I just saw this thread. Here's what appears to be happening. When values dropped, owners stopped paying their HOA dues and many went into foreclosure. The HOA could not function without the dues money and the property began to deteriorate. A downward spiral of less money and further deterioration began. At the bottom of the market, investors began buying into the project heavily. The HOA ignored the rental cap so it could collect dues from the new owners who were making money and were therefore willing to pay. This allowed the HOA to begin to deal with deferred maintenance and operate the property at a reasonable level.
The improvements that have been achieved cannot be sustained without more money. Investors tend to vote down increases in dues and special assessments. Unit owners have to self assess for capital improvements, which means you need owner-occupants. If the rental cap is removed, the project will begin to deteriorate again. Below about 70 percent owner-occupied, owner occupants lose interest, because of the presence of tenants and the inability to finance. What you end up with is a poorly operated apartment complex with weak management. That's a recipe for investment disaster.
The best way to improve the property and attract owner occupants that will pay more for the units is to leave the rental cap in place and devise a plan to reduce the number of rentals over time. Units currently rented can be grandfathered for a few years, but must become owner occupied at sale until the cap is reached.
In your shoes, I would vote no on removing the rental cap. Smart investors will have an exit strategy for their units that involves selling to owner-occupants and will do the same. The rest of the short-sighted herd will likely vote to remove the cap.
This isn't exactly right - the situation isn't that dire - to give more details
We currently have a 30% rental cap
Of the 20 units, the developer sold 7 as rentals (breaking his own written rule of 20% or 30% max).
Only 3 of the owner units have short sold - but 1 was sold to another investor that ignored the rules.
A couple units are owned by parents who are letting their children rent or stay there, which is technically not allowed
So we are sitting at about 10 units that are not "owner occupied". One other unit has been empty for 7 years as the buyer couldn't sell her other property and couldn't rent out this one.
None of the dues have gone unpaid, but there have been a few times owner occupies were far delinquent but we recovered via liens against the short sales and catch-up.
The reserve is medium funded - we won a lawsuit against the developer which paid for most of a new roof and rotted decks last summer. There is $80,000 in reserve and most of the other stuff to be done is mostly cosmetic.
There is another pending lawsuit against the insurer of the developer. These lawsuits have been pending for about 4 years now, and also don't help our situation.
There are 2 owner occupied residents that are sue-crazy and have brought several legal complaints against the board, which doesn't help either.
Again, I just want out of this place in roughly 2 years so I want to maximize my selling options and price, so I'm one of those short-sighted owners.
