With all of the buzz surrounding the newly passed Baltimore County HOME Act, it’s important for landlords to understand all of the facts. As with any new legislation, there are differing viewpoints as well as a lot of misinformation floating around. The basic principle of the new law states that landlords cannot discriminate against prospective tenants based solely on their income source, and a housing voucher is considered a source of income.
What does the HOME Act mean for landlords?
In the past, it was a landlord’s sole discretion as to whether or not they wanted to accept tenants with housing vouchers. This is no longer the case as a housing voucher is considered a source of income and landlords can therefore no longer deny a prospective tenant based solely on their housing voucher status.
How is the housing voucher calculated as an income source?
Most landlords require that prospective tenants have a gross income of three times the monthly rent. When presented with a housing voucher as a source of income, the landlord can only require that the prospective tenant makes three times their portion of the rent.
Do I have to accept every prospective tenant just because they have a housing voucher?
The simple answer here is no. All landlords should have a clearly defined set of qualifications that are used to determine an applicant’s approval to rent. This often includes a minimum credit score, rental history, and a criminal background check. If an applicant fails to meet your minimum qualifications, regardless of voucher status, then you do not have to accept the applicant. However, if an applicant does meet your qualifications, you cannot deny them simply because they hold a housing voucher, as that voucher is considered a source of income.
Will I be able to charge more for a housing voucher tenant?
The housing office considers a variety of factors when determining a “Rent Reasonableness” amount for a particular property. The maximum amount they will pay varies based on standards such as the location of the property as well as the tenant’s income level. The offer could be more or less than the landlord could receive from a market tenant. The four main criteria are as follows:
- Fair Market Rent – this value is calculated by HUD and looks at all units that been rented in your specific area of the last 15 months
- Payment Standard – local Housing Authority will determine their payment standard or the maximum amount they are willing to pay for each number of bedrooms, which typically falls between 90-110 percent of the Fair Market Rent. This is based largely on the ability of a voucher family to find quality housing in a particular area as well as the number of bedrooms and amenities in the home
- Tenant Portion – A tenant who received a housing voucher will often have to contribute a portion of their income to the rent, which is usually 30% of their monthly adjusted income, but cannot be more than 40%
- Utility Allowance – if utilities are included in the monthly rent, the Housing Authority will include that amount as an increased rent offer. If the tenant will be responsible for separate utility payments, the rent offer will be lower to allow the tenant enough money to cover their utilities without exceeding the maximum tenant contribution.
Pros and Cons of housing vouchers for landlords
In accepting tenants with housing vouchers, landlords increase the total number of prospective tenants looking at their home. The increased pool of prospective renters will likely limit the time a property spends on the market which will, in turn, minimize vacancy time. Additionally, in accepting a housing voucher, landlords can usually guarantee timely payment for at least the housing portion of rent each month.
On the other hand, accepting housing vouchers means increased paperwork and a more vigilant inspection process by the Housing Authority which could mean more upfront repair costs for the landlord. The process from application to move-in can take an average of 30 days to complete.
How can Bay Management Group help?
Bay Management Group has a team of seasoned professionals to navigate the voucher process. Our applicant screening process ensures that every applicant is screened and qualified in accordance with Federal, State, and Local Fair Housing laws. We are able to quickly and efficiently complete the necessary paperwork and schedule inspections to minimize processing time. Additionally, our dedicated property managers and in-house accounting team coordinate with the Housing Authority to set up payment schedules so that you get paid faster.