Portland City Rental Services Commission screening criteria will force investment property owners out of rental housing.
On Tuesday the 21st of August 2018, Portland Rental Services Commission held a hearing regarding the new draft of their screening criteria policy concept. In that hearing, they left a total of thirty (30) minutes for public input, which is not enough for a document of ten (10) pages that threatens the livelihood of most residential investors.
This document, which has been in the draft phases for over ten (10) months, is an attempt to regulate and limit the rights of property owners to screen tenants.
If you own rental housing of any kind in Portland, you must be aware of this draft language that is scheduled to be heard at the Portland City Council at the end of September 2018 and will most likely be adopted unless landlords make their voices heard.
Investors need to understand that the deck is stacked with pro-tenant advocates and the key objectives of this committee are: 1) for property owners to rent to all tenants (regardless of their qualifications); and 2) to find a way to lower income tenants to find housing.
I have summarized key bullet point highlights of the draft ordinance below, please read carefully:
- All applications must be date stamped and a receipt delivered to future tenants
- Notices in 5(five) harbor languages need to be made available to all tenants
- A landlord, property manager, or housing provider, owning or managing less than fifty (50) units within the City of Portland, may refuse submission of a completed application only if the applicant has a verifiable pattern of lease violations with that same landlord/property manager/housing provider and the most recent of such lease violations occurred within a one-year period.
- When requiring applicants to pick-up or submit applications in person (as opposed to online or by mail) any open application period that is publicly advertised must be published at least 1 week in advance of the application pick-up or submittal period.
- The potential Landlord risk with this language is that it suggests that units (where tenants apply in person – i.e. smaller landlords), need to be marketed a week before they can accept other tenants. This is not first come first serve. There should be no delay in renting a unit to a new tenant unless the city is willing to pick up the tab for the lost rent. This commission seems to forget that investment property owners have mortgages, and other bills to pay in order to deliver rental housing to the marketplace.
- Landlords must accept any of the following as forms of identification: i) Valid Social Security Number (SSN), ii) Valid Permanent Resident Alien Registrations Receipt Card, iii) Immigrant Visa, iv) Individual Taxpayer Identification Number (ITIN), v) Non-Immigrant Visa, vi) any other government-issued identification, or vii) any other non-government issued identification that would allow verification of identity and enable the landlord to screen for both credit and criminal history in the United States.
- This is a violation of what is commonly referred to as the Red Flags Rule, which requires certain ID be verified when using a credit report. This is a federal rule from the Federal Trade Commission requires. (https://en.wikipedia.org/wiki/Red_Flags_Rule)
- A landlord may not reject an application as incomplete due to lack of Social Security Number (SSN).
- Landlords may not inquire about the immigration status of the applicant or require that the applicant prove citizenship.
- Landlords cannot require income to rent ratio be greater than two (2) times the amount of rent listed for the unit.
- This means that property owners will be forced to rent to residents that do not have the money to pay the rent.
- Tenant advocates believe that the current housing shortage is forcing low-income tenants out of rental housing and are looking to use this language to require property owners to rent to non-qualified tenants. Most landlords that offer market-rate housing have had extensive experience with renting to tenants whose income is limited. An income ratio of two (2) times the rent is just not enough for tenants to be able to pay their rent. The Commission should be looking at keeping the current industry standard of three (3) times the rent.
- This policy is very short-sighted and will create a larger problem for those tenants that will be evicted for inability to pay their rent. A better solution would be for the city to co-sign behind those tenants and provide Landlords insurance for lost rent and potential damages.
- All sources of income must be considered when estimating the ability to pay the rent including but not limited to wages, rent assistance, verifiable family assistance, and public benefits.
- A landlord may not deny an applicant for residential tenancy unless the landlord conducts an individualized assessment of that applicant and provides in writing to the applicant how, taking into account any supplemental evidence as defined in this ordinance, there is a nexus between the specific circumstances surrounding the reasons for denial and a substantial, legitimate, nondiscriminatory interest of the landlord.
- New Protections include:
- Criminal history: (you need to read it to believe it)
- When evaluating an applicant with a criminal record when the landlord intends that the criminal record will be a reason for denial, the landlord must consider the following as part of the individualized assessment: i) The nature and severity of the conviction, ii) The number and types of convictions, iii) The time that has elapsed since the date of conviction, iv) Age of the individual at the time of conviction, v) Evidence of good tenant history before and/or after the conviction occurred; and 4 vi) Any supplemental evidence related to the individual’s rehabilitation, good conduct, and additional facts or explanations provided by the individual, if the individual chooses to do so.
- Including any information the landlord is required to consider as a part of an individualized assessment performed pursuant to this section, when an applicant’s criminal history shows any of the following alone, or in combination with any other factor listed below, it is presumed that the crime or conduct for which the applicant was convicted or charged is not of a nature that would adversely affect property of the landlord or a tenant, nor is it likely to adversely affect the health, safety or right to peaceful enjoyment of the premises of residents, the landlord or the landlord’s agent: (1) An arrest that did not result in conviction, unless the resulting charge is pending at the time that the applicant submits the application, (2) Participation in or completion of a diversion or a deferral of judgment program, (3) A conviction that has been judicially dismissed, expunged, voided or invalidated, (4) A conviction for a crime that is no longer illegal, (5) A conviction or any other determination or adjudication in the juvenile justice system, (6) A conviction or pending charge for any of the following: (a) When the date of sentencing is 3 or more years or the date of release is greater than 1 year, whichever is latest, before the applicant submits the application: (i) Felony assault and battery, (ii) Misdemeanor domestic violence, (iii) Robbery offenses (no weapon involved), (iv) Sex offenses (non-forcible), (v) Stalking, (vi) Felony burglary or felony breaking and entering-related offenses, (vii) Theft, stolen property, or fraud-related offenses when the history shows two or more felony convictions within the timeframe in this section, (viii) Felony destruction, damage, or vandalism of property offenses, (ix) Drug possession when the history shows two or more felony convictions within the timeframe in this section, 5 (x) Drug Manufacture, distribution or possession with the intent to distribute, or (xi) Weapons offenses, other than use of a firearm against a person.
