Homeowners Hope Proposed Legislation Will Curb Boarding Home Rentals in Single-Family Neighborhoods
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Private equity companies purchased 44 percent of single-family homes in the U.S. last year and Texas Gov. Greg Abbott said he wants to address the market distortion in the 2025 legislative session.
“I strongly support free markets,” Abbott wrote on X after reposting comments alleging that the investor rush into the single-family market is driving up home prices. “But this corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home. This must be added to the legislative agenda to protect Texas families.”
Abbott’s comments, reported last week by the Dallas Morning News, are music to the ears of residents like Julia Pitlik of Plano and a Dallas District 13 homeowner who have had enough of what they say are investor-owned boarding homes operating illegally in their single-family neighborhoods.
Dallas Boarding Homes
Homeowners in Dallas’ Willowgate neighborhood say there’s a residential hotel operating on their street and they don’t understand why the illegal use is allowed.
It’s a bit of an open secret that “boarding homes’ operate throughout single-family neighborhoods in North Texas. Renters pay for one room in a large multi-bedroom home and it goes unnoticed and unreported until the tenants cause a problem. Common complaints include loud parties, parking issues, and sanitation problems.
The code infractions are occasionally addressed in a timely manner but city officials appear to turn a blind eye to the zoning violation of a boarding house operating in a single-family neighborhood.
The home at 3547 Merrell Road is listed on Realtor.com as an off-market six-bedroom, three-bathroom single-family dwelling. The same home is listed on Zumper by MPS Real Estate Investors as a room for rent for $1,000 per month. Lease terms require a renter for three months.
“Perfect for traveling nurses, medics, and other traveling professionals,” the advertisement states.
A third listing for the Merrell Road address on PadMapper describes a one-bedroom, one-bathroom apartment.
A neighbor who lives nearby and asked to remain anonymous said the home at 3547 Merrell Road, originally a three-bedroom, was converted to six bedrooms in late 2020 or early 2021. The neighbor looked up the address on the Dallas Central Appraisal District and said no permits were issued at that location.
By definition, she said, the home is a residential hotel, according to the Dallas Development Code.
Jeremy Reed, assistant director of Dallas Code Compliance, told CandysDirt.com he’s aware of the issue on Merrell Road.
“This property has an active boarding home case open,” he said. “Inspections are being conducted.”
Boarding Home Loopholes
There are loopholes that allow several unrelated adults to rent rooms in a home in a single-family neighborhood; for example, if a service is provided or the residents are disabled. Sober-living homes are allowed in some neighborhoods because addiction is considered a disability.
The Willowgate homeowner said they’ve been told the Merrell Road home, originally found to be operating illegally, was later granted a boarding home license because a cleaning service is provided there.
“This was previously found in violation of operating as a residential hotel in a single-family neighborhood by Code Compliance,” the homeowner said. “How can it be granted a license when boarding home licensing requires proof of proper zoning and this location isn’t operating under FHAA protection? How is code compliance not finding it in violation today operating as it was in 2021?”
Recently the City Plan Commission and Dallas City Council allowed a dwelling for homeless veterans to continue operating in a residential district on South Polk Street. Elected and appointed officials said they didn’t want to set a precedent of “asking forgiveness rather than permission,” but the home was generally not causing a nuisance and it fit a housing need.
Those who have fought against boarding homes in their neighborhoods say they are constantly accused of being “NIMBYs” or anti-housing. Some are afraid the off-site investment firms or hedge funds that own the group homes could sue them.
Julia Pitlik of Plano said she’s been on the receiving end of the Not in My Backyard criticism but isn’t backing down. CandysDirt.com interviewed Pitlik in November about the group home in her Briar Meadow neighborhood and talked to her again this week.
Nothing has changed, Pitlik said, except her voice has gotten louder and her resolve stronger. She’s reached out to state representatives and the office of Texas Gov. Greg Abbott.
Pitlik emailed the governor’s office Monday night.
“I wanted to reach out formally regarding the boarding house issue in Plano (in my neighborhood) that is owned by a $1B Hedge Fund headquartered in Steamboat Springs, Colo., where the City refuses to enforce its own code/compliance that prohibits boarding house/rooming house operations in both residential and non-residential districts,” Pitlik wrote. “Investor and hedge fund ownership of single-family housing is a big issue nationwide. Surprisingly, Texas now leads the nation with the highest percentage of single-family homes owned by institutional investors/hedge funds. According to the Urban Land Institute, in order to meet investors’ return expectations, hedge funds and other investors maximize profits by imposing high rent increases, inflating fees, and delaying home maintenance and improvements, which diminishes the quality of housing over time.”
Pitlik provided a presentation to the governor’s office about the boarding house issue in Plano that she’s shared with other lawmakers and public officials across the state.
Urban Land Institute Findings on Single-Family Rentals
The Urban Land Institute released last year a 34-page research report titled “Profile of Institutional Investor-Owned Single-Family Rental Properties.”
“We believe that a more nuanced understanding of the various types of institutional SFR operators and their business models will allow for a more robust discussion of the role policymakers can and should play in this market,” the report states.
Researchers found that, as of June 2022, “large institutional investors” owned roughly 574,000 single-family homes.
“We have defined an institutional investor as an entity that owns at least 100 single-family homes,” the report states. “To put this in perspective, there are 15.1 million one-unit rental properties nationwide. This would suggest that the total institutional ownership share is 3.8 percent; the vast majority of owners in the SFR market are small and medium investors who own less than 100 properties. There are 46.6 million total rental properties, so one-unit properties make up 32.4 percent of the total rental stock.”
The report concludes that, because of their size, scale, and organizational infrastructure, national single-family rentals can improve the rental experience.
“Institutional investors’ practices have an impact on hundreds of thousands of renter households and have the potential to set new standards for practice in the rental market,” the report states. “And it is often more feasible for institutional investors than for their mom-and-pop counterparts to implement certain important practices, such as rent reporting … In short, institutional investors have economies of scale that allow them to implement policies that can improve the rental experience at a far lower cost than mom-and-pop investors can. This should be the focus of future public policy.”
