Bend policy on 3x rent requirement?

Question

Hi BP'ers!

I have a rental that I am listing at $635 a month in a C area. I have had several calls on it, and one in particular I wanted to ask your opinion about.

Her and her husband are on SSI disability (I do not know for what, as I am not going to make the mistake of asking THAT question) But I have two questions. They bring in a combined $1442 per month plus another $400 in food stamps.

They say they do not have any debt whatsoever, but clean credit and excellent rental recommendations. (I'll know for sure when I can meet them to show it and take an application)

First question, if everything else checks out perfectly, do I bend on the 3x rent income requirement? If I do that with her, does that open me up to possible ramifications for declining others in the future? If I shouldn't bend on this policy, do I tell them that before showing the place and taking an application? Or do I still encourage them to apply to make sure I'm not out of compliance with trying to deter them from applying?

Second question, the house is not wheelchair friendly (I do not know if either of them are in a wheelchair) But what happens if one or both of them is in a wheelchair? I could put in a ramp easily enough, but its an older home and most of the doors are narrower than a standard wheelchair width.

Thank you for you advice in advance!

Dawn Anastasi · Answer

Per the Fair Housing Administration, Food Stamps are considered income.  Social Security (SSI) is considered income. So you cannot deny them based on food stamps, but you CAN deny if they are on Section 8 because Section 8 is not income.

Regarding accessibility, you are required by law to provide "reasonable" accommodations. However the accommodations must be paid for at their expense.  So if they want a ramp, they will need to pay for it.  But, keep in mind that an outside ramp does not need to be removed at their expense because it does not impair you from getting a non-handicapped tenant in the future.

If putting in the ramp is in any way not allowed due to your city rules (e.g. it would overlap the sidewalk) then that would not be considered "reasonable" and you would not have to rent to them.

Likewise, widening doorways would have to be done at their expense but then they would not have to pay to shrink them back down again because that is also not considered something that would impede you from renting to a non-handicapped tenant.

However, if there would be major expenses for them to make the unit work for them, likely they're not going to afford that and go somewhere else. But it's important to know what the Americans with Disability Act rules are.

Account Closed · Answer

They are bringing in $1842. 3x rent is $1905. That's close enough for me. I would show it and let them apply.

Rodney Kuhl · Answer

I asked this question when I was looking for a tenant for my first rental. I got mixed responses then, and I can see both sides of it. One thing to keep in mind regarding SSI is they don't pay taxes on that income. Therefore, someone earning $1800/mo from SSI would be like the equivalent of someone making roughly $2400/mo pre-tax.

Michele Fischer · Answer

We once had someone in a wheelchair look at a second story unit with no elevator.  We let it play out and they eventually self excluded themselves.  Wasted our time, yes.  But ultimately it probably depends on what other options are available, like a newer unit with wider hallways.

I also rent in C class areas.  We require that rent not exceed 50%, but if the source of income in non-taxable we allow 59%.  Food stamps, TANF, and anything else recurring is income.  Point is, you could adjust your criteria for non-taxable income, since that payment has more buying power.  We have new tenants who can't make rent this month because they didn't realize how little their take home pay would be from their new W-2 job.  Since the job was new and we knew this was higher risk on several levels, we have a co-signer.  For government assistance, ask for the proof of benefits to verify the existence and amounts.

As far as starting down a slippery slope, your rental criteria can flex over time.  I use a scoring sheet with a point system, and I'm often tweaking what applicants gain or lose points for.  The main thing is that you keep the criteria the same for one entire move out cycle.  If you have already turned down other applicants for not meeting your criteria for this opening and now you accept them, that can be discriminatory.  But next time when you have another opening, you can revert back or change to something different with no concerns.  I attach the current criteria to each application and information on why I accepted them or rejected them, so feel I could easily defend it to anyone even though its dynamic.

Michele Fischer · Answer

Does it really matter if the food stamps are cash equivalent?  They basically provide more buying power for the applicant; it is less money they have to take out of their discretionary income to buy food, so they are more likely to be able to afford rent.

Dawn Anastasi · Answer

It's a good thing as a real estate investor to always find out what your local laws and advise is, which is what Bradley did.  It's good that this discussion might inspire others to research further.

Dawn Anastasi · Answer

I got my information on a presentation by a woman who has worked at the Fair Housing Council for 20 years.  She handed out a pamphlet during the seminar that states that you cannot discriminate based on "Lawful Source of Income" which is "a person's legal means of income, including such subsidized forms as Social Security, Food Stamps, Unemployment Compensation, etc."  (Direct quote from the written material.)

Matt Devincenzo · Answer

I'm running out so I don't have a lot of time to comment.

On the wheelchair, you're right you couldn't decline them based on that. However you do not have to make modifications for them if they need something due to their disability. The fair housing act is clear the disabled person must make those changes themselves at their expense, and repair everything at their expense upon their moving out if you so desire. So as long as you follow that if they choose to rent from you then no need to worry about "modifications that would be required. Act here

Account Closed · Answer

I would include the food stamps, because if they had a job and brought home $1842 in income, they would be spending part of that on food.

Harrison Stowe · Answer

I can't speak specifically to the possibility of limited mobility accommodation, but I see nothing wrong with slight flexibility with the x3 income rule. This particular set of tenants sounds like responsible folk, and if they're not carrying bad credit history or some sort of toxic debt, then they might well be within range. And I definitely agree with prior commenters who counted food stamps toward income - it bolsters against food costs either way.

While I'm not currently managing any properties, an old friend from my college years rents out smaller units in and around Silver Spring, MD. Some of his current tenants are kids in their mid/late 20s who who don't clear a x3 rent bar on their monthly income. That being said, most of them are so grateful for the opportunity to rent in the area that they're timely and responsible with their monthly check, and were with their prior landlord as well. On the other hand, he's found that some tenants who are well beyond the x3 rent barrier can treat his property and payment schedule with less respect because they feel their high(er) income can buffer against it.

My friend tries to take it case-by-case within reason. Granted, he's working in a high-demand rental market, but I think that principle could apply in this case as well.

Bend policy on 3x rent requirement?

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