That title is a little misleading because, in fact, the federal Fair Housing Act does not prohibit source-of-income discrimination.¹ I noted just this morning a case from Maryland² discussing a specific issue related to source-of-income discrimination and thought this was a good reason to take a brief look at source-of-income laws.
I have to start by noting that the Poverty and Race Research Action Council is the source for my information on these laws because they conduct an annual survey of state and local source-of-income discrimination laws.³ Not all of these laws are created equal. In Texas, for example, the law concerning source of income discrimination forbids such laws, part of an effort by a conservative legislature to keep more liberal cities from passing such laws. The Wisconsin law has been interpreted to exclude Section 8 housing vouchers, which may be the most common kind of rental assistance, and as the PRRAC notes, other state laws have been weakened by interpretation as well.
This kind of weakening (or merely interpreting, depending on your attitude) is what the Maryland Supreme Court is considering in Katrina Hare v. David S. Brown Enterprises, Ltd. The landlord in that case had an income qualification rule that permitted the rent to be no more than 40% of the tenant’s total income. The tenant, who lived on social security, had income of only around $800 a month, but had a housing voucher for about $1400 a month. Even counting the voucher as income, her total rent was far more than 40% of her income; in fact it was around 70% of her income because most of her income was assistance to pay rent. Her share of the rent, a few hundred dollars, was far less than 40% of her income even without rent assistance, but comparing the full rent to all her income meant she didn’t meet the landlord’s requirements.
The landlord’s position was a simple “look at the words of the statute” argument. As written, the statute requires a landlord to treat a rent voucher as income and forbids discrimination based on source of income. The landlord claimed that it treated her voucher as income when calculating total income for its 40% rule and thus did not discriminate. The tenant’s position was practical. Tenants who get rental assistance usually have income that is far less than the rent they have to pay. If you add rent assistance that is equal to most of the rent to their existing income and do the landlord’s calculation the tenant will almost never qualify to rent the apartment for which they are getting assistance. Thus, the “look at the words of the statute” argument leads to the absurd result that landlords can still, in effect, discriminate based on source of income.
I won’t guess how the Maryland Supreme Court is going to rule in this case, but it illustrates an important point for landlords and developers who are concerned about the administrative burden of accepting vouchers but do not want to violate source-of-income discrimination laws. You cannot just look at the PRRAC list and conclude that in the listed states and cities you must accept housing vouchers or, using the landlord’s argument in Maryland, assume you’ll be able to reject tenants with vouchers. The exact language of the law matters as do court decisions interpreting the law. Legislatures and city councils can learn the same lesson because if the goal is to require that landlords to accept housing vouchers and other rental assistance it may not be enough to simply outlaw source-of-income discrimination as the Maryland legislature has done.
And as a final note, this is a more general problem with anti-discrimination laws. Everyone thinks they know what it means to say “thou shalt not discriminate” based on this or that, but not everyone “knows” the same thing. There is no easy statutory or regulatory path to achieving the goal of equal housing opportunity for all while at the same time not unduly burdening housing providers. There is also no easy way for landlords to be sure that because their motives are good they are doing what the law requires. If you are doing business in a jurisdiction on the PRRAC list an investment in closely examining the local source of income law will almost always pay off in the long run.
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¹ Source of income discrimination occurs when a landlord refuses to accept rent vouchers or similar third-party sources of income when evaluating the tenant’s financial ability to pay rent or, in some cases, simply refuses to accept rent payments from certain third parties, usually a government agency or a charity of some kind. It is never mentioned in the federal Fair Housing Act although it is forbidden by regulation for certain federally subsidized housing programs.
² See, Source of Income lawsuit
3 See, PRRAC Source of Income Survey
4 What, you don’t agree?