By: Stacy Grove

I recently received a question from a local homeowners association considering a cap on the number of homes that can be rented within its neighborhood.

The questions were reasonable: Is a rental cap legal? Can an HOA determine whether a buyer plans to become a landlord? Is there another way to prevent rentals from increasing?

My answer may not be the most popular one at the HOA meeting:
I’m not a fan of rental caps.

I understand why homeowners consider them. They may have watched a poorly managed rental fall into disrepair or dealt with an absentee landlord who does not respond when the grass gets tall, trash accumulates or tenants repeatedly violate neighborhood rules. Others worry that institutional investors will purchase too many entry-level homes and make homeownership harder for local buyers.
Those are legitimate concerns. But a percentage cap is a blunt instrument. It restricts every homeowner’s property rights in an effort to control the relatively small number of owners who are actually causing problems.

In 2025, Fishers and Carmel adopted ordinances limiting rentals to 10% of the homes within individual subdivisions. The issue generated an intense debate over neighborhood stability, housing availability, local control, and private property rights.
Indiana responded in 2026 by passing House Enrolled Act 1210. Beginning July 1, 2026, Indiana cities, towns and counties generally may not prohibit or restrict an owner from using privately owned residential property as a rental. Existing local caps in Fishers and Carmel must stop being enforced by January 1, 2028.

The law applies to local governments. It does not eliminate an HOA’s ability to adopt rental restrictions through its private governing documents.

Indiana did, however, change who may vote on those restrictions. Beginning July 1, 2026, only HOA members who use their property as a homestead may vote on association matters involving rental prohibitions or restrictions.
Any HOA considering a rental cap should have an Indiana attorney review its declaration, bylaws, amendment requirements and the new law before holding a vote. This is not a project for a board to complete using a sample amendment found online.
A buyer might plan to live in a home but later relocate for work, get married, experience financial hardship or inherit another property. Someone who never intended to become a landlord may eventually need to rent the house rather than sell it. A buyer’s plans can also change after closing.

The relevant question is not whether an HOA can predict a buyer’s intentions. It is whether a properly adopted and recorded restriction applies to the property and can be enforced if the owner later rents it.

Buyers should review recorded covenants before purchasing. Their real estate agent can help identify restrictions, but buyers should seek legal advice when the documents are unclear.

“Rental property” is sometimes used as shorthand for poorly maintained property, disruptive residents or an owner disconnected from the neighborhood. Those things are not synonymous.

Some owner-occupied homes are poorly maintained. Some renters are excellent neighbors. Some landlords live ten minutes away and respond immediately. Some institutional owners have professional management systems, while some individual owners do not answer the phone for three weeks.

A rental cap regulates an owner’s use of the property. It does not guarantee good maintenance, responsible occupants or responsive management.

It also limits housing choices. Not everyone who wants to live in a neighborhood is ready or able to purchase a home there. Teachers, medical residents, relocating employees, divorced parents and families building homes may all need single-family rentals. Reducing the supply does not make those households disappear. It gives them fewer options and may put upward pressure on rent.

If the concern is neglected property, nuisance behavior or an unreachable owner, address that problem directly.

An HOA can consider:
Enforcing exterior-maintenance standards consistently for rented and owner-occupied properties.
Requiring current owner and emergency contact information when legally permissible.
Ensuring tenants receive neighborhood rules without allowing the HOA to improperly select who may live there.
Creating a fair process for documenting violations and notifying owners.
Working with local government on building, safety, occupancy and nuisance enforcement.
Consulting legal counsel about narrowly written rules addressing conduct, maintenance and lease administration.

Rules should be based on what an owner or resident does, not simply on whether the resident holds the deed.
A rental restriction can also affect a homeowner facing military deployment, assisted living, job relocation, divorce or a difficult housing market. In those situations, renting may provide an important financial bridge. A restriction may also shrink the future buyer pool because an investor cannot purchase the property and an owner-occupant knows renting it later may not be an option.
Neighborhoods have a legitimate interest in safety, maintenance and reasonable standards. But those goals can usually be pursued directly.
If the concern is tall grass, enforce the landscaping rule. If the concern is noise, enforce the noise rule. If the concern is an absentee owner who cannot be reached, create a lawful contact requirement.

Regulate the problem.
Don’t assume the renter is the problem.

This article provides general information and reflects my perspective as an Indiana real estate professional. It is not legal advice. HOA boards and property owners should consult an Indiana attorney regarding their governing documents and specific circumstances.