Indianapolis Council Proposal 215 - adding "Source of Income" to the discrimination list

45 Replies

This month the Indianapolis Council is to consider City Council General Ordinance No. 215.  This proposal will require/mandate that all Landlords accept Section 8 vouchers and be subject to rules that go along with the vouchers.  This is adding Source of Income to the discrimination list (i.e. race, color, religion, etc.).

From what I gather, this has been attempted before but has failed.  I have attached the link for review and comment.  What do the Indianapolis landlords think?

http://www.indy.gov/eGov/Council/Proposals/Documents/2014/PROP14-215.pdf

Not from Indy, but working for one of those voucher programs has given me a first row view to quite a lot of blatant discrimination against low income tenants simply because they have a voucher. I know many investors here don't like the low income end of the market, and that's fine, there are unique challenges to dealing with the lower end of any market. I've never seen an ordinance that prevents landlords from taking reasonable precautions through screening to ensure tenants have a good rental history, have a stable income, are not felons, etc. If you're really against participating in the program, don't own low income rentals, raise your rents, etc. There are plenty of ways to avoid Section 8 even in markets with income discrimination laws. 

@Dan Perrott   regarding "This proposal will require/mandate that all Landlords accept Section 8 vouchers and be subject to rules that go along with the vouchers."  I don't see that in the text. Can you point out the text that supports your conclusion (the mandate to accept section 8 vouchers)?

We've discussed this on BP before. If you have a $600/month apartment and the Applicant has a $600/month voucher, and that is the only source of "income", most landlords would say 'no' because the person doesn't make 3X the rent in income. The "income" could be from HUD (Section 8), WalMart, or anywhere else... but the algorithm is the same.

I have property in a municipal jurisdiction that has had a law on the books for quite a while that made source of income a protected class.  I have had Section 8 tenants with me for years with no more problems than my mainstream tenants.  In the majority of cases, the county housing authority pays the bulk of the rent on the first of the month, with the tenant only responsible for their "voucher" share of the rent.  I have also had good luck getting annual rent increases from the housing authority as well.

If the concern is that the Section 8 tenant will destroy the property, then please realize that the Section 8 tenant has to pay the same security deposit as anyone else, and that the Section 8 tenant has to take care of the property to remain in the HUD program. I had a Section 8 tenant for 13 years with less turnover damage than I usually get with my mainstream tenants.

Originally posted by @Chris Martin :

@Dan Perrott   regarding "This proposal will require/mandate that all Landlords accept Section 8 vouchers and be subject to rules that go along with the vouchers."  I don't see that in the text. Can you point out the text that supports your conclusion (the mandate to accept section 8 vouchers)?

We've discussed this on BP before. If you have a $600/month apartment and the Applicant has a $600/month voucher, and that is the only source of "income", most landlords would say 'no' because the person doesn't make 3X the rent in income. The "income" could be from HUD (Section 8), WalMart, or anywhere else... but the algorithm is the same.

That's a common misunderstanding of the voucher. The voucher is not a fixed amount, it varies so that the tenant will be contributing ~1/3 of their income towards rent, with the voucher/PHA/HUD contributing the rest, so in essence, everyone with a voucher is making 3x the rent.

This sounds absurd. I cant believe we have such pathetic morons on the council in my city. Apparently they need a refresher course on "free enterprise". I was just sitting here thinking we got too many democrats in this city, then i come across this thread. go figure.

@Bradley Bogdan Your description of HUD vouchers, specifically "everyone with a voucher is making 3x the rent" is not consistent with my experience. We have a tenant with a voucher that pays $506 per month. She pays $140 of the $646 rent. 3X the rent is $1938. Her SSI is $720. Her "income" is $1226 or 1.9X the rent.

@Bradley Bogdan  @Chris Martin  Dave NA Thanks for the replies.  I don't have any issue with section 8 tenants.  My issue is that we as landlords are forced to comply with the section 8 tenant law (and potential costs).  Section 8 is a federal program that you can choose to accept.  With this change, there is no choice - it's mandated.  When my wife and I reviewed this release we thought that our 3x income and 600 credit score requirements would eliminate the section 8 tenants.  If they met these requirements they would not need section 8.

