Housing discrimination is a real threat to your rental apartment investment, and one of the trickiest aspects of landlord tenant law.
When investors first purchase a rental property, they sometimes go into it with expectations about the “perfect tenant” for the property, completely unaware how those expectations conflict with tenant rights.
Often, those expectations were planted by developers or real estate agents selling the property. You’ve probably seen brochures or heard a sales pitch advertising a “single’s” unit with one bedroom, a downtown loft for “active professionals”, or a “quiet building” a/k/a no kids. Maybe the rental apartments are adjacent to restaurants and night life, have an office for “professionals”, or a “bonus” room — not for sleeping! But each of these scenarios can lead to different types of housing discrimination.
Just 1 Housing Discrimination Charge Can Sink Your Business
So, why should you be worried about housing discrimination complaints? Landlord tenant law doesn’t necessarily track what’s on a brochure — or in your mind — when it comes to professional property management. It’s important that your expectations about what makes a great tenant don’t force a property manager to push the limits. A disconnect between the owner and manager not only slows down the tenant selection process, but it can land everyone in hot water.
Real Property Management Requires Knowing Landlord Tenant Law
To be qualified for a rental apartment, a tenant must have enough income to pay the rent. That’s usually calculated at somewhere between 35 and 50 percent of the person’s income, depending on the market. In addition, the qualified tenant should possess decent credit, and have no prior eviction or relevant criminal history. The tenant must be willing and able to meet particular property rules, like no-smoking or no-pets, one car per tenant, or any other rental property management policies. Finally, the tenant should have a good rental reputation, which means they are not disruptive or a chronic complainer.
Fortunately, these are all factors that are easily verified by your property manager.
Professional Property Management is Key to Avoiding Housing Discrimination
The qualified applicants that the real property manager encounters may be young professionals, but maybe not. It could be a retired couple, or a couple who have small children. It may be a tenant who suffers from a disability. A property manager or landlord cannot reject those qualified candidates who meet the standard, but do not meet other, non-essential expectations.
So, for example, the rental ad can’t track what a developer or real estate agent may have told you about the property — that’s it’s perfect for (fill in the blank). A landlord or property manager can’t identify who would be best served by the property. Likewise, a landlord or property manager can’t ‘steer’ some applicants, like families with kids, away from one property or unit and towards another.
If that one-bedroom also has a bonus room suitable for sleeping, the family can’t be rejected because the owner would prefer a single professional. If the family wants the vacant top-floor apartment, the neighbors — and the landlord — will have to deal with the pitter-patter of little feet overhead. The real property management is bound by landlord tenant law.
It’s up to individual applicants to decide if the property is right for them. Each unit must be suitable for a diverse range of tenants. That’s simply the nature of rental property management.
Trends in Housing Discrimination
Property managers in the U.S. are facing mounting pressure from lawmakers when it comes to screening applicants for rental apartments. For example, Oregon recently amended its landlord tenant act to limit the use of criminal background checks and eviction reports. Nationally, there’s a prohibition against rejecting someone over prior drug or alcohol abuse, and those who fail background checks are entitled to written notice.
While these rules regarding tenant selection may seem burdensome to the uninitiated, in practice, there’s very little evidence to show that applying these standards creates any reduction in rental profits. Families with kids can make extraordinarily reliable tenants, while young professionals have been known to trash units and cause frequent disturbances. Housing discrimination, like applying stereotypes, doesn’t work. Instead, it creates a false sense of confidence that can lead to lost profits.
So, if you want to keep your profits flowing, it’s best to check your expectations of who you think the perfect tenant may be, and free up your manager to look for that faceless tenant who meets a far more important objective — being qualified.
Sometimes risk is good, but when it comes to following landlord tenant law, it’s best to play it safe. A housing discrimination lawsuit can costs tens of thousands of dollars, and you could even wind up with limits on your ability to manage other rental apartments.