With the new year underway and all the new laws in California rental housing going into effect, a lot of the owners and investors we work with at Progressive Property Management have questions about what The Tenant Protection Act means for them and their rental properties.
We’ve been answering those questions with some in-depth insight about how things like rent control and just cause evictions affect the current rental market in California and your responsibilities as a landlord.
It’s important to point out that AB 1482 was not the only law passed last year that affects rental property owners and their homes in California. There was also a bill that has a huge impact on whether or not you can allow Section 8 applicants for your home.
It hasn’t received as much attention as the rent control law, but we think it’s just as important. Today, we’re talking about what SB 329 means for you and your rental property, especially when you’re screening tenants and making decisions about who you will place in your home.
Section 8 Housing: SB 329 Overview
According to this new law, you can no longer give a blanket denial to any and all Section 8 tenants. You have to be willing to accept the application from a potential tenant who receives Section 8 benefits, and you have to screen that application the same way you’d screen any other application.
Essentially, this makes Section 8 tenants a protected class against whom you cannot discriminate. It doesn’t mean you’re making all of your properties Section 8 homes. But, it does mean you have to consider applications from renters who have Section 8 vouchers.
Understanding the Section 8 Program
If you’re not entirely familiar with the Section 8 program, this is a good time to educate yourself on what it means and what it entails. Section 8 is a federal housing program that’s funded by the United States Department of Housing and Urban Development. While it’s called Section 8, the proper name for this program is the Housing Choice Voucher Program.
Section 8 exists for people who cannot afford to pay rent in the markets in which they live. If their income is low or they’re not earning any income, they can apply to the program for assistance. They will need to demonstrate that their income does not meet the rental values of the current housing market, and the government will provide a voucher in a specific amount that covers the rent they can’t afford.
When you are renting your property to a tenant with Section 8 benefits, you have to meet specific habitability and safety requirements. There will be an inspection of your property, and if any improvements are required, you will have to make them within a specific period of time. You will also receive rental payments from the government rather than directly from the tenant. The amount of rent you’re charging must be considered fair according to the market.
Marketing Your Property and Establishing Rental Criteria
In the past, there would be rental advertisements that specifically said “No Section 8 Tenants.”
If you had included that statement in your online advertising, yard signs, or other marketing materials, you cannot do it anymore. The law will not allow you to dissuade Section 8 tenants from applying for your property.
Instead of advertising that you do not want Section 8 tenants to apply, you might want to include specific rental criteria items in your advertising. This can help prospective tenants pre-screen themselves, and save all parties a lot of time. You don’t want to use your time and resources to screen tenants who are not going to qualify for your home, whether they’re Section 8 or not. So, in addition to speaking brilliantly about all the benefits of your property and including dazzling photographs that show it off, you might want to list a few of the standards that you have in place for all applicants.
Here are some of the perfectly legal criteria that you can include in your marketing or when you’re showing a property:
- There might be a specific credit score that’s necessary for approval. You can require that tenants applying for your rental property have a minimum credit score of 650 or 600 or 500 – whatever you decide will make an acceptable credit risk.
- You can advertise that previous evictions will automatically disqualify an applicant.
- Income standards are still permissible. While you cannot restrict where a tenant gets their income, you can require a specific amount of income in order to meet your standards for approval. Perhaps this is $5,000 of verifiable income per month on a $2,000 per month rental property. You can set your income standards wherever you want. Industry best practices say you should look for income that’s at least three times the monthly rent.
Remember that once you set these standards and share them publicly in your advertising and with your applicants, you have to apply them consistently to all parties. You cannot have these standards in place for your Section 8 applicants but not your other potential renters.
Be Specific with Denials
With this new Section 8 law in place, you cannot discriminate against potential tenants if their income is generated by the Section 8 program or another housing voucher. This legal protection means that you may get more Section 8 tenants applying for your properties than you’ve had in the past.
Your potential tenants will still need to meet your criteria. You can deny a Section 8 applicant if they don’t meet your credit standards or if you discover an eviction from three years ago. If they do not meet your standards and you’re going to deny them for your property, make sure you are prepared to explain why. You’re required to do this anyway, in accordance with the Fair Credit Reporting Act, and it’s even more important now, with California’s new rental laws.
Send a letter explaining that they have been denied for the home they applied for. Then, explain why and be sure to reference the rental criteria that you provided before they filled out the application. Highlight the area in which they fell short, whether it was the amount of their income or their credit score or a poor landlord reference or a recent conviction for a violent crime.
Professional Property Management in California
If you deny an applicant just because they receive Section 8 benefits, you can face a fair housing fine of about $20,000.
That’s an expensive mistake to make.
The potential for mistakes is easier than ever in California. With the new laws, renting out a property is more complex and challenging than ever before. It’s easy to fall into traps and make big mistakes, even if you’re an experienced landlord and you’ve been doing this for years.
We’d like to help rental property owners navigate the new laws and prepare for any additional legislation that might be just around the corner. Our team stays up to date on everything that’s happening on a state, local, and federal level. We’re always investing in professional development and taking continuing education classes that allow us to manage your property effectively and proactively.
This is not the time to self-manage a California rental property. Whether you have questions about the Section 8 law that’s now in effect or any of the new rental laws we’re working with in California, contact us at Progressive Property Management. We’d love to be your resource.