In response to increasing regulations at both the state and local levels on rental of single-family residences, the Wisconsin REALTORS® Association will be seeking legislation that protects the rights of homeowners to rent their homes by barring the enforcement or adoption of local ordinances that prohibit or unreasonably restrict the ability of homeowners to rent out their homes.
Thousands of Wisconsin homeowners choose to rent out their homes every year. Some rent their homes when they must move away temporarily for work, school or military duty. Others purchase homes in popular vacation areas for investment purposes and rent them out to tourists who travel to Wisconsin for vacation. With the downturn in the real estate market, many more homeowners are choosing to rent out their homes, rather than sell them at significant losses.
State and local regulations, however, are making it more difficult and, in some cases, impossible for homeowners to rent out their homes. For example, Wisconsin’s Department of Health Services imposes expensive inspection requirements and fees on homeowners if they rent their homes to anyone who has another permanent residence, regardless of the duration of the rental period. See Wis. Stat. § 254.61. Local communities often charge $200 to $500 to perform these inspections. Other communities have gone even further by adopting ordinances that specifically prohibit the rental of single-family homes.
Impact on Homeowners and the Real Estate Market
Making it more expensive to rent and/or prohibiting homeowners from renting out their homes is harmful to Wisconsin families, homeowners and the real estate industry for the following reasons:
Negative impact on second-home markets: Many people have purchased second homes as an investment with the intention of renting them out on a seasonal basis to generate income or to help pay for ownership costs. Banning the rental of homes by ordinance undermines the investment-backed expectations of these homeowners and prevents them from using the property for the primary purpose for which they purchased it. Moreover, without the ability to rent, prospective homebuyers may be less likely to purchase homes in these areas, which could negatively impact the prices and/or marketability of these homes.
Increase in foreclosures: Many homeowners who didn’t intend to rent out their homes have recently been forced to do so due to the downturn in the economy. Renting out their homes provides these homeowners with a necessary income source to provide for their family and to possibly avoid foreclosure. Prohibiting rentals could result in a greater number of foreclosures.
Greater difficulty obtaining financing: Obtaining financing to purchase or refinance real estate has become more difficult. Appraisers and loan underwriters are scrutinizing more closely all conditions that could affect the value of the property, including local ordinances. Ordinances which prohibit the rental of homes could negatively impact the value and thus the ability to obtain financing for these homes.
Hurts tourism: The ability to rent a cottage or cabin “up north” is part of Wisconsin’s cultural heritage. For generations, families from Wisconsin and other parts of the country have rented cottages and cabins to spend time together hunting, fishing and boating. For those families that cannot afford to own a second home, renting a cottage or cabin for one or two weeks out of the year presents them with a special opportunity to enjoy Wisconsin’s wonderful water resources. Local ordinances that ban the rental of cottages and cabins, and/or subject them to expensive inspection requirements, limit the ability of families to vacation in Wisconsin and ultimately hurts our state’s tourism industry. The WRA will work with legislators and other stakeholders to hopefully address this issue during the next several months.
If you have questions about this legislation, please contact Tom Larson (email@example.com) at (608) 240-8254.
Tom Larson is Vice President of Legal and Public Affairs for the WRA.