Legal Risk: “Source of income” discrimination is among the fastest growing areas of fair housing litigation, generating 1,713 complaints in 2022, a year-over-year increase of 39.8 percent, according to the NFHA. Source of income discrimination occurs when landlords reject applicants or evict tenants not because they can’t afford the rent but because they use something other than traditional income from employment to pay, such as Section 8 or other housing vouchers, welfare, disability, unemployment, veteran, or other government benefits. The case can be made that source of income discrimination violates the FHA to the extent that racial minorities, people with disabilities, and other FHA-protected classes rely on these income sources at disproportionate rates. However, the principal risk of liability stems from the 20 states and over 70 major cities whose fair housing laws expressly ban source of income discrimination.
States that Ban Source of Income Discrimination in Housing: California, Connecticut, Colorado, Delaware, District of Columbia, Hawaii, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Dakota, Oklahoma, Oregon, Rhode Island, Texas (covers homeowners associations only), Utah, Vermont, Virginia, Washington, Wisconsin (doesn’t cover housing vouchers)
Solution: There are five steps you can take to guard against inadvertent liability for source of income discrimination:
Accept all forms of legal income;
Don’t charge fees or impose less favorable rental conditions based on a tenant’s source of income, for example, by requiring a tenant to get the lease guaranteed because they don’t pay in cash;
Don’t require prospects or tenants to be employed if they have the non-employment income necessary to pay rent;
Be careful about imposing minimum income requirements or credit score benchmarks; and
Keep your ads free of statements, images, or other content that express or imply a preference for or against prospects with housing vouchers or other forms of income.
You Make the Call
Can you reject a rental applicant who’s unemployed and dependent on welfare and alimony because she doesn’t meet your community’s income requirements?
a. Yes, as long as you consistently reject other applicants who don’t meet your income requirements
b. No, because rejecting her would be discrimination based on sources of income
c. Yes, because applicants who don’t have steady jobs are too great a financial risk
Answer:
a. If an applicant has the lawful funds to pay her rent each month, you can’t reject her simply because you object to where those funds come from. On the other hand, you don’t have to accept an applicant with insufficient income. So, a. is the right answer.
Wrong answers explained:
b. is wrong because an insufficient amount of income, regardless of source, is a legitimate, non-discriminatory reason for rejection as long as you consistently apply the income standard with all prospects.
c. is wrong because requiring applicants to have a steady job is a form of source of income discrimination that the laws ban. As long as applicants can get the money they need to pay rent from legal sources, the source of that income is none of your concern.