- When the date of sentencing is 1 or more years or the date of release is greater than 1 year, whichever is latest, before the applicant submits the application, driving under the influence-related offenses, when the history shows two or more convictions within the timeframe in this section, or (c) A criminal conviction older than 7 years for any conviction, the date of conviction being the date of sentencing, or more than 4 years from the date of release, whichever is latest. (d) A criminal conviction older than 10 years for any convictions, the date of conviction being the date of sentencing, when the history shows two or more misdemeanor or felony convictions within the timeframe in this section, or (e) A criminal conviction older than 20 years for any convictions, the date of conviction being the date of sentencing, when the history shows four or more misdemeanor or felony convictions within the timeframe in this section.
- Credit history:
- “ any information the landlord is required to consider as a part of an individualized assessment performed pursuant to this section, when an applicant’s history that is not related to criminal history shows any of the following alone, or in combination with any other factor listed below, it is presumed that no nexus exists between the factor in the application and a substantial, legitimate, nondiscriminatory interest of the landlord: i) Credit history that shows any of the following alone or in combination with 3 or fewer of the following: (1) Insufficient credit score, (2) Lack of credit history, unless the applicant in bad faith withholds credit history information that might otherwise form the basis for denial, (3) Adverse accounts under $1000, unless the account is related to debt from a prior tenancy, (4) Property debt under $300, (5) Bankruptcy filed by the applicant more than 5 years ago, (6) Medical or secondary education debt
- In other words, if you screen tenants that have items 1 -6 in their background review you need to ignore it
- Criminal history: (you need to read it to believe it)
Resulted in a general judgment against the applicant that was entered fewer than five years before the applicant submits the application, which implies that evictions need to be ignored as part of screening history.
The judgment against the applicant was a default judgment due to a failure to appear, if the applicant presents credible evidence to the landlord that the applicant had already vacated the unit upon which the action was based at the time that notice of the action was served.
Any information that the landlord obtains from an oral rental reference, except defaults in rent, outstanding balance due to the landlord or behaviors as a tenant that resulted in a termination with cause. Any information provided from an oral rental reference that the landlord intends to use as the basis for denial must be recorded in writing and attributed to the prior landlord (There goes the ability of a former tenant’s Landlord to warn a future Landlord anonymously and avoid retaliation.)
The commission wants you to use a co-signer to help a new tenant secure their rent and rental performance, something our company does not do because it is very difficult to collect rent from the co-signers.
An applicant who is denied for residential tenancy by a landlord must have the opportunity to appeal that denial directly to the landlord or property manager based on:
i) incomplete or inaccurate information on application
ii) newly acquired supplemental evidence
iii) evidence of inappropriate nexus identified in denial
The landlord is not required to hold the unit for the application during the pendency of the appeals process.
If the appeal results in the denial being overturned, the landlord must place the applicant on a waitlist for the next available unit, for up to 6 months.
The commission wants to limit the use of additional deposits requested from weak tenants by creating more hurdles for landlords to overcome.
a) Landlords may charge additional security deposit only if they determine that supplemental evidence provided by the applicant is not adequate to offset a substantial, legitimate, nondiscriminatory interest of the landlord.
b) To request additional deposit, the landlord must provide a written notice of “Conditional Denial” to the applicant to inform the applicant of the specific circumstances surrounding the reasons for the request.
If documentation of denial is not provided to the applicant within 2 weeks, the owner must refund their entire application fee within the same 2-week period.
There are new limitations on what you can charge for screening fees, that are already limited by state law.
There are also sections regarding Modification Requests, Exemptions, Damages and Definitions in the attached draft document but they have not been fleshed out.
Multifamily and Single-family investors in the City of Portland must call all City Commissioners NOW to voice their concerns.
The cost of complying with these new regulations is enormous. The city’s intent is to make it easier for low-income tenants to rent. But, financially weak tenants for whom this ordinance is designed will continue to struggle to make ends meet no matter how many changes the city makes to their rules.
Property owners invest a significant amount of money to buy and hold rental housing, and most tenants have the ability to pay rent. These rules are geared to a very small group of people that need help. This ordinance will just discourage investors from buying and keeping rentals in Portland, further reducing the supply of rental housing stock, which is opposite of what the city wants and needs.
These rules will not reduce the cost of rental housing, rather will increase the costs as landlords try to comply and meet the city’s requirements. There must be a better way to meet the Portland’s low-income housing needs.
You can add your input into the process at the next meeting of the Rental Services Commission:
18th of September, 2018 from 2:30 – 5 P.M
Portland Housing Bureau, 421 6th Avenue, Suite 500, Portland, Oregon 97204.
To track the progress of the Rental Services Commission you can log in here and sign up for their mailing list https://signup.e2ma.net/signup/1863801/1738353/.
Draft ordinance (as published on the 21st of August, 2018) can be found at the link below: