Is House Hacking or Rent by the Room considered a Rooming House?

Question

I was reading up on a couple of my local city code of ordinances and have a question on the legality of house hacks and rent by room strategies.This specifically is regarding DFW, Texas, and most cities have a provision about rooming or boarding homes. It is defined as the following.

• Boardinghouse, rooming house, lodging house and tourist house shall mean a building arranged or used for the lodging, with or without meals, for compensation, by individuals who are not members of the same family

Additionally, zoning ordinances prevent SFH and most MF to operate as a rooming house.

Do I simply get around this by being at or under the max number of allowed unrelated tenants under one home? I noticed this also may be an issue as many cities have set this at 2 or 3 individuals. Does anybody actually do this by the book and get a special permit license? I haven't heard of many people actually doing this.

Are there any other workarounds?

Thanks in advance

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Frank Chin · Answer

Yes, around here, I have similar restrictions, so I keep the number of unrelated tenants to 2 or 3. The best is 2BR triplexes, and generally I get 2 roommates to a unit with no issues. For my 3BR SFR, I generally get a family in there so there are no issues. I sometimes had 3 roommates for this SFR and had no issues. Legally I can only have two.

The first thing to remember is in single family suburban zones, especially the higher income ones, people often do not like non owner occupied properties, thinking tenants as troublemakers. It's interesting I rented to a family of four, who was there for 12 years, excellent tenants. There are some protocols that people observe, i.e. such as not parking on the street in front of other people's homes even though its technically a public street. An older couple a few houses away rented 2 extra rooms to 2 tenants, when their kids grew up and left home, and the couple needed the income. Neighbors had no problems. It was only a problem when their tenants had weekend card games, had a number of visitors, and had to park the extra cars on the street in front and on the side of my property. It's a large corner lot. My tenant made several complaints to the owner who rudely responded it's a public street where anyone can park. My tenant advised him that it's true, but if anyone else parks there from there on in, he'll report him to the town that they're running an illegal rooming house. Apparently my tenant checked the town ordinances, and the violator apparently did so too, and from that point on, he had no problem with people parking in front.

Moral of the story, don't get into trouble with the neighbors. Towns don't have manpower to enforce these things. Another way of getting into trouble with neighbors in these neighborhoods of neatly trimmed lawns is to have tenants too busy to mow, or does infrequent lousy jobs. Even when they cut the grass, none does edging. Neighbors will complain to the town, and you'll get fines. That's why in the last 15 to 20 years I had landscapers do it even when some tenants ask why I don't let them do it. I once didn't know a tenant of mine had another episode of depression, till the grass got to be two feet tall when neighbors complained to the town. I was informed, went out to check, and turned out the tenant who's normally clean shaven had a beard over a foot long. I since gave neighbors my phone so the first call would be to me instead of the town.

David Y M. · Answer

@Frank Chin

I figured that was the main risk. I've read read the co-living code by Christine McDannell and she says the main ways to get rid of those uncontrollable risks is through automation - ie. smart home tech, monthly maid service for common areas, and monthly landscaping work. The extra costs should be negligible if you are renting out enough units.

I've seen a couple startups start to gain traction the last 2 years trying to do this at an institutional level. Big money is entering rent by the room strategies, but I'm concerned they are going to crack down on this harder than Airbnb. It just seems inherently risky since it's so highly dependent on tenants and neighbors. Which leads to my next question.

In your honest opinion - how many landlords actually go through a rental registration program vs renting it out on the shadow market?

With regards to rent by the room strategies, many startups market it as coliving. There are several actually with the biggest one being a company called Bungalow. I don't believe this is going to sit well with cities with large residential families. They have 50+ million in VC funding, but not sure if what they are doing is necessarily scalable. I just can't put my finger on it since I've read through the code in my local jurisdictions and not sure what they could be utilizing to their advantage.

If you want to chat offline please DM me. I would love to hear your take, because I know this is actually more prevalent in New York where the population density and cost of living is much higher.