We would like the ability(legal rights) to chose which of our properties we will accept section 8 not being forced into the program.  It's another way the government is taking away the rights of the landlord.  This is where our concern is.

Regarding "With this change, there is no choice - it's mandated." I still don't see this in the bill. You make it sound like anyone with a voucher can move in, even if they make <3x and score <600... I don't think this is what the bill says. If your criteria is "we don't count  income from any government program"... then that would be an issue.

Originally posted by @Chris Martin :

@Bradley Bogdan Your description of HUD vouchers, specifically "everyone with a voucher is making 3x the rent" is not consistent with my experience. We have a tenant with a voucher that pays $506 per month. She pays $140 of the $646 rent. 3X the rent is $1938. Her SSI is $720. Her "income" is $1226 or 1.9X the rent.

 Your tenant's portion of rent is $140, her income is $506, thus her income is roughly 4x the rent. The point of a 3x the rent requirement is so that even if there is an emergency, the tenant will still have sufficient funds to make rent. Your tenant will never be responsible for a rent payment of about 1/3 of their income, thus always meeting that requirement. 

Originally posted by @Dan Perrott :

@Bradley Bogdan @Chris Martin  Dave NA Thanks for the replies.  I don't have any issue with section 8 tenants.  My issue is that we as landlords are forced to comply with the section 8 tenant law (and potential costs).  Section 8 is a federal program that you can choose to accept.  With this change, there is no choice - it's mandated.  When my wife and I reviewed this release we thought that our 3x income and 600 credit score requirements would eliminate the section 8 tenants.  If they met these requirements they would not need section 8.

We would like the ability(legal rights) to chose which of our properties we will accept section 8 not being forced into the program.  It's another way the government is taking away the rights of the landlord.  This is where our concern is.

 This isn't mandating that you MUST accept it, ie give preference, from what I'm reading, it simply says you can't discriminate against it if an otherwise qualified applicant applied. Having a high bar for applicants, such as credit score, good rental history or raising your rent, seem like they are perfectly legal ways to avoid most or all Section 8 tenants, as they've always been. 

The entire point of the program is to get away from congregating low income residents in poor areas of a city. Before Section 8, low income housing was almost entirely project based (probably referred to in your city as "the projects") which isn't particularly effective. The voucher program was created to mix the low income residents back into the city at large, and if you read the rules of the program, your PHA has a fair amount of flexibility in setting up the program to meet that goal in your community. To ensure tenants had stable housing, the vouchers are set up so that a tenant is never responsible for more than they could afford on the open market, roughly 1/3 of their income. So, to have landlords refuse to accept the program out of hand effectively becomes another form of discrimination, just as refusing to rent to a minority household, a disabled household, a household that makes only 3-4x rent in a complex with high income tenants making 10+ times rent is. 

I totally understand and empathize that its a bit of extra hassle and paperwork to participate in the program, but considering there's still plenty of ways to avoid the program, I hardly see this as an overstep by the city. 

???

That's your definition. That is not my definition. My definition of "Rent" doesn't change for S-8 applicants/tenants. Rent is not $140. Her income is not $506. Rent is $646 for everyone. I treat everyone the same as far as qualifying. My definition of "income" includes sources of W-2 employment along with government entitlement programs (VA, SSI, S-8, etc.), pension income, etc. that collectively represent "income".

@Dan Perrott

As a landlord, I screen all applicants using a standard procedure that includes a minimum credit score and a rent to income ratio no greater than 40%.  Since the Section 8 applicant is only responsible for the portion of the rent equal to about one-third of their income, they have no problem passing the income test.  However, many Section 8 applicants don't pass the minimum credit score test, although some do.  

All the law says is that I can not refuse to rent to an otherwise qualified applicant solely because they are participating in a subsidized housing program.  If they pass my screening criteria, then I can decide to enroll my property in the Section 8 program.  Before the housing authority will place a Section 8 voucher holder in my rental property, the property must pass their inspection.  Fail the inspection, and I won't have a Section 8 tenant, and I won't have the guaranteed rent from the housing authority on the first of each month.  

