Can "having a job" be part of your tenant screening criteria?

19 Replies

Hear me out.

Let's say part of your screening criteria is a minimum of 3x rent as income. In CA and some (all?) other states, you cannot discriminate based on source of income. That means if the prospective tenant receives unemployment, Social Security, etc., you have to count that as income, just like income from a job.

So, separate from the 3x rent as income issue, can you also have a requirement that the prospective tenant must be employed or work in some way (self-employed, etc.)? Would this be viewed as discriminating against those receiving unemployment, SS, etc.?

This is more of a curiosity for me. We accepted tenants last year where the wife worked but husband got unemployment, for a sum total of over 3x rent, and they've been great tenants.

Originally posted by @Kimberly T. :
Hear me out.

Let's say part of your screening criteria is a minimum of 3x rent as income. In CA and some (all?) other states, you cannot discriminate based on source of income. That means if the prospective tenant receives unemployment, Social Security, etc., you have to count that as income, just like income from a job.

So, separate from the 3x rent as income issue, can you also have a requirement that the prospective tenant must be employed or work in some way (self-employed, etc.)? Would this be viewed as discriminating against those receiving unemployment, SS, etc.?

This is more of a curiosity for me. We accepted tenants last year where the wife worked but husband got unemployment, for a sum total of over 3x rent, and they've been great tenants.

My understanding for CA is that unemployment insurance payments is a source income for which you can't discriminate, same as SSI. It seems like the law was written to cover governmental sources of aid and income, but doesn't address other types income.

So if a tenant has a tax return with only self employment or passive income can you discriminate against that? I would find it hard to believe that self-employed carpenters and gardeners or doctors are a protected class. Ten years ago I was looking for a rental to live in and my tax return showed a six figure income from real estate projects. We were approved for house until the property manager saw my tax return and told me my income wasn't "secure" because I bought and sold properties (and owned rentals at that time). He said real estate was an unstable business. He probably thought I was a drug dealer. Regardless, he openly discriminated on my source of income. I suspect that's legal.

IMO, the "source of income" thing is the government's attempt at protecting those getting getting aid and SSI so they can qualify for rental housing. They've already cut way back on providing housing themselves, so they need the private sector to do it. They know LLs might favor wager earners over those getting aid or SSI. So, they passed a low to force the issue.

Since you can't disciminate based on "source of income", I think that requiring employment would violate that.

One thing that I like to see is if they're collectable. Being on some form of handout makes it very difficult to collect. Self emploed people are hard to collect from too and I prefer not to rent to them.

My state doesn't have any source of income type rules, but if they did, I wonder if requiring people to be collectable would be allowed?

I would think anyone on disability has you on discrimination

Federal law protects disabled tenants after they have moved into a rental unit as well as during the application process

I learn something new every day. CA's Fair Employment and Housing Act defines income as ANY source of legal or verifiable income. So that means you can't require a tenant applicant to be a wage earner. It's also totally legal to ask the applicant about the source of income and you may request documentation to verify it. And of course, the amount has to meet your criteria. You can't advertise with language such as "must have a job" or "must have pay stubs".

Additionally, I learned that if you allow married couples to qualify by using both of their incomes, then you have to let single people applying together qualify by pooling their income as well.

duplicate

I use to require our section 8 applicants to have a job. I see alot of applicants on section 8 and disability or SS. It's funny now I look at a secure tenant as someone with a steady source of government income rather than day job income.

No, you can't require a tenant to have a job. You can require they have an income and the ability to pay. Federal law, meaning everywhere.

Some guy comes along, you have 600 buck rents, he has no job, but puts $7,200 in a demand deposit account, you as a signator to draft on the account, you secure the account with a UCC filing, are you suggesting you don't want to rent from him because he isn't working? Maybe he's a college professor taking 2 years off doing research and writing a book.

Trying to mix your political views in a RE business can get you in trouble. :)

Some excellent points made. As I said in my OP, I was just curious, we've rented to people on unemployment, we're not trying to unduly disqualify anyone.

The reason for my question is I've seen responses to questions here on BP about not accepting tenants who were unemployed, or not accepting unemployment as income. It hadn't occurred to me that that might be legal in other states. But according to what @Bill Gulley is saying, that would be illegal in any state?

Originally posted by @Frank Romine :
I use to require our section 8 applicants to have a job. I see alot of applicants on section 8 and disability or SS. It's funny now I look at a secure tenant as someone with a steady source of government income rather than day job income.

Since you're in CA you might find this informative:

http://www.hrfh.org/housing_discrimination.html

Be careful should you choose to make such a requirement in the future. These days a prospective tenant is only a few clicks away from easy to understand information that makes it clear that landlords cannot require tenants to have jobs.

