Tenant Screening and Source of Income Discrimination

by Chris on November 21, 2016

While the Fair Housing Act, the law that sets the framework for housing discrimination, does not offer protection to tenants based on their source of income, more and more states and local governments are adding that protection to their own fair housing rules.

For instance, Syracuse, New York recently passed a law that requires landlords to consider rental applicants on government assistance and other forms of income. Harrisburg, Pennsylvania’s city council is discussing a similar measure. More than a dozen states and several dozen county or municipal governments already have enacted laws prohibiting source of income discrimination.

tenant screeningGiven the pace at which source of income prohibitions are becoming law, and the high spike in rents across the country, it is likely that source of income (“SOI”) will become a familiar term in 2017.

Depending on the language of these laws, protected sources of income can include Social Security, disability, veterans benefits, child support or alimony, and unemployment, as well as state benefits. In some cases, federal Section 8 voucher holders are included. Others, however, such as the statewide rules in California, do not include the Section 8 program.

In addition to these specific statutes, HUD recently took the position that a blanket ban on rental applicants with any criminal history unfairly targets minority tenants. It is possible that the preponderance of tenants who receive government assistance are minorities, women and tenants with disabilities. Therefore, it is not inconceivable that HUD will take a similar position that rejecting tenants due to source of income may be discrimination based on race, national origin, gender, family status, or disability — all protected classes under the FHA.

Landlords currently reject applicants on source of income for any number of reasons. Perhaps the most common is the increased regulation that comes with accepting a government program such as Section 8. Inspections are rumored to be onerous, the lease agreement may need alteration, and eviction of these tenants can take longer.

But it’s important for landlords to be aware that when source of income statutes have been challenged, in the majority of cases the courts have held that a landlords inconvenience is “irrelevant” or not sufficient to warrant blanket rejection of tenants who receive assistance.

Property management companies that specialize in affordable housing tout the benefits — a steady stream of prospects to fill vacancies, stable income that is not affected by business closures, and high tenant retention. However, voucher programs remain controversial because some landlords experience delays in payments or other bureaucratic headaches.

Another controversy stems from frequent tenant complaints over the condition of the property. Tenants on vouchers often feel that landlords tend to neglect these properties, while landlords say tenants do the damage, or that they can’t afford to make the litany of upgrades required by HUD.

Because this appears to be an emerging trend, landlords may want to consider how to screen tenants who are on government assistance in order to avoid costly penalties for discrimination.

The best way to avoid discrimination in tenant screening is to treat all rental applicants the same:

The rental ad should not identify any “ideal” tenant but rather describe the property so that individual applicants can decide for themselves. There should be no prohibitions against any particular group, including those on government assistance.

The rental application should not be framed so as to benefit some but not all applicants. Do not create the impression that income must be from employment.

When offering tours and managing the rental property, it’s important not to treat tenants differently or to intimidate any individual tenant.

Regardless of the source of tenants’ income, a rental property must be kept in good condition to avoid injury, loss of property value, and tenant complaints.

Tenants on assistance tend to stay long-term. It’s important to contemplate that in the lease agreement. For instance, work out how routine repairs and updates are to be made, and provide for regular property inspections. Long-term tenants build a strong emotional connection to the property and other tenants, so it’s not a good practice to ignore tenant concerns. A disgruntled tenant quickly can draw in others. This phenomenon can work to the landlord’s benefit — tenant retention improves where tenants are allowed opportunities to build a sense of community.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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