Keri Miller, HOA Treasurer at Mallard Creek, and Mike Hunter, Attorney at Offit Kurman, discuss how residents feel about the rise in corporate rentals and what is being done to curtail the short-term rentals trend. 

Opening Bell

Corporate Purchasing of Homes in U.S. Suburbs Increases as Residents Push Back 

here to discuss. Is Carrie Miller, homeowners Association treasurer, treasurer, Excuse me at Mallard Creek Kerry, glad to have you on this morning. Just tell us a little bit about the rising corporate rentals and their impact on the housing market. Great, well, I'm glad to be here. Thank you for having me. Alicia. Uh, so yeah, I've been living in my community since 2000 and 17 and when I moved in, um, I noticed that initially it was an income property, but I did notice there was some issues that, that didn't really didn't really sit well with me. Uh, you know, there were, uh, there was high grass and just different things that you could tell that renter occupied units tend to have. So I stepped in and I wanted to do something and once we had a, um, we had a shootout last february. And with me being a new mom, it was terrifying. Right? So I knew immediately we had to do something at the board to make sure that we could vet and make sure we knew exactly who was moving into our neighborhood. So we came together and we, we really tried to figure out what we could do that wasn't discriminatory and that would give everyone the opportunity to, to still have, uh, to still be able to maintain their rental properties. But also with whenever those leases ended, they would have to come to us for approvals, you know, in charlotte and elsewhere investing groups seem to be purchasing a disproportionate number of homes in predominantly black neighborhoods. I'm curious what has been the reaction to that from residents and what is being done to curtail the short term rental trends. Yeah. So what we've been doing lately and I live in a different neighborhood here in charlotte north Carolina. It is historically black and we have suffered generations of redlining here in this area. So what we've done was come together and decide, you know, we were, we had to, we had to make sure that we could fix the covenant. So in the covenant, it does state that you can lease your property, but there's no, uh, there's really no guidelines around it. So any and everyone could buy a property here and rent it out to their own leisure. And that was where the issue stood. So we had a whole bunch of absentee landlords who really just wanted someone to pay the rent, pay their mortgage and occupy the unit. So we came together as a community and here and now at least we have 100 and 10 units and we had to have a 65% um, consent rate to be able to to pass that amendment. So we went around, we knocked on doors, we had town hall meetings and after that shootout, we did make sure that we, we focused on the safety aspect and in our, our new amended covenants or releasing amendment, we basically said that you can only, you can buy, but you have to occupy your, your unit for up to a year and any time that you would want to rent your unit. We have to approve the least. We have to approve the, the background check. There has to be a criminal background check now. So that's actually, um, in addition to the leasing amendment where you are supposed to live here for a year. And so that has actually, uh, cartel the, the investors because no one's going to buy a property And live here if they're, if they're intending intending on renting. And since then we have seen as of last month, 10% lower, uh, 10% lower renter occupied units. And right now we're at a last year we were at 41% occupied. Now we're at about 33 and we're right there underneath our cap. So we did it, we did establish a rental cap as well. And then you have to have a waiting list to be, uh, to be to be able to rent your unit. So there are quite a few obstacles for someone to be able to purchase a unit here and to rent it? Any insight in terms of, you know, what started this trend or what allowed this to kind of become an issue within the community. I'm sorry, can you repeat that? Any insight in terms of what started this trend, Right investors kind of buying up these problems. Absolutely, yes. Yeah. So what happened was we I'm also part of another organization. Um, derided Statesville Road. Um, I, I'm actually someone who just participates. I'm not on that board, but we have a monthly meeting and we talk about the things that we're seeing in our communities each, uh, so what we were seeing, we were seeing trash, there was an uptick in crime, There were people who were squatting, there were people who were not taking care of their properties. And so that's when we realized, okay, we needed to do something. And then we also started to see, um, investors, we call it investor invasion. Right? So they were coming into on this part of town where the, the, the, the units are a little less expensive, a little bit more affordable than the other parts of, of charlotte. You have your crescent and you have your wedge and we're outside on the crescent, so you're not directly center city where all the, where all the gentrification is taking place, but we're on the outskirts, where you have people who, who move forward to live in charlotte, but it's a lot more affordable. And so when everyone is using the word affordable as okay, let's put any and everybody in this in this neighborhood just because they can afford the rent. So we, we, we, we dug deep, we read over our bylaws and covenants and we decided, okay, this is what we can do to, uh, to deter those investors. And if you can hold this for a moment because I want to bring in, um, Mike Hunter attorney at off it, kerman might just want to get your take on kind of the legal side of this in terms of, you know, the charlotte market right now and the effort to kind of mitigate what has become a problem in these communities. What are you seeing from the legal side of this? Uh, my practice, the bulk of our practices in charlotte and the surrounding counties, major metro metropolitan area. And I can tell you starting probably 23 years ago, I started getting more and more clients coming to me asking, uh, for these rental restrictions as they saw the coming wave of corporate investors. And I'm telling you within the last couple of months, it has just exploded. I think within the last two weeks I have had probably a dozen clients come to me Asked me for rental structures. I drafted two sets just yesterday. Uh, it's, it's just amazing how many of them are coming to us from these types of restrictions and carry, hit the nail on the head. And the way they're addressing it primarily is requiring a two year, one or two year ownership period before a new purchaser can lease the home and also putting a cap on the percentage of homes that can be rented. And a second, uh, option that a lot of communities are going for our requiring the criminal background checks to keep out people with, uh, convictions for violent felonies or felonies involving weapons, violence, drugs or sexual offenses. And that's been pretty effective from the, the community. I haven't adopted. The background checks has been pretty effective. You know, Carrie mentioned a moment ago, really trying to put these, these, um, you know, limits in carefully, right, not, um, you know, teetering on the line of discriminatory and so I imagine on your side of things, if you can break that down for us, because I imagine it's been some of the criticism, right? Like some advocates saying rental home companies, um, and these inclusions could also be kind of discriminatory. Can a consensus kind of be reached among neighbors and then balance out the investor interest here. I'm sorry to you, mike. Oh, I'm sorry. In terms of balancing out investor interest and concerns that maybe some of them have or maybe flag, um, you know, in this kind of, you know, bounce to the community and the investor. Yes, I have heard some of my H. O. A clients have had people complain saying that these, uh, these restrictions were discriminatory in nature, but I haven't seen any evidence of that myself. They truly are concerned with, uh, troublemakers living in the neighborhood. We've had gunfights erupt out of rental homes. We've had people who who just allow the home to fall into a state of disrepair. It's not the tenants are bad. Uh, it's, it's the landlords that are bad who failed to screen their tenants and failed to maintain the property. So it doesn't have anything to do with the tenants in terms of where things are at right now. Mike has there been better resolution? Have you guys been able to come up with, you know, some of the plans that Carrie was talking about a moment ago to kind of maybe mitigate this problem and stop it from being a trend and something that that is balanced between the investor and the community. Yeah. And I think Kari's neighborhood is a perfect example of where we've done this and it's worked. Uh, there's still about 30% or so. The homes are, are investor owned and that's fine. Uh the the landlords are doing a better job of screening their tenants. Um the homes are maintained better and they're not having the, the crime problems that they were having. She's a, she's a perfect example of how these types of amendments or restrictions can work. I really appreciate both of your time here. It's, it's an interesting case of what's happening there, but really a bigger case of kind of the same trend being seen around the country and especially in light of where home prices are now, where interest rate hikes are right now. Um, just great context, Kerri Miller homeowners association Treasurer at Mallard Creek and then Mike Hunter Attorney at office kerman