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P.S. It is a sign of a neighborhood changing. We definitely saw an influx of multigenerational families move into our development. It may not seem like a big deal but these town home community are not designed for 6+ people living in 2/3 bedroom units. Our development became noisy and overcrowded. Time to sell!
While the number does certainly seem excessive, are they causing issues for your sister? If they are quiet and clean, I see no reason why you'd have to be concerned about the number of occupants if it doesn't affect you (or in this case, your sister) personally.
I don't know the legality of having that many people in a townhouse. I know in apartments, I believe it is max of 2 adults per bedroom.
I'm sure 11 people don't really want to be living with each other for long, so it may just be a temporary situation where the family is living together while they try and get on their feet and some of them move out eventually.
If it does become a problem, if there are no rules in regards to # of occupants, I'm sure there are rules in terms of noise etc. since it is a townhouse, so maybe your sister could pursue that (if there actually is an issue).