Suggest you take your questions and concerns to your own attorney whose practice includes the fair housing laws.  The attorney can interpret the proposed ordinance for you and advise you of your rights and obligations under the ordinance if it is enacted.

Originally posted by @Chris Martin :

???

That's your definition. That is not my definition. My definition of "Rent" doesn't change for S-8 applicants/tenants. Rent is not $140. Her income is not $506. Rent is $646 for everyone. I treat everyone the same as far as qualifying. My definition of "income" includes sources of W-2 employment along with government entitlement programs (VA, SSI, S-8, etc.), pension income, etc. that collectively represent "income".

 Your definition is one shared by many landlords, I'm just saying it disqualifies virtually any Section 8 applicant (with how Section 8 rules calculate rent there could be a sliver of folks in your area that would qualify, depending on your local FMRs, income caps, etc.), which defeats the point of the program. The point of the program is to mix low income residents into the general populace by ensuring that they can afford rent. From the government's perspective, they've guaranteed that a tenant isn't taking on greater responsibility for rent than they would be able to achieve on the open market at the industry standard 3x rent level by paying the difference. They see the program as removing income as a potentially disqualifying factor, as the tenant isn't responsible for a greater % of rent to income than any other qualified applicant. By your definition, for you to accept most qualified Section 8 applicants, the voucher would need to be worth about 3x what it is now. Not hard to see why cities might want to address that. 

The crux of the issue with treating a voucher as income is that it isn't a cash benefit, its the same reason food stamps aren't counted as income (though some landlords here do, they aren't required to). The value of the voucher isn't guaranteed the way a fixed income is, it is  a variable guarantee to ensure that the tenant portion of rent is always appropriate. 

Perhaps the best parallel is government backed VA mortgages. They are advertised as an almost entirely no money down mortgage, which in effect to the veteran, is true. In respect to the lender though, they aren't exposing themselves to more risk than the industry standard 75% LTV, as the government has guaranteed the other 25%. Financially speaking, you as a landlord aren't exposing yourself to greater financial risk for a tenant not to make rent than the industry standard of 3x income to rent, so in light of landlords using income to disqualify applicants with vouchers designed to make being low income not an issue, they're seeking to redress that. Makes a lot of sense.

Just wanted to share this as well: http://nhlp.org/files/03%20NHLP_Bull_NovDec08_sour...

A good summary (though a few years old) on different state's interpretations of how income discrimination laws apply to Section 8. California's laws hadn't been resolved in court at the time, but they too eventually determined that a person's income could only be considered against the portion of rent they would be paying if they held a voucher, however landlords (as successfully argued in court by one Donald Sterling in 2010) can choose not to participate in the program. 

@Dan Perrott   we in  Oregon are required to accept applications from S8. We can qualify them though and if they don't meet criteria we use then we don't have to rent to them.

Thanks again for the many responses.

I created this post because I feel that our rights of being a landlord are being stepped on.  It should be a choice of who we rent to (not in violation of rights).  Income source is not a right.  I understand that my use of consistent rental criteria will eliminate most section 8.  That is not the point of my concern, it is the stepping on my right as a landlord.

Also - In Indianapolis as of January 1st we are required (by actual name/contact phone number - not company name, not trust name, not LLC name) to register each rental property with the city. I do not have a problem with this because it will allow the city to fix issues with RE owners not maintaining their properties (i.e. slum lords). It seems that allot of local and remote landlords are not taking care of their properties effectively.

Originally posted by @Dan Perrott :

Also - In Indianapolis as of January 1st we are required (by actual name/contact phone number - not company name, not trust name, not LLC name) to register each rental property with the city. I do not have a problem with this because it will allow the city to fix issues with RE owners not maintaining their properties (i.e. slum lords). It seems that allot of local and remote landlords are not taking care of their properties effectively.

 How would a major corporation owning 10,000s of units possibly comply and whose name would be given?!  This is where good ideas can go astray with municipal government looking at only local issues.  That said I do agree with the slum lord comment.

