Indianapolis Council Proposal 215 - adding "Source of Income" to the discrimination list
Rental Property Investor · Indianapolis, IN · Member since 2014 · 354 posts · 167 votes
This month the Indianapolis Council is to consider City Council General Ordinance No. 215. This proposal will require/mandate that all Landlords accept Section 8 vouchers and be subject to rules that go along with the vouchers. This is adding Source of Income to the discrimination list (i.e. race, color, religion, etc.).
From what I gather, this has been attempted before but has failed. I have attached the link for review and comment. What do the Indianapolis landlords think?
http://www.indy.gov/eGov/Council/Proposals/Documents/2014/PROP14-215.pdf
See the agents BiggerPockets members work with in Indianapolis, IN.
See agentsI am not rabidly anti-govt in any way, nor do I believe in discrimination. If Section 8 was just about taking portion of the rent from the govt, that would actually be a positive for me as a landlord. But its not that simple. Now I have a third party with a say in the contract. The condition of the property, the amount rents can be raised, how and when evictions are done etc etc. Thats the part I have the biggest issue with. If a Section 8 tenant was simply like any other tenant who gets govt assistance, thats okay. I don't care if the tenant is on SSI and pays rent that way. The SS Administration doesn't force me to do anything different for that tenant than any other. HUD on the other hand imposes themselves on me and thats where I have the biggest issue.
This month the Indianapolis Council is to consider City Council General Ordinance No. 215. This proposal will require/mandate that all Landlords accept Section 8 vouchers and be subject to rules that go along with the vouchers. This is adding Source of Income to the discrimination list (i.e. race, color, religion, etc.).
From what I gather, this has been attempted before but has failed. I have attached the link for review and comment. What do the Indianapolis landlords think?
Just read this initial post, not the link.
HUD regulations (fed law) already stipulates govt. assistance income discrimination. Landlords can discriminate as to the ability to pay and if a source of funds is not reliable income, stipulated by HUD, HUD certainly discriminates in this manner.
Requiring all landlords to accept Sec 8 will be difficult to enforce, even if turned down tenants make claims. It may not be the source of income as much as what other qualifications may entail.
Not all properties will pass inspection, I suppose there might be condition requirements for all rentals, but that's another issue.
Only rentals that fall within the median income rent levels and voucher amounts offered would be effected, even with a voucher applicants won't qualify for nicer properties. They probably can't make up the difference and stay within the income guidelines.
Probably why the ordinance didn't pass, it may not provide the desired effect.
Is there a low qualified inventory? Did the PHA push this?
Seems like another city council exceeding their authority as they often do, telling an owner they must participate in a HUD program, while HUD can't even make that requirement.
Seems the city can have another agenda, housing standards coming under the PHA's inspection authority so that the city avoids some of the building regs functions, it could be a burden to the Sec 8 folks who won't have funding for the additional regulatory oversight. So I can see the Sec 8 administrators or PHA not going along too. If a property passes Sec 8, it's not much of an issue to building regs.
Have no idea of who thought this was a good idea, I doubt the intended outcome will be as expected. :)
If you like social engineering then you'll like this proposed new rule. I choose not to participate in Section 8 but know other landlords that enjoy receiving their tax dollars back via this program (if you want to look at it that way). When in doubt, fewer rules and more freedom is better.
We had this implemented in Chicago last August. Honestly it did not impact me at all. All my advertisements state "tenant must have three times monthly income and no more than 3 late payments in 3 years" As long as that is my rental policy for all my properties than all I need to say when I get asked if I accept Section 8 is " Yes, I do accept section 8. My rental policies are that income is 3 times rent, and you have no more than 3 late payments in the past 3 years"
Not to pick on you Brie, but that's exactly the policy most of the income discrimination laws are seeing to avoid. In the various state/local law review I linked earlier, the majority (but not all) of state courts cited interpreted this exact policy as effectively banning Section 8 and specifically cited such a rule as discriminatory. The Chicago law is too new to be included there, but I would definitely get a legal opinion to make sure you're on the right side of the law.
The rationale behind such a rule being illegal was much the same as the rationale in doing away with many of the Jim Crow laws of the south. Rules were equally applied, such as a poll tax or literacy test, but were in practice obviously discriminatory. If a tenant was making 3x the rent, it is virtually guaranteed that they wouldn't have a voucher, and the income caps for most areas make it not even close.
@Dan Perrott,
"Source of income" has already been added in Chicago to the Discrimination list a year ago, which in no way has negatively affected the landlords.
As a landlord you have a list of requirements for your tenants and I won't think that the "source of income" was on your list.
Most of the landlords I know, including myself have: credit score, landlord reference, employment status, landlord references, pets policy, etc.
As long as the Section 8 tenants meet all the other requirements you have, including the fact that it shows that he has income to pay the rent, why would you be worried who pays the rent?
