Is Max Occupancy Limit Illegal /Discriminatory to Large Families?

[Tricia O'Brien]

What are your thoughts about how to screen out some high risk applicants you don't want??

Specifically households with more than 4 people total?

I have a 3 bedroom / 1 bath SFH rental in Indiana in a class D area (about 1290 sq feet) and I have a maximum occupancy of 4 people - full time and part time residents. I bought it in 2018, and the first tenants I leased to had a family size of 3. I didn't advertise a max occupancy limit in 2018 or currently in 2021, that's just who I ended up picking in 2018.

It's vacant now, and when I told a property manager a couple of weeks ago that I wanted a max occupancy of 4 (as one of my preferred criteria)  he said that might be seen as discriminating against large families and it might be a violation of some Fair Housing Law.  He said the fire marshall in most cities allows 2 people per bedroom so 6 would be normal max occupancy.

He recommended NOT putting in a Facebook or Zillow or Avail.co or  realtor.com  listing that the max occupancy is 4.  However,  if someone applied with 5 or 6 or 7 people in the household , I could reject them for another reason, like credit score too low.  I believe he was  recommending  NOT telling people to their face that we don't accept families with more that 4 people total.

What are your thoughts?? 

Should I tell people by phone we don't accept families with more than 4 people (either before or after they do an application)?...

Maybe  say something like "It has always been my policy since 2018 to have a max occupancy of 4 people because it's less than 1400 sq feet and only has 1 bathroom." 

I decided to self manage for now.  Someone emailed   a pre-screening form Sunday  who said her family size is 5-6 people and total gross income was only $3,100/month (above my preferred  income requirement) . So I just failed to respond to her email because I don't want her to apply.  I'm confident she cannot afford to live there and is  a high risk for non payment of rent.

After paying rent and utilities, she'd only have at best $2k/mo for all other expenses for 1 adult and 4 or 5 children if they lived there.

My house has: 

Rent: $760/mo with tenant responsible for paying all utiliites ( runs $200-$350/mo)

Rent plus utilities: runs  about $960/mo to $1110/mo (depending on household size and habits) 

My Preferred Criteria for Tenant Applicants:

1) Maximum occupancy 4 people - full and part time residents

2) Gross Income at least $3040 / month (4x rent amount but 3.1x expected  rent and utilities for 3-4 person household)

3) No evictions in  past 5 years of any household member

4) No felony convictions ever of any household member

Am I on the right track to take the PM's advice and NOT be up front about the max occupancy ??

  Less than 10% of people who have inquired so far have a family size more than 4, but I'm feeling awkward about how to handle it when it happens.

Any advice would be appreciated!  Thanks!

[Adrien C.]

My head hurts reading all this illegal nonsense. Go read up on fair housing rules before you get sued. You literally have a public post telling a judge how you want to discriminate. It’s a slam dunk case. You’re basically saying you want a middle age white married Christian couple with 1 kid and a cute little dog. 

You need to nail down your criteria and then process applications in the order received. If they meet your criteria, offer them the place. You just need to be consistent. With fair housing violations, the burden of proof is pretty minimal for you to get fined. Asking for a letter about them is a horrible idea. Just gives them another thing to use against you if they’re not selected. 

You're in class D ghetto hoods. You'll be luck to keep it at the HUD guidelines of 2+1. Those are exactly the type of tenants going after someone like you for a quick buck. And in this case, they deserve to win.

In the hood, 4 times rent is plenty good. I’d also eliminate anyone with evictions within 5 years and felonies within 8 with the exception of sex crimes which are lifetime ban. You can pick a credit score minimum but it’s the hood and the 750s are never happening. You’re gonna get someone in the 500s with medical charge offs of $200 and Victoria secret charge offs of $480 and old utility company charge offs, some phone bill charge offs and half a dozen student loans in deferment for a degree never finished. Probably a car repo too. As long as they have sufficient income and no debt for past landlords, you’re good. That shows they care about paying the landlord but screw everyone else. 

Btw- I’d stick with your property manager as he seems to know what he’s taking about.