If you think that's bad, check out the "Affirmatively Furthering Fair Housing" section of the Fair Housing Act. It will require areas that are homogeneous to accept low income housing, in order to promote "diversity" and "inclusive communities": 

http://www.nationalfairhousing.org/PublicPolicy/Af...

Its not just the income qualification. What if the landlord does not want to deal with Section 8 rules, inspections and other govt intrusions into their business? 

Originally posted by @Chris Martin :

???

That's your definition. That is not my definition. My definition of "Rent" doesn't change for S-8 applicants/tenants. Rent is not $140. Her income is not $506. Rent is $646 for everyone. I treat everyone the same as far as qualifying. My definition of "income" includes sources of W-2 employment along with government entitlement programs (VA, SSI, S-8, etc.), pension income, etc. that collectively represent "income".

You are right here. This is how I see it as well. We accept S-8 participants who meet our minimum criteria to rent. They are treated the same as anyone else. There are only minor administrative differences in working with S-8 tenants. We prefer 3x rent, but will accept 2.5x with additional security deposit. 

I see nothing wrong with telling landlords to count S-8 as a source of income. It is clearly an income equivalent, because the monies are earmarked for housing needs only and the tenant never has their hands on the money.  But it serves the purpose of helping the tenant afford to rent a place and translates into real money for the landlord. Food stamps are earmarked for nutrition needs, they have value, so we count them as income equivalents as well. When an applicant questions why we need them to show us proof of income or income equivalents of 3x or 2.5x the rent, we explain it is so we will know they will be able to afford their rent in addition to their other living expenses such as utilities, food, clothing, transportation, medical care, recreation, home supplies, home furnishings, etc.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

My concern is similar to @Anish Tolia  .  It reminds me of the infamous seat belt law in our state.  They had a well intended law for our own good...initially it was not meant to be intrusive and a cause for pulling you over.  Now they can and do pull you over and put you in their system over their seemingly harmless well intended law.   

I'm all for landlords keeping up their properties and support that myself.  If the health department calls, we jump and correct immediately.  If we are complicating the tenant screening process, that will be a set back.

I've worn seat belts for years by choice not legislation. I don't want the government intruding on my business.  These incremental intrusions can and will add up and cost time and money.  The cost will eventually  be passed on to the tenants via higher rents.  

Originally posted by @Sean Troy :
Originally posted by @Dan Perrott:

Also - In Indianapolis as of January 1st we are required (by actual name/contact phone number - not company name, not trust name, not LLC name) to register each rental property with the city. I do not have a problem with this because it will allow the city to fix issues with RE owners not maintaining their properties (i.e. slum lords). It seems that allot of local and remote landlords are not taking care of their properties effectively.

 How would a major corporation owning 10,000s of units possibly comply and whose name would be given?!  This is where good ideas can go astray with municipal government looking at only local issues.  That said I do agree with the slum lord comment.

 We are required to "register" properties in Milwaukee as well.  We have to give an "owner" name and an "operator" name. Although the owner and operator can be different and can be LLCs, trust, etc. but there has to be a phone number where someone can be reached, at least for the operator.

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz | Podcast Guest on Show #29

Originally posted by @Marcia Maynard :
I see nothing wrong with telling landlords to count S-8 as a source of income. It is clearly an income equivalent, because the monies are earmarked for housing needs only and the tenant never has their hands on the money.  But it serves the purpose of helping the tenant afford to rent a place and translates into real money for the landlord. Food stamps are earmarked for nutrition needs, they have value, so we count them as income equivalents as well.

 I attended a Fair Housing seminar and the person running the program has been working in the Fair Housing Administration in my city for 12+ years.  She said S8 is not considered income because the money is not given to the tenant.  However, food share is income, because the money is given to the tenant directly.

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz | Podcast Guest on Show #29

@Sean Troy  - The city has not figured how the registration is going to work as of yet.  We as landlords have not heard how this was going to be implemented.  I am sure this will become a discussion on BP in January.  In the December INREIA meeting in Indianapolis the registration process (what is known about it) is on the agenda.

This property registration is supposed to name a specific person to be held responsible that they can call when an issue with a property arises.  I call it the single throat to choke.