683


07/11/2020 11:55 AM  
As indicated in the past: I have never managed a property. I have lived in three hoas/condos. I have been on the board at two. Else ad hominems say everything about a person's credibility.
CathyA3
(Ohio)

Posts:1120


07/11/2020 12:47 PM  
Currently FHA certification requires a condo community to be at least 50% owner-occupied. During the Great Recession, this requirement was bumped to 75% (I think). That meant that a number of condo communities that had previously been FHA approved no longer were, which reduced the pool of possible buyers at a time when the real estate market had already slowed painfully.

FHA typically has other requirements that can limit the types of rentals that would be allowed in eligible communities. It also limits the number of units that may be owned by a single entity, although we all know the games that can be played to get around this.

Other lenders also have requirements about the maximum number of rental properties in a community for which they will approve a mortgage loan. In addition, many lenders do not continue to service their loans - they sell them to Fannie Mae, for example, which may also have its own requirements for loans they will purchase.

I have my doubts about the possibility of amending bylaws to require owner-occupants to serve on the boards. I question the legality of something that imposes a requirement on a subset of owners, never mind the fundamental unfairness of it. And many condo communities already have problems filling their director positions - this could only make it worse, and it could increase the numbers of communities that go into receivership as a result. (I wonder how the investors will like them cookies when the cost of receivership means they're no longer cash flow positive.)

I also wonder if California will see condo owners bail if this law passes. Owners would be left with the worst of both worlds: the obligations and legal liabilities of home ownership along with the disadvantages of living in a rental community. (I'd be outta there toot sweet.) And I wonder how condo developers will feel if their market starts to dry up as potential non-investors say "nope".

The unintended consequences of this bill bear further investigating.
SheliaH
(Indiana)

Posts:3358


07/11/2020 12:51 PM  
You have the same concerns as I've always had about rentals. I live in a townhouse community and we had a devil of a time dealing with delinquencies by homeowners who rented out their homes to bad people and ended up losing the home because those "you can get rich flipping homes or renting tbem" infomercials made it look on so easy. We continue to have trouble getting people to serve on the board because most owners live off site (and sometimes out of state) and frankly, I don't trust owner-landlords to do right by owner occupants like me.

I heard financing can be difficult for someone who wants to buy in a HOA that's dominated by owner-landlords because those communities have such a high rate of foreclosures. I also heard getting insurance for everyone can be a problem because insurance companies may look at the entire community as a rental property and charge accordingly, whether you're an owner occupants or not.

As far as a political stance is concerned, our community can't endorse specific candidates, but I don't see why you can't express your concerns based on what your homeowners think of this. It certainly shouldn't stop you or any home in that community to write letters to your representatives and say what you think. You can do that as Bobby j. Homeowner, not bobbyJ, board member.






KerryL1
(California)

Posts:7397


07/11/2020 1:10 PM  
Thanks, Augustin for the good summary. I hope to read it soon but not this weekend. I'm happy we in CA still will be able to prevent short term rentals.

The eff. 1/20 SB 323 makes any owner absentee or not eligible to serve on the Board. So I guesss this proper all wants to overturn that?

Our condo building's CC&Rs do restrict renting out a portion of our units, for transient purposes, and requires landlord to submit complete leases to the HOA. The firm of Community Association lawyers that wrote our CC&Rs wrote them for at least a dozen more in my urban center. So, at least i nurban condos, there are CC&R limitations on rentals.

A rent Clai post also asked about renting to a housemate and his CC&r's section the topic was like ours.
MarkW18


Posts:1290


07/11/2020 1:58 PM  
This bill will pass and probably signed into law by the end of the year. Affordable housing and homelessness are a hot button right now, so this is a done deal.

The real party starts when lawyers start to interpret what THEY THINK the legislators thought they meant.
BobbyL1
(California)

Posts:9


07/11/2020 2:12 PM  
It's not big money interests, per se. It's the grassroots California YIMBY org (Yes In My Back Yard). We have a housing crisis here and the YIMBY position is to force development of housing by any means and at any cost. This was a bill written by them, submitted to an agreeable state assemblyman who submitted this in a package of housing reform bills. With COVID, all of those housing reform bills were put on hold, except for this one.

IMO, we need more housing. I'm not a NIMBY (Not in My Back Yard) by any means. But my contention is that this is the wrong approach to get to more housing. The effects are nuanced but substantial and likely cannot be fully realized until 2, 3, maybe 4 years down the road.

What's concerning is that legislators that are in both state houses and on the housing committees are not just pro-housing, they're pro-renters and anti-homeowners.

I'd like to get a lobbying or grassroots effort going, but there's only (approx.) 14 days until the next hearing.

