First, life in the building
No disrespect intended to renters or landlords; PMI companies believe that buildings with more renters can get run down more easily. I’ve seen it. It can be a simple as having no one keeping up with the names on the mailboxes; little stickers can look shabby; junk mail fliers sit on the floor in the lobby. The bigger problem is a combination of renters caring less and their landlords wanting to keep the condo fees down. Low fees can lead to less maintenance, less heat in the common areas, no rush-orders to repair the elevator, and such. It gets worse if the landlords (or the owners who live there) stop paying their condo fees. That’s why you don’t want one person or entity to own a huge chunk of the association; if they get in trouble, you are sinking with them.

Second: resale
High owner-occupancy does not automatically mean the association is well run, but it is a measurable sign. A well-run association can help the value; poorly run ones can hurt it. Sellers in an association with a big work project coming up must disclose it. So, deferred maintenance hurts resale. Condo associations are supposed to have reserves for expected periodic maintenance (like a roof every thirty years.) Many do not.

In addition, remember those PMI companies? They are not going to insure a borrower in a condo complex that seems risky to them. So, upon resale, your pool of borrowers is reduced if you are selling in a complex that has too many renters.

If you live in a condo, tell us if you think the PMI companies are right about owner occupancy. If you are a buyer, have you been shut out of buildings because they don't meet PMI guidelines?

Thank you to my sources at Asset Mortgage Group, Mortgage Master and Monument Mortgage.