Renting to someone who previously used section 8 vouchers?

Question

I am managing my family's rental property and have been receiving applications for about two weeks. We have rental criteria that applies to every applicant, and so far only one has come close to meeting all of the criteria. This individual is a single parent, who within the last year has taken a full time job at a hospital. This applicant has children (high school and one over 18) who will be living at this home along with a grandmother. Each applicant over 18 has submitted an application, background check, etc... and combined their debt to income ratio meets our requirements (their credit scores are low because they don't have any open credit lines, and don't want any cards).

My question is this: They haven't paid rent all on their own before (they previously qualified for section 8 status). However, now this individual plans to one day own their own home, and is planning to work towards that goal by paying rent without the aid of section 8. Should I be worried that they will not be able to pay the rent? I want to give this person a chance.
The cons I see are: this individual has no savings, the individual's mother has an open court case that is being settled (she is not at fault) due to a car accident and ongoing medicals bills, they have one past eviction due to the accident preventing them from working for three months(they were asked to leave). They have a lawyer letter detailing that the case should be resolved in their favor.

This seems complicated, but with this property we don't typically receive applicants with a squeaky clean record. Thanks in advance for any insight.

Harriet Baldwin · Answer

Let the letter speak for itself.. And in the future be careful not to let people think they are "pre" approved.

If you do engage, emphasize they didn't do anything wrong, it's just that they don't meet your criteria. But be careful, they will want to know how they can meet your criteria and that becomes a slippery fair housing slope.

Stephanie C. · Answer

Thanks for your reply, Jeff. We also have rental criteria that we follow ( and share with all applicants), and in the past I have made an exception for a renter not meeting ONE of the criteria (bad credit). However, in that case, as you suggested, I also required first and last month's rent in addition to the deposit, and the renter had lots of money in savings.

With the current applicant, however, since they have bad credit, no savings, a past criminal record (many years ago) and a recent eviction due to not being able to work (and thus not being able to pay the rent), I ended up issuing an adverse action denying their application today( It was just too many things against them for me to feel comfortable renting to them). I also felt that asking for a double deposit PLUS first and last month's rent would be cruel, since I know that they don't have the savings. I also received another application ( the same day) where the tenant met all of the rental criteria, so I accepted them instead.

Now the denied applicants are emailing, texting, calling trying to figure out "what went wrong". My instinct is to let the form letter speak for itself and not reply with more details. However, doing so seems cold. Would you advise ceasing communication at this point?

Jeff Copeland · Answer

Rather than prepaid rent (which can cause complications of its own), we would require a higher security deposit in cases like this (for example, if we are making an exception to our screening criteria for an old eviction, or an eviction with a legitimate explanation like this seems to be).

The security deposit buys you time. Ignoring any damage to the unit, if you are holding the equivalent of one month's rent as a security deposit, you have one month to deal with a missed payment before you are losing money. The higher the deposit, the more of a cushion you have, time-wise, to deal with problems. (This may vary from state to state, or from lease to lease, but here in Florida, the security deposit can generally be liquidated to cover damages, or past due rent and other balances owed by the tenant).

Note than when you deny an applicant, or require something extra from them (such as a higher deposit or prepaid rent), it's referred to as an Adverse Action under the Fair Credit Reporting Act. So in either case should give them an Adverse Action Notice that essentially states "We are [denying your application / requiring an extra deposit / etc] based on credit and background information we received from ______ (usually one of the credit bureaus, or court records, or whatever)."

For Fair Housing purposes and other obvious reasons, it's important that you follow your screening criteria, and be consistent (i.e., if this applicant gets approved with a double security deposit, the next applicant in the same situation should get the same treatment). But nothing says your criteria can't allow for some flexibility and allow you to use your professional judgement to make exceptions on some cases. Our published tenant screening requirements essentially say "These are our minimum requirements. If we make an exception, we normally require an additional deposit and/or prepaid rent".

Stephanie C. · Answer

Thanks for your response, Patti. My understanding is this applicant now makes too much money (with the new job) to qualify for section 8. According to their current landlord they pay $1145 per month rent currently (rent at this property is $1300). They want to move into a home, and out of the "hood" (their words). Like you, though, I am also concerned that their lack of savings will prove problematic when renting a home (as opposed to an apartment).

Someone suggested requiring them to pay 6 months rent up front due to the past evictions, criminal record (over 15 years ago) and low credit score. Again, I would have to follow this policy for all renters as well. Does asking for rent up front make sense in cases like this (where I want to help and not flat out reject the applicant)?

Patti Robertson · Answer

Why would they not now qualify for SEC 8? If they lost their voucher I would be concerned.  When I have someone apply who is looking at a huge rent increase over what they have been paying I always say something like “you must have a boat load of money saved up!”  They usually come back with “not really”. Then I point out that, “well, you’ve only been paying $700/month, and the place you called about is $1100/month.  That’s $400 more a month.  If you have only been paying $700 and somehow have had to spend all your income on other bills and don’t have $400 to put into savings, where do you plan to come up with an extra $400 every single month for the next year to pay for this rent increase?”  They usually say “you have a good point. I guess I can’t really afford it.” Sometimes they get belligerent instead and say “I told you I can afford it.  It’s none of your business what I spend my money on.”  In this case, they don’t pass the be nice while courting criteria, because we all know if they aren’t nice before they are a tenant, they sure as heck won’t be nice once they are locked into a lease!

Keith A. · Answer

@Stephanie Caudill

I’m guessing your criteria doesn’t disqualify someone for a past eviction? If not and they meet all your other qualifications, especially minimum income, then you shouldn’t disqualify them. For legal reasons, stick to your criteria for accepting or disqualifying, and if you make allowances for this person you’ll need to do the same for future applicants.