The most worrying and confusing part is that the only org opposed to the bill (https://caiclac.com/) made suggestions on how to amend this bill for the worse, not better. They suggested making this bill completely retroactive, whereas the original bill only called for it to be retroactive to Jan. 1, 2012. The Assemblymember made those changes with the understanding that CAI-CALC would drop their opposition to the bill.

I would appreciate any additional thoughts you have on this!
BobbyL1
(California)

Posts:9


07/11/2020 2:19 PM  
Thanks. I'm still trying to ascertain all of the impacts and consequences by leaning on the informed voices in this forum. This is helpful.

The short term rental issue is less worrying to me. I know that the legislators know this is an issue. So they're keen on preventing short term renting.

I'm not necessarily against investors 100%, I think there are benefits to having some investors in a building. But I'm personally against anything that jeopardizes my ability to sell my unit, prevents me from realizing my property's true value, excessively interferes with my shared interest in a common interest development, or prevents the association from properly managing the building.

It's like the legislators took a broad brush and painted all HOA's as bad entities when they considered this bill.
BobbyL1
(California)

Posts:9


07/11/2020 2:22 PM  
Sorry folks, new to the board. Didn't realize my replies don't nest under other replies.

07/11/2020 10:11 PM was for CathyA3
07/11/2020 10:18 PM was for AugustinD
LetA
(Nevada)

Posts:997


07/11/2020 2:52 PM  
The sad part about it BobbyL1 is the legislators that are making these laws live in armed guard gated communities. They are do as I say not as I do type people.
GeorgeS21
(Florida)

Posts:2902


07/11/2020 2:54 PM  
Let,

Where do you come up with these blanket statements?
CathyA3
(Ohio)

Posts:1120


07/12/2020 5:23 AM  
Posted By GeorgeS21 on 07/11/2020 2:54 PM
Let,

Where do you come up with these blanket statements?



Maybe not armed, gated communities. But on average, unless they've bought in luxury condo buildings - and these do exist - many condo owners have relatively modest means, and for most people the greatest part of their net worth is in their homes. By contrast, you typically need to be well-heeled to finance an election campaign, which means your experience of life will be different. Of course there will be exceptions to this.

Now that BobbyL1 has added some more details, I agree with his take on this: a well-meaning effort to address the housing issue which will have detrimental unintended consequences. It's setting California up to replay what happened to the Florida condo market during the Great Recession, when investors scooped up condos that were going for a song - at a time when it's likely we'll see similar, or even worse, economic conditions.

Rental markets have the same un-affordability issues that plague owner-occupied housing, and we also saw that play out during the Great Recession. If renting is the only game in town, then there is nothing to stop landlords from raising rents however they want. Further, this bill will be knocking the legs out from under the segment of the market that provides an alternative to rentals, namely moderately priced homes that provide first time home buyers will an opportunity to buy. Many first time buyers choose to buy condos, and now California legislatures think it would be a good idea to reduce the available supply of these homes. /smh

It's so frustrating that people seldom think through all of the possible implications of their bright ideas.
CathyA3
(Ohio)

Posts:1120


07/12/2020 5:38 AM  
Recommendation: Facebook page, Twitter feed, etc. stat. Do all the stuff you need to do to advertise your page and get the word out.

Get the word out about the negative consequences of this bill. It may actually be a good time to reach people on line, since many will be stuck at home avoiding covid.

Also a good time to let your elected officials know what's on your mind. Flood their offices with calls and letters.

Write op-eds for your local papers (does anyone read these any more?).

Call the local radio and TV stations to see if they'd like to do a story about this, and find a thoughtful, well-spoken individual to be your official media contact.

Your message: this bill will do the opposite of what the sponsors claim it will.

And don't give up. Even if the bill passes, it's still possible to amend or even repeal it before too much damage is done.

BobbyL1
(California)

Posts:9


07/19/2020 1:20 AM  
Looks like there's been a pretty dramatic update to the bill text in committee:

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB3182

Allowing HOAs to set rental restrictions at 25% or higher. And the ability to be more aggressive as lending need require.
CathyA3
(Ohio)

Posts:1120


07/19/2020 5:13 AM  
Good news, yes? It sounds like people who understand how all of this stuff works are keeping tabs on the bill and legislators are listening.
GeorgeS21
(Florida)

Posts:2902


07/19/2020 9:33 AM  
Yes, this definitely sounds like cooler heads prevailed - and, could be a result of lobbying efforts by HOA/COAs to offset the lobbying efforts of the property rights group.
MarkW18


Posts:1290


07/19/2020 11:13 AM  
Did anyone actually read this, top to bottom. The groups you're praising, won't go for some of these changes.
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