[REN #581] NEW Rental Laws Choke Landlords in Portland and Seattle

Picture of living room with couch and lamp for Real Estate News for Investors Podcast Episode #581

Portland landlords are gearing up for a fight over legislation that would limit their use of an applicant’s criminal history. And that’s not all. City officials also want to reduce income and security deposit requirements. Landlord advocate Ron Garcia of the Rental Housing Alliance is calling it “activism run amok.”

City Commissioner, Chloe Eudaly, first revealed her plans for new tenant screening rules in May. As reported by Willamette Week, her legislation would force landlords to accept some applicants with a criminal history or prove that these individuals would be a threat to the safety of other residents, or the property itself. [1]
 

Portland Tenant Screening Proposal

The kinds of criminal history that landlords could not use to disqualify applicants include convictions that have happened more than three years prior, or a prison sentence that ended more than one year prior. The crimes themselves would include felony assault and battery, misdemeanor domestic violence, robberies that didn’t involve weapons, the dealing or manufacturing of illegal drugs, and sex crimes that did not involve force.

The other piece of legislation that deals with financial requirements would force landlords to accept someone with an income that is only twice the amount of the rent. That’s much lower than the industry standard of three times the rent, or at the very least, 2.5 times the rent. As for the security deposit, the legislation would limit it to one half month’s rent if the landlord is also charging last month’s rent.

Eudaly wants to standardize the way that landlords accept tenants so that applicants are accepted on a first-come first-served basis. Her housing director Jamey Duhamel told Willamette Week, “There is so much subjectivity; housing access relies exclusively on landlords’ feelings about a tenant.” He said, “The goal is to create clear channels to access housing of choice for all renters that are consistent, fair and equitable.”

Not all landlords agree with that version of consistent, fair, and equitable, however, and these proposals go beyond an applicant’s place in line. As reported by the Rental Housing Journal, Garcia said in an interview, “If a conviction has passed over five years we still have to rent to them. If somebody has what was a conviction, but was dismissed because the people ended up paying the restitution, then they are exempt from any kind of criminal screening.”

Garcia says landlords screen tenants for criminal activity to safeguard other tenants. He says landlords should speak up as well as tenants who don’t want neighbors with criminal backgrounds. [2]
 

Seattle Landlords Suing Over Similar Rules

It isn’t just Portland landlords who are facing this kind of rule-making. Seattle is facing a lawsuit over a more stringent version of those rules. They were passed last year, and went into effect in February.

Seattle’s so-called “Fair Change Housing Law” forbids landlords from any kind of criminal background check — including those recently convicted or released from prison. Landlords can reject an adult sex offender, however. Landlords who violate the rules face a $55,000 fine.

Yes, it’s true that people with felonies need a place to live, but Seattle landlords also feel they, and other law-abiding tenants, are being victimized. One of the plaintiffs, from the Rental Housing Association of Washington (RHAWA), said, an applicant’s full list of qualifications should be considered, but “across-the-board restrictions” are not appropriate. Sean Martin of the RHAWA said, “Blanket restrictions imposed by the City put rental property owners at too high of a risk of exposure to the safety of other tenants and their property.”

The RHAWA board president, William Shadbolt, told the Rental Housing Journal that the organization represents mom-and-pop landlords who typically have two rental properties. He says they are part-time landlords raising a little money to help put their kids through school or secure their retirement, but they don’t earn enough to deal with more and more regulations. [3]
 

Mom-and-Pop Landlords Victimized

Shadbolt said, “The impact of this and other short-sighted ordinances passed by the city council is that thousands of mom-and-pop landlords can no longer afford to operate their units.” He said, “They’re being forced to sell their rental properties in the thousands… they’ve thrown up their hands and voted with their feet.”

Shadbolt said, that’s also reducing the amount of affordable housing in the Seattle area. He said, properties have been sold to bigger developers who’ve replaced affordable units with expensive condos and other housing.

According to the Rental Housing Journal, the organization supports an individualized assessment. That would include the nature and the severity of the criminal conviction. Shadbolt says, “These laws are destroying the affordability in our city. Making criminals a protected class, and other ordinances like it, that makes the city council directly responsible for increasing people’s rent.”
 

Get Involved with Rental Issues, Policies

Portland city officials will hold a hearing next month on their screening criteria and security deposit reform proposal. The Seattle lawsuit is still pending. But Denise Meyers, of the RHAWA, said the trend is spreading and rental owners need to educate themselves on local laws and issues.

She suggests working proactively with both government and non-government organizations to come up with solutions. That will help prevent landlords from being demonized and viewed as “the problem.”

Meyers said, “Embrace the fact that owning a rental property is not a passive investment. You are providing a housing service to the public that is subject to consumer protection and fair housing laws, not just property laws that assume equal bargaining power between parties.”

Links:

[1] Willamette Week Article

[2] Portland Tenant Screening Rules: Rental Housing Journal

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