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Key Takeaways
Assembly Bill 1418 would prevent California landlords from enacting “crime-free” housing programs, which would include refusing to rent to or evicting people with criminal records. It would also prevent California landlords from charging multiple months' rent as a security deposit. New York has passed a similar law to address homelessness and high housing prices.
As any landlord can attest, screening tenants is one of the most important aspects of running a profitable business. As long as the screening doesn't violate fair housing guidelines (no discrimination based on age, race, sexual orientation, disability, religion, national origin, or familial status), landlords are generally free to make decisions about who they rent to, all things being equal between candidates.
But a series of new housing laws in California, New York and elsewhere could do away with some of the previous red flags that landlords used to disqualify potential tenants. Here's what you need to know.
Refusing to rent or eviction due to criminal activity
Assembly Bill 1418 would prevent California landlords from enacting “crime-free” housing programs that include refusing to rent to or evicting people with criminal records. This “nuisance law” was originally proposed to combat crime and nuisances.
The laws, implemented to varying degrees by local governments and with strong support from police, prosecutors and politicians, have helped make neighborhoods safer, especially in areas with drug and gang-related problems. But an LA Times investigation found that they disproportionately affected minorities, preventing them from obtaining housing and making it difficult for them to find housing after completing their sentences.
Limitations on the amount a borrower must pay up front
California landlords will no longer be able to charge multiple months' rent as a security deposit. California Assembly Bill 12 limits the amount landlords can charge to one month's security deposit. New York passed the same one-month security deposit bill in 2019. Security deposit amounts vary by state, with some states, such as Florida, having no limit.
Having a low credit score won't mean your application will be rejected.
Credit checks are a traditional way to screen tenants, but in some places they can be a futile exercise: California bill SB 267 prohibits landlords and property managers from using a person's credit history as part of the application process if they receive a government rental subsidy such as Section 8, and does not offer applicants the option to provide alternative proof of a verifiable legal means to pay their out-of-pocket rent.
Under California law, landlords cannot refuse to rent to a tenant if they have a Section 8 voucher. They cannot state “No Section 8” or “No Vouchers” in rental ads or require tenants to verify Section 8 eligibility before renting.
Landlords must have a valid reason not to renew a tenant's lease
The law is similar to those recently adopted in California, Oregon and Washington. In New York City, landlords must have a valid reason to not renew a tenant's lease. In other parts of the state, municipalities can decide whether to adopt the law at their own discretion.
The exact criteria for “good cause” include non-payment of rent, illegal activity, if the owner is seeking to change the use of the apartment from residential to another purpose (such as commercial space), or if the owner wants to demolish the building.
Previously, New York City tenants had fewer protections if they lived in a single-family home or a building with fewer than 10 units, or if the landlord lived in the building, unless the landlord owned more than one building.
The reasoning behind the new tenant protections
Skyrocketing rent prices and the end of coronavirus relief measures have caused homelessness to soar to 12% by the end of 2023. The number of homeless people was around 653,000, a record since the latest count of statistics began in 2007 and an increase of more than 70,000 on the previous year.
The numbers are all the more shocking because homelessness has been on the decline since 2012. HUD Secretary Marcia Fudge told The Associated Press that the high homeless numbers underscore an “urgent need” to support proven solutions.
“The biggest culprit is a lack of affordable housing and rising housing costs that leave many Americans living paycheck to paycheck and vulnerable to homelessness when a crisis hits,” Jeff Olivet, executive director of the U.S. Joint Council on Homelessness, told The Associated Press.
Homelessness surges in California and New York
California has taken a pro-development stance to combat rising homelessness, reducing the threat of anti-development lawsuits and avoiding zoning restrictions. Among the new laws approved are rental laws that prioritize housing for tenants and make it harder to turn them away.
But its implementation has been controversial due to the state's powerful landlord lobby, and Gov. Gavin Newsom has embarked on a two-pronged approach to clearing out homeless encampments while also promoting tiny homes as a scalable solution.
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ADUs have also been approved in New York, where homelessness has hit a two-year high: An estimated 4,140 people are living without housing, up 2.4 percent from 4,042 last year and the highest number since the city began tracking the numbers in 2005.
While many believe the problem is the 70,000 migrants seeking shelter each night, New York City Social Services Commissioner Molly Wasow-Park said in an interview with The New York Times that the city has seen no evidence of a “systematic increase in the number of unsheltered asylum seekers.” Mayor Eric Adams' administration has made solving homelessness a priority since the pandemic caused a surge in homeless numbers, but it faces an uphill battle.
Final thoughts
Major cities across the nation are experiencing a surge in homelessness, which has led them to make tenant protections and affordable housing key elements of their legislation. Thus, the housing crisis means that landlords who can provide affordable housing are in a much-needed position in cities across the nation, particularly New York City and various cities in California.
Section 8 housing has traditionally been a contentious issue for landlords because inspectors can point out costly repairs and renovations before approving an apartment, but because Section 8 pays guaranteed market rent, it can be a win-win proposition for landlords who master the Section 8 process. But collecting tenants' share is often another sticking point among landlords, with many writing it off in lieu of guaranteed income.
Section 8 has traditionally been the launch pad for small landlords' investment careers. The apartments are often in affordable neighborhoods, and if they pass an inspection, they can command high rents. The downside is that landlords may not be as picky about tenants as they used to be, especially with new rental laws. If a property is damaged by a Section 8 tenant, it is very difficult for a landlord to claim for expenses, so they must pay out of pocket and pass another inspection to re-rent. Many landlords would rather avoid the hassle.
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