We don't have an issue with renting to section 8 tenants as long as they meet our standard requirements (3x rent, 600 credit score, security deposit, etc.)
I state again
I created this post because I feel that our rights of being a landlord are being stepped on. It should be a choice of who we rent to (not in violation of rights). Income source is not a right. I understand that my use of consistent rental criteria will eliminate most section 8. That is not the point of my concern, it is the stepping on my right as a landlord.
@Dan Perrott,
I can understand how you feel. I know some investors that don't buy in the City for the exact this reason.
In Chicago, as the number of tenants is higher than the owner occupied homes, and the tenants are whom are considered to have the power at vote in the city, most of the laws passed are in favor of the tenants.
I will assume that there are many large cities that have this issue.
@Dan Perrott I'm not sure your 3x income requirement will get you out of renting to Section 8 tenants. As I linked earlier, some states/localities with income discrimination laws like New Jersey have found that that isn't a valid criteria to apply to a voucher holder. I'm sure if this particular law passes, someone in Indy will challenge it in court and get a firm answer.
As for choosing who you would like to rent to, do you believe that the current fair housing laws go too far? Should we as landlords be allowed to not rent to certain races, religions, ages, etc? Do we as landlords have a responsibility to provide housing to our community on a fair and equitable basis, regardless of if we approve of the life details of who apply? If its not ok to deny housing to a particular race "because they're more likely to be involved with crime/be evicted/become unemployed", why should we have the right to say we wont provide housing to low income folks who have a gov't subsidy to pay rent at the industry standard rate "because they're more likely to be involved in crime/be evicted/become unemployed"? Its uncomfortable to remember that the reason the FHA was passed in the first place was that these kinds of discrimination were common, and property owners almost always had a good explanation as to why.
I know I'm soapboxing a bit on this topic, so I apologize, but it frustrates me on a daily basis to see folks discriminated against in my day job. I've had landlords tell me that they won't consider one of my client's child support as part of her income because its "not real income" and refuse to take an application. I've had landlords tell me they don't think clients will "fit" at a particular rental due to veteran status, age, the fact they are a single parent, have a documented disability, have a voucher and race. Sometimes its subtle, sometimes its not, but in all cases, there is a moral judgement against these tenants that they are less worthy of housing. I entirely agree that we should have expansive rights when it comes to operating our properties, for instance I think many areas have some ridiculous hurdles to clear to evict someone who's violating the lease or not paying rent, but I disagree that we should have the right to deny housing based on moral grounds. If they take away a right that we shouldn't have had to begin with, are they really taking anything away?
Can you make a landlord pass the unit inspection if she doesn't want to? Can you make her fill out the tons of paperwork needed for a S8 applicant?
I love S8, but I'm not sure regulations like this are enforceable or will have the intended effect.
@Bradley Bogdan Maybe I just don't want to have to deal with the gov't anymore then I have to. Maybe I just don't want to rely on the gov't to pay me. I've seen how the Federal gov't handles its check book.
I have also heard that if a S-8 tenant destroys your property that there is nothing you can do about going back after them for damages because they are S-8. Now bare in mind I could be wrong on this because it is hear say and not personal experience.
Clearly there is rationale to protect section 8 tenants as a class. Many landlords hide behind free market and freedom rationales because they don't want to deal with these "types". In cities with large section 8 populations, these attitudes can severely limit these tenants from fair housing.
On the other hand, I have not heard anyone talk about the 1 to 2 month delay that can occur from rent collections due to section 8 procedures. Rent is not paid before move in either. That can have a serious financial impact on a landlord.
I am not rabidly anti-govt in any way, nor do I believe in discrimination. If Section 8 was just about taking portion of the rent from the govt, that would actually be a positive for me as a landlord. But its not that simple. Now I have a third party with a say in the contract. The condition of the property, the amount rents can be raised, how and when evictions are done etc etc. Thats the part I have the biggest issue with. If a Section 8 tenant was simply like any other tenant who gets govt assistance, thats okay. I don't care if the tenant is on SSI and pays rent that way. The SS Administration doesn't force me to do anything different for that tenant than any other. HUD on the other hand imposes themselves on me and thats where I have the biggest issue.
http://www.naahq.org/read/apt-advocate/income-bill-defeated-Indianapolis
Even if it passed, it isn't a "mandate" as the OP suggested. All it means is you can't discriminate on source of income. It doesn't mean your $950 rental must be rented to a $600 voucher holder.
See also https://www.municode.com/library/in/indianapolis_-_marion_county/codes/code_of_ordinances
@Heather W. I personally don't think someone should be compelled to ensure that a rental passes inspection (and that doesn't seem to have been a legal issue from what I've read), however in most cases, I would hope everyone here would live up to the fairly low bar Section 8 inspections usually impose. I know there are horror stories of finicky inspectors or odd property features that don't lend themselves to passing, but those are the exceptions, not the rule. I'd say we could do away with the inspections altogether, but I still have 2 landlords I work with that insist that their tenants don't need the heaters that they were required to provide and should just use the stove/oven for heat like they do.
