It depends on where you live. Some areas have problems with investors scooping up significant portions of the available properties, which reduces supply and drives up prices for home buyers. Investors typically pay cash and offer far more than the house would ever sell for normally, so home buyers have to grossly over-pay to win.

@bta that's only a problem due to restrictions on construction. OPs friend should lobby their local government to remove zoning restrictions, if they're concerned about housing being unaffordable.

In a condo development, owner-occupiers might prefer to share the black with other owner-occupiers, as landlords may be less interested in certain types of investments (energy efficiency is more directly interesting for owner-occupiers than for landlords). This could be a reason to put a self-occupancy restriction in a condo owner association.

Is this Australian law? You might like to tag your answer with the jursidiction.

@PaulJohnson not the first part - the prohibition on penalty clauses is common to all common law jurisdictions AFAIK

Do you have a citation for "Restrictions on renting properties tend to make housing less affordable, not more affordable."? The dynamics of a free vs. restricted market in housing don't seem trivial to me, so I'd be interested if there was data available (especially how that plays into the current US housing crisis, which some argue to be driven at least partly by companies buying/holding large parts of the available properties).

Doesnt it depend on how those investment properties are being rented? Where I live people were apparently buying properties to use for short term rentals (air BNB) because they can (in theory) make more that way. They put laws in place in the city to restrict that because they believe it was causing problems with rental prices.

This answer is confusing, in that it argues that to promote owning the home you live in, it's a good idea for someone to buy a house and not live in it as an investment property. Now there's one fewer houses available for people to buy and live in. How does that help?

@JHR well let's boil it down to something simpler: this answer proposes that a restriction like "you may not rent the property out during X time" is enforceable whereas one like "you must use it as your primary residence" is probably not. If the problem is that speculators are prepared to buy and hold without making the property available on the rental market in the short term, then they wouldn't be strongly deterred by a "may not rent" clause; it's only a small decrease in flexibility.

@JonathanReez People give zoning way too much credit. It doesn't help, but there are plenty of places that have no zoning and still have these same problems. It's a complex problem with many confounding factors.

@bta the only place in the entire developed world which doesn't have restrictive zoning is Japan, which indeed has much more affordable housing than the US. If you were going to bring up Houston - unfortunately while it doesn't have "zoning", it still has tons of restrictions in practice.

@JonathanReez Labor and materials shortages have been the more immediate recent problem for housing affordability across the U.S., though I agree that zoning often hurts things, too, especially in particularly restrictive cities. It's true that eventually enough supply will be built to reach equilibrium with demand, but it's not something that can be done overnight, particularly when a lot of industries creating the materials shut down for an extended period during the pandemic and the pandemic and its responses also created a labor supply shortage. All of that increases construction prices.

@JonathanReez yet home ownership in Japan is well behind most of the OECD en.wikipedia.org/wiki/List_of_countries_by_home_ownership_ra‌​te

@JHR that’s really an economic -social question than a legal one.

@CharlesDuffy no, they would reduce them to the break-even cost of renting. Nobody would rent out a property for £200pcm if it cost them £300pcm more to do so than leaving it unoccupied. In the case where that value (£300pcm in this example) is greater than tenants are willing to pay, occupancy falls below 100%.

That's not a hypothetical either - renting a property out does cost money. E.g. in my local authority you have to pay for a yearly Gas Safety check and register the property. Probably redecorate at end of tenancy / fix wear and tear during. All these costs could rapidly increase to the point of prospective tenants not being able to afford it.