Source of Income to Become Statewide Protected Class

Bill Passed in Olympia Will Require Rental Owners Accept All Legal, Verifiable Sources of Income When Screening Applicants

Sean Martin | Interim Executive Director

The long-fought issue of Source of Income Discrimination (SOID) protections for renters in Washington State was decisively settled this year as HB 2578 (Rep. Ricelli, D-Spokane) passed through the legislature with bipartisan support and was signed in to law by Governor Inslee. The process ended an ongoing debate in Olympia stretching back more than 10 years as rental housing owners and renter advocates agreed to legislation which creates new protections for renters while also ensuring that rental owners can recoup unpaid dollars at the end of a tenancy.

RHAWA was successful in changing the dialogue in Olympia this year to recognize that private-market rental owners can provide solutions for low-income renters, and we were able to come to an agreement which will benefit the rental housing industry and renters equally. The new law takes effect September 30, 2018.

For the rental housing industry, the key component of the legislation involves the creation of a landlord mitigation fund. Prior attempts at enacting a statewide SOID law were rebuffed by the legislature in large part because those proposals lacked financial guarantees or incentives for rental owners to work proactively with low-income renters who, even with their source of income protected, were still likely to fail an actual screening. This is the key component that locally enacted source of income protections have lacked.

A newly created Landlord Mitigation Fund will allow rental owners who rent to low-income renters using housing subsidy programs to be reimbursed for claims related to unpaid rent, utilities, fees, repairs, and damages. The fund allows claims ranging from $500 to $5,000 per incident to be paid out to a rental housing owner when the renter is the recipient of a housing subsidy.

Damages, beyond wear and tear, that are eligible for reimbursement include, but are not limited to: Interior wall gouges and holes; damage to doors and cabinets, including hardware; carpet stains or burns; cracked tiles or hard surfaces; broken windows; damage to household fixtures such as disposal, toilet, sink, sink handle, ceiling fan, and lighting. Other property damages beyond normal wear and tear may also be eligible for reimbursement at the department’s discretion.

The mitigation fund will also pay up to $1,500 for property improvements when a property fails a housing subsidy program property inspection as a part of renting to an applicant who pays part or all of rent using a housing voucher. RHAWA fought hard for inclusion of this provision as a financial safety net for rental owners, and to keep doors open to low-income renters who would otherwise be turned away due to the property failing the inspection.

RHAWA also addressed a common concern about lost time for housing subsidy program inspections to be completed, by winning a provision which allows reimbursement to also include up to fourteen days of lost rental income from the date of offer of housing to the applicant whose housing subsidy program was conditioned on the property passing inspection until move in by the applicant.

Housing subsidy programs are now defined to include valid short-term or long-term federal, state, or local government, private nonprofit, or other assistance program in which the tenant’s rent is paid either partially by the program and partially by the tenant, or completely by the program directly to the landlord. Common examples are the Section 8 program and VASH — Veterans Affairs Supportive Housing.

Rental owners who receive reimbursement from the program are prohibited from taking legal action against the tenant for damages attributable to the same tenancy and from pursuing collection, or authorizing another entity to pursue collection on the landlord’s behalf, of a judgment against the tenant for damages attributable to the same tenancy.

RHAWA’s belief is that the mitigation dollars soon-to-be available will remove barriers for low-income renters who previously may have presented financial risk to an owner in instances where damages occur or rent goes unpaid and the renter has no means to make the landlord whole.

Funding for the mitigation fund comes from a $3 increase, from $10 to $13, in the “affordable housing for all” surcharge assessed by a County Auditor for document recording fees. Initial estimates point to the fund totaling $3 million annually, with the money becoming accessible to mitigation fund claims beginning in 2019.

The new law also means that “Source of Income” will become a protected class when renting housing. The definition of Source of Income includes benefits or subsidy programs including housing assistance, public assistance, emergency rental assistance, veterans’ benefits, social security, supplemental security income or other retirement programs, and other programs administered by any federal, state, local, or nonprofit entity.

Short-term vouchers are also included in the law’s protections, meaning that rental owners may not alter lease term offers to an applicant just because their rent voucher does not cover the duration of the advertised lease agreement. Source of Income does not include income derived in an illegal manner.

If a landlord requires that a prospective tenant or current tenant have a certain threshold level of income, such as using an income to rent ratio, any source of income in the form of a rent voucher or subsidy must be subtracted from the total of the monthly rent prior to calculating if the income criteria have been met. This is similar to what many local jurisdictions have done when passing local Source of Income ordinances over the past few years.

Under the law, a landlord may not refuse to rent to or expel a prospective or current tenant based on their source of income. Additional protections include preventing rental owners from:

Publishing or communicating any form of advertisement which indicates a preference, limitation, or requirement based on any source of income.

Changing terms of a lease offer, including altering price, terms, conditions, fees, or privileges relating to the rental.

Attempting to discourage the rental or lease of any real property to a prospective tenant or current tenant.

Telling an applicant that a unit is not available for inspection or rental when the dwelling unit in fact is available.

Making unavailable or denying a unit to a prospective tenant or current tenant who would be eligible to rent the unit were it not for their source of income.

The lone exception to the new law is if the prospective tenant’s or current tenant’s source of income is conditioned on the real property passing inspection and a written estimate of the cost of improvements necessary to pass inspection is more than $1,500 and the landlord has not received moneys from the landlord mitigation program account to make the improvements. In such circumstances the rental owner could still legally deny the applicant.

Beginning September 30, a person in violation of these rules can be held liable in a civil action up to 4 and one-half times the monthly rent of the real property at issue, as well as court costs and reasonable attorneys’ fees.

The legislation also carries with it several future reporting requirements to ensure the mitigation fund is being effectively administered and how it can be improved. This process will include RHAWA representatives, as well as tenant advocates, and the housing authorities. That report will include discussion of the effectiveness of the program as well as how it can be improved.

RHAWA is hopeful that the feasibility for expanding the use of the mitigation fund to provide up to ninety-day no interest loans to rental owners who have not received timely rental payments from a housing authority will be added.