New (ish) Colorado law Lowering Income Requirement

[Makan A Tabrizi]

Colorado limited income qualification to 2X rent recently. Does anyone have a strategy to protect against less-than-qualified tenants getting approved? I used to charge the equivalent of one monthly deposit for qualified tenants (when it was OK to screen based on 3X rent). Should I be increasing my deposit requirement to the two months max allowable to mitigate some of the risk? I remember when I lived in LA paying first, last, and deposit was standard but that was when rents were lower. It seems like a lot to ask nowadays for the equivalent of 3 times rent upfront. Then again I don't have any other solutions. Any suggestions would be appreciated.  

[Makan A Tabrizi]

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.