Most landlords I know with S8 tenants feel very secure about those rent payments and would have more such tenants if there more vouchers out there. Providing services to the poor has its perks. Really depends on whether or not your local housing authority is easy to deal with.

Originally posted by @Bill Gulley :
No, you can't require a tenant to have a job. You can require they have an income and the ability to pay. Federal law, meaning everywhere.

Some guy comes along, you have 600 buck rents, he has no job, but puts $7,200 in a demand deposit account, you as a signator to draft on the account, you secure the account with a UCC filing, are you suggesting you don't want to rent from him because he isn't working? Maybe he's a college professor taking 2 years off doing research and writing a book.

Trying to mix your political views in a RE business can get you in trouble. :)

Many property managers are very wary of tenants who want to pay in advance or who would be willing to set up such an account. They don't cook meth or have grow houses in MO?

Kristine Marie Poe AMEN!!!! ON YOUR POST BELOW!!!

"Most landlords I know with S8 tenants feel very secure about those rent payments and would have more such tenants if there more vouchers out there. Providing services to the poor has its perks. Really depends on whether or not your local housing authority is easy to deal with."

Kimberly, that's not really what I said, I was speaking to the fact that federal law requires you to consider income regardless of it's source, assuming it's legal, they are speaking directly about social security and different types of assistance programs. The source of funds can not be discriminated against, where and how money is acquired.

What can be a discriminating factor is the degree that such funds are likely to continue in the future over the term of a contract. You must consider child support that has had a track record of being paid as ordered by a court. However, if that child is 17 1/2 and has graduated from high school and is not attending college and has no intentions of furthering their education, state law usually allows child support to stop at 18. So that income is not expected to continue and you don't have to count it.

I can tell you too, that if you need to find someone who really knows HUD leasing regulations, Section 8 rules and or Public Housing regulations, start asking the tenants, I have met several that know the regs better than anyone in the PHA office and most know them at least as well. Most I'd say are more than aware of the requirements for them to qualify and receive the income or subsidies they do. And, I don't see that as playing the system!

Just consider human motivations, you have a job, a few houses you lease and you have a life. Your RE business isn't the only source of your survival. To a tenant who has some handicap who can't work, that subsidy is their only key to survival and staying off the streets, they are doing exactly what they should be doing to protect themselves and their family. Knowing the regulations and how to remain qualified is much more important to them than it ever could be to you. So let's not demean their efforts to live decently.

May be it wasn't your intent, but all I see about hounding the lower class into total despair from one political side seems to be echoed by the thinking we could require tenants to have a job.

After that, it would make more sense to me to require all in a building to have the same working hours. If a shift worker comes in a 1 AM and watches TV that may disturb the people next door. Next day, the neighbor's kids wake up the shift worker. You get disturbance calls from both sides! Let's just make it a requirement that everyone has a job and during the same hours. :)

K. Marie, only you would bring that angle up to an example made as an ability to pay. Mo. has been the #1 producer of meth, we have the best cooks in the country! Those who are weary or leery should further verify the source of funds as we all should be doing. I've posted before about concerns of lump sum payments, that's why my example was a drawing account for the benefit of the landlord. Perhaps Aunt Mary gifted the money from the sale of stock to her nephew so he could write a book. LOL

Yes, tens of thousands would be out of work if Sec 8 went away and many landlords would never rent a place for what they get without subsidies. But, that's getting off topic, we're talking job and ability to pay requirements here. :)

@Bill Gulley perhaps you were reading into my question, or perhaps I didn't make it clear enough, but I'm not trying to get out of renting to anyone for not having a job. We have rented to someone on unemployment and they've been a great tenant. Again, I asked because I was curious, since I'd seen responses on BP from landlords in other states about denying a unit to someone without a job, or someone on unemployment, so I was wondering if that was legal in other states.

@Bill Gulley I'm going to have to say I disagree, or I'm misunderstanding your posts.

Based on the HUD guidelines the income inclusion/exclusions they list are only with respect to PHA. All the other income guidelines I saw were with respect to a specific grant or need program, so in both cases that applies to the specific agency policies but is not federal law that applies to fair housing standards LL must follow.

Also the fair housing site mentions nothing about "income source", and doesn't have any discrimination charges in the last years for income but has them for the six federally protected classes.

Several states have adopted it as a specific requirement for tenant's rights within that state. In all the state's guidelines I've seen they specifically state that income source is not federally protected. There are also several organizations with missions to lobby for it to be added federally.

I'm not saying you are wrong.....but I think you're wrong ;) that's a new one for me, but unless you have something to back it up I'd say it is not federally protected, only state (at least for now).

