In our previous blog post, we discussed some of the dissonance landlords face when it comes to selecting good, qualified tenants while also remaining in compliance with Fair Housing legislation.
In this post, we further discuss legislation surrounding source of income as a protected class and steps landlords can take to stay compliant while screening new applicants.
Why Source of Income Matters for Tenants and Landlords
Source of income refers to where a tenant’s money comes from to pay for a house or rental apartment. This is important because it has to do with Section 8 legislation and the Housing Choice Voucher (HCV) Program.
This assistance program facilitated through the U.S. Department of Housing and Urban Development (HUD) enables qualifying people with very low income to choose wherever they want to live (as long as the housing meets the requirements of the program), including single-family homes, family homes, townhouses and apartments.
Qualified families use their voucher to pay for rent at any affordable privately-owned rental housing. The housing subsidy is paid to the landlord directly from the government agencies.
For a landlord, this sounds like a good thing – why would a property owner not want a guaranteed source of income from the federal government? The challenge for landlords lies in the implementation of the program, which varies from city to city.
The Challenges of Meeting HCV Program Requirements
Rental units that accept vouchers must meet certain requirements, including passing initial and annual inspections. If anything is found to be problematic during these inspections, the property manager will have to fix it. The lease will also have to comply with certain requirements. If it does not, you will have to change it.
While these requirements are intended to ensure safe, stable housing, navigating the process via the local government agencies can become a bureaucratic nightmare for landlords. If you don’t pass the initial inspection, sometimes even for cosmetic reasons, you have to spend money fixing the issues. Moreover, this also delays the tenant’s ability to move into their unit.
Further, there can be challenges with securing rent payment from local administrators. Sometimes payment can be delayed several months, which admittedly is frustrating from a landlord’s perspective.
Given these and other logistical headaches, it’s not surprising that some landlords have just said no to housing vouchers. It’s not because they don’t want to rent to low-income families; rather, it’s because dealing with the government agencies can be painful and difficult.
Now in Columbus, as in many other cities and states, laws have been passed saying that landlords are not allowed to decline HCV. Landlords must accept Section 8 tenants if they are otherwise well-qualified. In short, you cannot discriminate based on source of income.
How to Objectively Screen Rental Applications & Remain in Compliance
Because many tenant screening processes can disproportionately impact minorities, it becomes very important to create an objective set of measures to strip away any ill-intent or bias during the application process.
Some of the guidelines we follow to tighten up our screening rubric includes stripping out names and any personally identifying information from our decision-making process.
Our leasing agent first inputs data such as the person’s credit score, income, criminal history and 20 or so data points into a spreadsheet. The spreadsheet is then separately evaluated by the director of property management who grades the spreadsheet against our rubric of minimum criteria. The final decision is based on the data alone, as the spreadsheet contains no photos or other personally identifying information.
We believe that sticking to this set of minimum standards and never deviating or making exceptions is a fair and accurate way of approving potential tenants for a unit, while also helping ensure that we are abiding by local and federal housing regulations.
Compliance is an important yet tricky part of being a property manager. To hear more of our conversation about source of income and discrimination, tune in to our podcast Owner Occupied.