Steve Rosenberg, VP of Investor Education at Mynd Property Management and Giles Imrie, VP of Corporate Counsel at Mynd are talking about what rental property owners can and cannot do when they’re advertising properties and screening residents who have Section 8 housing vouchers.
Accepting Section 8 Resident Applications
Effective January 1, 2020, California implemented two bills which essentially require landlords to accept Section 8 or housing vouchers as an income source from applicants.
Rental property owners cannot discriminate against an applicant or deny the application just because they have a housing voucher. This existed in certain California cities prior to January 1, but now it is a statewide requirement.
Cons of Accepting Section 8 Applications
Previously, it was common for property owners to advertise that they did not participate in Section 8, and wouldn’t consider any residents who had that housing voucher. This was common because participating in the Section 8 program was an administrative burden. There’s a lot of hurdles to cross, including a home inspection, verified habitability, and an approved residency. The delay in getting approved and prepared could cost a lot of money.
Pros of Accepting Section 8 Applications
Most owners weren’t unwilling to accept Section 8 residents; it’s actually a program that many landlords appreciate because it’s a guaranteed source of income. You know the rent will come in every month because it’s coming from a government agency and not an individual.
But for most owners, the Section 8 process simply wasn’t worth their time.
Implement Changes in your Oakland Rental Property Advertising
California's property managers, landlords and investors have to stop advertising whether or not they accept Section 8 applicants. You cannot discriminate against anyone with a housing voucher, which means you cannot express that you’d prefer Section 8 applicants didn’t apply. Your printed marketing materials and your online advertising must be reviewed to ensure you are compliant with this new law.
You have to treat all applicants equally.
Section 8 is Considered Income
Many investors may be wondering why this is now required.
The technical implication is that Section 8 housing vouchers or any of these vouchers that are described must be considered protected sources of income. If you require specific kinds of income from specific sources only, you’re discriminating against potential residents. So, you can no longer opt not to consider a housing voucher as part of an applicant’s income.
Maintain Section 8 Compliance
As you may have expected, there are some tenants' advocacy groups out there that are already doing some testing by visiting websites and checking application portals. They are making phone calls trying to get property owners to fall into the trap and say they do not accept Section 8 or housing vouchers.
So, we recommend that you be vigilant with your compliance. If you haven’t already removed language like this from your marketing and application materials, you must do so immediately.
There were a number of Oakland rental property owners that were choosing to not participate in Section 8 simply because of the administrative burden and the time constraints in getting the property occupied and rent coming in.
Unfortunately, this legislation does not address or fix the underlying root problem with housing voucher programs. Each one is run by a different housing association with a separate set of administrative requirements.
If they would fix the problem of consistency and efficiency, they’d find that the issue would take care of itself.
Maintain Fair and Consistent Screening Criteria
You are now required to allow Section 8 and housing voucher applicants to participate just like everybody else, but this does not mean any of your other screening criteria has to be changed in any way. You can still have the same credit criteria and require the same income verification.
The only change with the income criteria is that you can only look at the portion of the rent that the resident will be paying, not the entire rent itself.
Here’s an example:
If your rental criteria says that a resident must earn three times the amount of rent every month, you’ll have to consider three times the amount of what the Section 8 resident would be paying. So if they are responsible for only $300 of their rental payment and the voucher takes care of the rest, you need to look for income that meets or exceeds $900 from that resident.
There are two sister bills in place. The second bill does designate vouchers and it also adds military personnel and veterans as protected classes when it comes to source of income. So all three of those protected classes now have a heightened level of protection under existing and new discrimination laws.
Oakland Rental Trends and Industry Best Practices
It is hard to say if this will become a national requirement over time. It started with the cities, and quite a few California cities were already doing this. It may have started in Los Angeles, and then it moved out through the state from there. Any time one large city influences something, other cities begin to pick it up. And, there are some very powerful tenant rights organizations in California, and they’ve worked hard to pass this bill as well as the rent control laws. California and Washington are sort of the front runners and then Colorado is quick to follow as the new rental trends and patterns tend to move east.
As an Oakland rental property owner, what you really need to know is that you have to be careful with your advertising and your screening process. You can no longer refuse an application from a potential resident who is part of the Section 8 program or has a housing voucher.
Keep an eye on this blog space, because we’ll be updating you frequently on how this law takes shape and what other things it may be leading to.