Landlords of prospective Section 8 tenants must allow credit history alternatives

Subsidized housing vouchers are the most effective tools to address California’s homelessness crisis, according to the U.S. Department of Housing and Urban Development (HUD).

But when landlords establish obstacles which prevent tenants who qualify by using housing vouchers to pay a portion of the rent, their effectiveness to provide housing is stripped. Our housing policies are public policy under which landlords are allowed to operate. Of course, as in any business, there are guardrails, so the public policy is actually implemented.

Perhaps the biggest obstacle is that many landlords have a philosophy which simply denies tenants the right to pay rent using income they receive from government housing vouchers. Even though it is unlawful to discriminate against a prospective tenant based on their source of income, landlords with the intent to render housing vouchers unusable develop their illegal workarounds by raising the bar in other parts of the application process, such as requiring a credit check, to override public housing policy

The work around developed by landlords hostile to government sourced funds as rent subsidy was a product of the rule of alternatives allowing a landlord to either:

use a financial or income standard to assess the tenant’s ability to pay the portion of the rent they earn from sources other than income from the subsidy; or
use the person’s credit history to provide evidence of the prospective tenant’s ability to pay rent. [Calif. Government Code §12955(o)]

Well, the credit report alternative as a road block to qualification ends on January 1, 2024. Residential landlords using the credit history test to establish a prospective tenant’s capability to make rent payments must now offer them the option to provide alternative verification — in place of credit history reporting — of their ability to pay rent. This alternative to a 3^rd-party credit report includes:

government payment benefits;
pay records; and
bank statements. [Gov C §12955(o)]

Further, the landlord must give the tenant a reasonable amount of time sufficient to gather and provide the alternative evidence of their ability to make the payment of rent — and that evidence must be considered by the landlord along with the rest of the application. [Gov C §12955(o)(1)(B)]

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Discriminatory policies are avoidable

While landlords might not be blatantly discriminating against prospective tenants by relying solely on their credit history, the effect is often discriminatory for those with thin or nonexistent credit histories (e.g., those who are seeking housing after being homeless).

Further, government housing vouchers — such as Section 8 vouchers — are considered a tenant’s source of income in California, and thus are a protected status.

In other words, California landlords may not deny housing to a tenant based on their use of housing vouchers to pay a portion of the rent. Further, due to the tenant’s source of income, the landlords may not:

advertise a preference or limitation for certain sources of income;
refuse an application;
charge a higher deposit or rent;
treat the tenant differently in any way;
refuse to renew the lease;
terminate the tenancy;
misrepresent the availability of a unit;
require conditions or rules on the tenancy not required of others; or
restrict the tenant’s access to property facilities, common areas, or services. [Gov C §12927]

Residential housing applicants or tenants who believe they have been discriminated against based on their credit history, not their ability to pay using supplemental income sources, may file a complaint with California’s Department of Fair Employment and Housing (DFEH). The DFEH then investigates and attempts to resolve the complaint.

When the complaint is not resolved, the DFEH is authorized to file a lawsuit against the landlord to seek monetary relief for the applicant or tenant.

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