New (ish) Colorado law Lowering Income Requirement
Member since 2023 · 50 posts · 26 votes
New (ish) Colorado law Lowering Income Requirement
6 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
@Makan A Tabrizi, sounds dumb but actually not as different than you think!
People can't pay rent on GROSS income 2x rent, so this must mean they intend NET income not GROSS income. The legislator's there are obviously not fit to make these decisions because that is a pretty big and obvious omission in the text of the law.
https://leg.colorado.gov/sites/default/files/2023a_184_signe...
The rule of thumb is generally GROSS income 3x rent which is pretty close to NET income 2x rent. So, they really didn't change anything substantial there!
A note of greater concern is nearer the bottom of the law. The tenants "cash assets" count towards their yearly income. So, if a tenant earns $30k but has $10k in savings their "income" is considered to be $40k for application purposes.
Here are a couple ideas:
1) That part of the law seems to ONLY apply if you use credit scores/reports. So, if you don't you can use any criteria you want.
2) If you do use a credit report, you could tighten things up by looking at their monthly debt. I also require "Rent + Monthly Debt Payments<= 45% x Gross Income".
However with the new law you couldn't use this income requirement. So, you could simply set a maximum debt percentage like "Monthly Debt Payments <= 50% rent". That quite as accurate, but for the most part accomplishes a similar screening without using income.
For me, I would probably drop credit from my screening and RAISE my income requirement. If they have more income and no evictions or civil judgements I would be fairly confident.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Makan A Tabrizi:
It is a stupid law. Landlords will approve someone earning 2x the rent, but they'll simply increase the deposit or charge a higher rent to offset the risk.
Yes, I would require a double deposit for a high-risk tenant. I do not use "last month's rent" because that may cause confusion, particularly if the Tenant decides to extend or renew.
The DIY Landlord Book4.7248 Reviews - Member since 2023 · 50 posts · 26 votes3y
Quote from @Nathan Gesner:
Quote from @Makan A Tabrizi:
It is a stupid law. Landlords will approve someone earning 2x the rent, but they'll simply increase the deposit or charge a higher rent to offset the risk.
Yes, I would require a double deposit for a high-risk tenant. I do not use "last month's rent" because that may cause confusion, particularly if the Tenant decides to extend or renew.
Would charging different rent and/or deposit for different tenants in the same building open me up for liability?
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Makan A Tabrizi:
People can sue you at any time, for any reason.
You only open yourself up to liability if they can prove discrimination against a protected class. If you charge a different price for single moms than you do for married couples, then you could be in trouble. If you have a rental open and choose to charge a different rate than you've charged existing renters, there's nothing illegal about that. Prices fluctuate all the time. Grocery stores charge more for milk on Tuesday than they did on Sunday.The DIY Landlord Book4.7248 Reviews - Member since 2023 · 50 posts · 26 votes3y
Quote from @Nathan Gesner:
Quote from @Makan A Tabrizi:
People can sue you at any time, for any reason.
You only open yourself up to liability if they can prove discrimination against a protected class. If you charge a different price for single moms than you do for married couples, then you could be in trouble. If you have a rental open and choose to charge a different rate than you've charged existing renters, there's nothing illegal about that. Prices fluctuate all the time. Grocery stores charge more for milk on Tuesday than they did on Sunday.Gotcha. Airlines charge different prices for seats on the same plane but I wasn't sure how this would work with housing. Thank you for your input.
- Member since 2023 · 50 posts · 26 votes3y
Quote from @Kevin Sobilo:
@Makan A Tabrizi, sounds dumb but actually not as different than you think!
People can't pay rent on GROSS income 2x rent, so this must mean they intend NET income not GROSS income. The legislator's there are obviously not fit to make these decisions because that is a pretty big and obvious omission in the text of the law.
https://leg.colorado.gov/sites/default/files/2023a_184_signe...
The rule of thumb is generally GROSS income 3x rent which is pretty close to NET income 2x rent. So, they really didn't change anything substantial there!
A note of greater concern is nearer the bottom of the law. The tenants "cash assets" count towards their yearly income. So, if a tenant earns $30k but has $10k in savings their "income" is considered to be $40k for application purposes.
Here are a couple ideas:
1) That part of the law seems to ONLY apply if you use credit scores/reports. So, if you don't you can use any criteria you want.
2) If you do use a credit report, you could tighten things up by looking at their monthly debt. I also require "Rent + Monthly Debt Payments<= 45% x Gross Income".
However with the new law you couldn't use this income requirement. So, you could simply set a maximum debt percentage like "Monthly Debt Payments <= 50% rent". That quite as accurate, but for the most part accomplishes a similar screening without using income.
For me, I would probably drop credit from my screening and RAISE my income requirement. If they have more income and no evictions or civil judgements I would be fairly confident.
Thank you for your input, most helpful.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.