Landlords in Bellingham, Washington and Boulder, Colorado are among the more recent to be confronted with new rental laws that require them to accept housing vouchers, including federal programs like Section 8.
While landlord participation in voucher programs is designed to be voluntary, extraordinarily low vacancy rates — less than 2% in Bellingham — and record-high rents like Boulder’s 10-15% increase over last year have city and state lawmakers across the country looking at options for low-income residents. The current trend: make it mandatory.
Tenants on government subsidies have long suffered from discrimination. In fact, housing advocates report that anywhere from 30-50% of housing voucher recipients cannot find a place to rent. As a result, those renters often lose their vouchers, which they may have waited years to claim.
At the same time, accepting the vouchers is not without complications for landlords. Section 8, for example, requires landlords to:
Submit a written request to accept the tenant (2-page form);
Undergo a property inspection based on a dozen or so minimum housing qualifications;
Correct any defects, then have the property re-inspected;
Undergo inspections once per year; and
Ask permission to raise the rent.
That stated, there are benefits to accepting tenants with vouchers or fixed government assistance, especially now that many tenants must dedicate half their monthly income to rent. Voucher programs provide a steady stream of qualified tenants, and the voucher portion is a sure thing while tenants relying solely on employment income may suffer setbacks.
Landlords subject to these source of income (SOI) rules cannot enforce a blanket prohibition against tenants who receive assistance. However, they still are allowed — even encouraged — to apply their own tenant screening policies. Not all voucher holders will be qualified. Landlords should run tenant credit checks, criminal background and eviction history as they would with any other rental applicant.
The difference, however, is that income qualifications are based on the portion of rent that is owed by the tenant, not the portion covered by the voucher or other assistance. Bellingham offers an example:
If a tenant applies for a $1,000 a month unit and receives a Section 8 voucher for $600, the tenant needs to meet the landlord’s income qualification as if the rent were $400 per month. So, if the landlord’s income qualification is twice the rent amount, that applicant only needs to prove $800 per month in income, not $2,000.
Landlords who are concerned about source of income restrictions when choosing tenants may benefit from knowing that the stereotypes of voucher holders don’t necessarily ring true. Many are seniors, veterans, or single parents. This demographic represents the most stable and responsible renters who, unlike millennials and working professionals, tend to renew their leases and take the time to care for the property.
Landlords who choose to accept housing vouchers, or those who are forced into it, should keep in mind:
Accepting any source of income is not synonymous with accepting any tenant. Tenants with bad payment history, prior evictions, violent criminal history and the like may not qualify for reasons other than source of income;
Most landlords learn about the voucher program from the rental applicant, who may not fully understand it. Speak with the voucher provider directly to get the best information about the requirements; and
It’s important to apply the same tenant screening policy for every rental applicant. To place tenants on assistance on equal footing, a landlord may have to modify the standard rental application to take the emphasis away from employment income and provide room for income from any source.
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).
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Disclaimer: The information provided in this post is 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.