Originally posted by @Matt Devincenzo :
@Bill Gulley I'm going to have to say I disagree, or I'm misunderstanding your posts.

Based on the HUD guidelines the income inclusion/exclusions they list are only with respect to PHA. All the other income guidelines I saw were with respect to a specific grant or need program, so in both cases that applies to the specific agency policies but is not federal law that applies to fair housing standards LL must follow.

Also the fair housing site mentions nothing about "income source", and doesn't have any discrimination charges in the last years for income but has them for the six federally protected classes.

Several states have adopted it as a specific requirement for tenant's rights within that state. In all the state's guidelines I've seen they specifically state that income source is not federally protected. There are also several organizations with missions to lobby for it to be added federally.

I'm not saying you are wrong.....but I think you're wrong ;) that's a new one for me, but unless you have something to back it up I'd say it is not federally protected, only state (at least for now).

There are several Acts overseen by HUD, they may not be on HUD's site. What should be in HUD guidelines are the rent to income guidelines of 33%. These regs are intertwined with Fair Housing, Equal Credit Opportunity, two that come to mind. Additionally, there are consumer laws at the state level and I'm not familiar with matters at the state level.

The words "regardless of the source of income" are used I assure you. It's probably not as a category, but in direction of applying the intent of regulation.

I spent years reading and studying regulations, I may not remember someone's name 5 minutes after meeting them (depends on how impressed I was, LOL) I've always had trouble with names, but I can remember text for decades, it depends on how impressed I was. I'm usually pretty impressed with and by HUD, Federal Acts, banking regulations, real estate laws and the application of such restrictions.

In book form, HUD regulations are in volumes, we had the complete set in the library of our PHA, the book case is for the regs was about 6' long and on 3 shelves. Just saying, it's a lot of material and as a Commissioner of the PHA, it was my duty to know what was in there. Now, I'm sorry I can't direct you to a specific paragraph.

There are some other aspects of posting here that I'd like to bring up, just haven't been compelled to really, perhaps I should and take it to the Off Topic forum as it would be straying from the subject here. It might be rather long.

My authoritative writing style probably ticks off a lot of people, I won't change it, but read it as my opinion based on my experience. It's the shortest way to present what I have to say getting to the point rather than touching on all the side issues that may be applicable, like verifying drug money. I really don't embellish, I do stress certain points of what I consider applicable and important to a topic that I have experience in.

Anyway, I'm sure if it's important to you, you can keep searching the HUD and various Acts and you'll see what I addressed. I'd have to search just like you do.

Sorry if our OP's post wasn't clear, it's the way I read it, I don't hammer someone personally (usually) but to the expressed intent or idea, wasn't personal. :)

@Bill Gulley not a problem. I'll definitely keep looking, because I would like to know myself personally. I can definitely appreciate the remembering text but not where you found it 5 years ago so no problem there.

Originally posted by @Matt Devincenzo :
@Bill Gulley not a problem. I'll definitely keep looking, because I would like to know myself personally. I can definitely appreciate the remembering text but not where you found it 5 years ago so no problem there.

Matt, the issue of counting income from government sources should be common knowledge, it's been around since the late 80s early 90s check in the Equal Credit Opportunity Act and Fair Housing, which is under HUD's oversight. Regs don't often change, they are amended, parts are deleted, but the meat never really changes, you'll find that the more you get into regulatory issues. As an example, go to the inception of HUD, look to the intent of its formation, it hasn't changed and is the anchor in every thing they do. Good luck :)

@Bill Gulley , thanks for sharing this with us. Now what about if the landlord requires a certain portion (say at least 50%) of the income to be "STABLE"? What if you get a tenant who does not have a base salary but is paid commission only? What if you see a tenant who made $7,000 in January, earned $0 in February and has already made $6,500 March? The rent is $1500 per month.

Will you rent to his person? It meets the 3x the rent but the income fluctuates.

3 months is not a sufficient period to look at, go to tax returns of commissioned sales and self employed as well as with anyone who has fluctuating monthly income for any reason. What's the average monthly income for the past two years? That should be your qualifying mark.

That said, there is room for common sense. Is a military housing allowance used when the service member has 6 months left in service?

Is a doctor getting out of residency a consideration?

What about a college student graduating in 3 months who has a verified job offer?

Cash reserves that can supplement income can be a factor, look closer at credit and past rental experience to consider the intent and probability of such reserves being utilized as needed. In K. Marie's post about her dealing in RE, this could have been used to cover perceived dry spells.

I have found that you're always better off looking at the factors surrounding any applicant as your primary underwriting concern, not personal matters (initially) or issues that relate to the person. After you get past the facts of the ability to pay you can then take in other issues. Just be fair. :)

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