Fair Housing Source of Income Discrimination
The Fair Housing Act as amended prohibits discrimination in housing decisions based on the seven protected classes of race, color, sex, national origin, religion, disability, and familial status. Some states, cities, and counties have expanded fair housing protections to include additional protected classes such as ancestry, marital status, age, military or veteran status, sexual orientation, gender expression, source of income, and Section 8 Housing Choice Vouchers.
In those localities where source of income is a protected class, landlords are prohibited from discriminatory actions such as refusal to rent based upon an applicant’s source of income, offering different terms and conditions to applicants based on source of income, or the use of income discriminatory marketing and advertising.
As a protected class by state, city, or county statute/ordinance, source of income (SOI) must now be recognized by landlords and incorporated into their fair housing rental policies and practices. A landlord cannot reject a rental applicant on the basis of the applicant’s source of income as long as the income is from a lawful source. In many of these states and localities, source of income protection includes rental assistance through participation in the Section 8 Housing Choice Voucher program. Per statute or ordinance a landlord cannot refuse to accept the applicant’s Section 8 voucher in evaluating rental qualifications.
Rent defaults are cited as the top concern for most landlords. Accordingly, financial ability to make rent is an important decisioning factor in the tenant selection process. Traditionally tenant screening for financial ability has included checking an applicant’s credit report, verification of employment, and requiring copies of current pay stubs. Employment wages have been considered a steady, stable source of income that could be reliably verified and a generally dependable means of rent payment.
Alternative sources of income include any lawful income that comes from sources other than employment. Alternative sources of income can be verified and documented similar to employment verification and wages documentation. Verification of income means that the amount of the income can be proven or that the receipt of the income can be proven. An applicant must be able to provide written documentation that shows either the amount of income or that the income has been received. The written documentation must also name the source of the income. An applicant can provide multiple documents that together identify the source of income and the amount of receipt.
As examples, lawful sources of income may include but are not limited to the following:
- Self-employment
- Pensions
- Private benefit programs
- Mutual funds
- Trust funds
- Investment – stocks and bonds
- Investments – rental property
- Social Security benefits
- Supplemental Security Income (SSI)
- Unemployment insurance benefits
- Disability benefits
- Workers compensation benefits
- Temporary Assistance for Needy Families (TANF)
- Veteran Affair’s Supportive Housing (VASH)
- Housing Choice Vouchers (Section 8)
- Student loans
- Short-term emergency grants from state and local agencies for rental assistance
- Assistance programs from community service agencies, non-profit organizations, or charitable organizations
- Alimony
- Child support
- Foster care subsidies
Landlords participating in the federal Low-Income Housing Tax Credit Program are prohibited from discriminating against potential tenants using Housing Choice Vouchers even if their locality does not have source of income protections.
Source of income discrimination can take many forms, as evidenced in rental advertising, qualification requirements, and rental policies and practices. In advertising a vacancy, a landlord posts an ad that expresses limitations on the source of income, such as “No Section 8”, or “we do not accept vouchers or subsidies”. When a potential tenant during the initial contact discloses an alternate source of income to be used for rent, the landlord quotes a higher than advertised rent amount, or falsely claim the unit is “no longer available”.
In qualifying an applicant a landlord rejects the application due to an alternate source of income or refuses to consider a co-tenant’s alternative source of income to calculate income eligibility.
In rental policies, source of income discrimination occurs when:
- A landlord’s rental criteria requires income documentation of copies of pay stubs, typically only available to individuals employed, i.e., a “regular job.”
- A landlord’s requirement for qualified income is inflated in order to discourage or disqualify applicants with public benefits or other alternate source of income.
- A landlord charges a higher rent for an applicant with alternate source of income, requires a co-signer/guarantor, or requires a higher security deposit.
- A landlord limits an applicant’s choice of rental unit by only showing less desirable units because of the applicant’s source of income.
- A landlord sets different rental terms and conditions, or places restrictions on the use of rental facilities or services for tenants utilizing housing assistance vouchers.
One of the most common examples of source of income discrimination is the refusal of landlords to accept tenants who receive tenant-based rental assistance through the Section 8 Housing Choice Voucher program.
Landlords must apply the same screening criteria to all applicants in a non-discriminatory manner according to applicable fair housing laws. To that end, landlords should conduct all due diligence to keep current with fair housing protections for the location of their rental property. A landlord must set his rental policies to business necessity and legal compliance with applicable federal, state, and local regulations and requirements. The landlord’s rental policies must be nondiscriminatory, legally compliant and consistently enforced.
Fair housing protections for source of income and/or Housing Choice Voucher participation do not prohibit a landlord from setting his rental criteria to include income qualification. However, if the landlord does require the applicant to have a certain income to qualify for housing, the landlord must subtract any payment from a Section 8 or other subsidy program from the total monthly rent to determine the amount of rent that the tenant would pay out of pocket); and include all sources of income in the tenant’s total income when calculating income eligibility for any tenant.
The landlord must count only the portion of the rent that will be the tenant’s responsibility in determining whether the applicant qualifies for the income requirement. If the landlord sets an income to rent ratio of 3:1; the rent is $1000/month; and the rent assistance voucher is $600/month, the tenant will be responsible for $400/month as his portion of the monthly rent. The tenant will need to have a total income of $1200 or more/month, (3x$400) to qualify under the landlord’s income criteria.
As of this writing, twelve states, the District of Columbia, and many cities and counties have fair housing laws that prohibit housing discrimination on the basis of source of income. However, not all source of income laws offer equal protection from discrimination. There is significant difference in the strength and effectiveness among current laws. While some laws provide specific source of income protections by source name, other laws use more generalized language to refer to source of income protections. Section 8 Housing Choice Vouchers may be explicitly named as a protected source of income in some localities but may be specifically excluded form source of income protections in other localities.