@Account Closed brings up an excellent point, none of these income discrimination laws compels you to rent your units to Section 8 tenants. You're still allowed to screen for every factor you were before, you're still allowed to set whatever price you chose for your rental, and you can always ensure your units won't pass inspection (though that still seems backwards to me). This isn't rent control like SF and NYC have. Instead of capping a free market like rent control, you're ensuring equal access to a free market, the entire point of a free capitalist economy.
Finally, as Heather said, a rule like this is about as enforceable as any other FHA provision against discrimination. As I've said before, I run into A LOT of landlords and property managers that do things that, by the letter of the law, are clearly discriminatory. Unfortunately, lower income tenants don't usually have access to legal services, and even if they do, there is little proof of discrimination to make a complaint on when the landlord simply tells you they won't take your application for X,Y or Z reason, or that you wont fit in, etc. About all they can do is click the "prohibited" button on craigslist ads that say things like "looking for quiet younger tenants" "not a good fit for families with kids" "Must be employed, no welfare queens" Rules won't completely solve discrimination, but at least it will send a message that its not acceptable or legal.
@Dan Perrott regarding "This proposal will require/mandate that all Landlords accept Section 8 vouchers and be subject to rules that go along with the vouchers." I don't see that in the text. Can you point out the text that supports your conclusion (the mandate to accept section 8 vouchers)?
We've discussed this on BP before. If you have a $600/month apartment and the Applicant has a $600/month voucher, and that is the only source of "income", most landlords would say 'no' because the person doesn't make 3X the rent in income. The "income" could be from HUD (Section 8), WalMart, or anywhere else... but the algorithm is the same.
That's a common misunderstanding of the voucher. The voucher is not a fixed amount, it varies so that the tenant will be contributing ~1/3 of their income towards rent, with the voucher/PHA/HUD contributing the rest, so in essence, everyone with a voucher is making 3x the rent.
So when I am doing this math it does not compute that because the tenant will be paying 1/3 of his income they are making 3x the rent.
For example....if the rent is 600 per month and the applicant makes 900 per month then they would contribute 300 toward the rent with HUD paying the difference of 300. If you consider the 300 voucher and add that to the applicants 900 per month income then they are making 1200 per month however, 3x the rent would require them to make 1800 per month.
@Alan Russell They are always making 3x of the portion of rent and utilities they are responsible for. In your example, they are responsible for $300 in rent, they have an income of $900, therefore they are above the same threshold you're using for other, non-voucher tenants. The government doesn't feel compelled to guarantee 3x their portion of the rent because they're the gov't and are, in theory, never not going to pay.
Going with a 3x the rent rule regardless of voucher will eliminate just about any voucher holder, effectively banning Section 8, even if you don't explicitly state such. If someone making $1797/mo for your $600, they will be responsible for $599 of rent and the voucher will cover $1. 1797+1=1798 means that they don't equal your minimum income of $1800/mo. Now, the math is a touch more complicated with utility calculations for any given area, but that's the gist. If you read the law review I linked earlier in the thread, there are areas who have hashed this exact question out in court.
In Wisconsin there's been a "lawful source of income" protected class at least as far back as the 90's which includes W2 income from the exotic dancer as well as welfare and other assistance programs. That being said, the best advice I ever received in property management is that if you focus on a prospective tenants ability to pay and not damage the property, none of the protected classes that have been or will be added will much affect the quality of your tenants.
@Bradley Bogdan - Bradley not sure about your thoughts or ideas however, in my world the Tenant is always "responsible" for 100% of the rent. I would never dream of asking the government to guarantee 3X their portion of the rent however, neither do I expect them to mandate that I have to rent to someone because they have a voucher. Personally I would consider the voucher as income however, that would not change whether they tenant meets my guidelines. Now personally i don't use the 3X income rather I look at a prospective tenants credit worthiness and debt to income. What I mean by this is that I generally don't like to see a tenant that is spending more than 40% of their income for rent, but more important to me is whether they pay their bills on time, have a good rental history, and no criminal activity in their history.
The CCC has sent proposal 215 back to committee. The committee will try to debate and amend the proposal on January 27. The council said that it was never going to pass in the form that it was in.
@Bradley Bogdan In Chicago, lag time is 1 month minimum not 2 weeks max. Once paperwork is turned in, CHA has 7 business days to set an inspection date which itself can be a week after. This is assuming there are no issues with the paperwork and that the tenant has complied by submitting a 30 day move out notice to previous landlord, which is another delay. There is typically a reinspection which takes more time. Then there is another week delay for the rent offer.