HB 2578 Prohibits Source of Income Discrimination

At the end of the 2018 legislative session, Washington became the 15th state to enact Source of Income Discrimination (SOID) protections. SOID legislation prohibits landlords from discriminating against prospective and current tenants based on alternative, non-wage sources of income—including Social Security and Veterans benefits—and establishes a landlord mitigation program to further encourage rental to low-income tenants.

Source of income discrimination has not previously been prohibited statewide and affected primarily those in a protected class under the Fair Housing Act. Prior to passages of the SOID legislation, state law did not prohibit landlords from refusing to rent to tenants based solely on their source of income. The law took effect on September 30, 2018, and adds a new section to the Residential Landlord-Tenant Act at RCW 59.18.255.

What Are Housing Choice Vouchers?

To understand how the legislation may help low-income tenants find or retain housing, a brief look at Federal Housing Choice Vouchers (HCV) is helpful. There are two types of HCVs: project-based, in which housing is especially designated for eligible low-income families, the elderly, and persons with disabilities; and recipient-based. The recipient-based voucher program was created by Congress as a part of the Housing and Community Development Act of 1974.

Often referred to as Section 8 vouchers, some of the recipient-based program goals are:

• To give low-income tenants greater mobility and opportunity through access to market housing stock in renters’ area of choice
• To reduce government’s role in housing construction and management
• To reverse the effects of years of discriminatory housing policies by federal, state, and local governments

Why Isn’t the HCV Program Working as Expected?

The program’s efficacy has been reduced because of market- and program-based barriers that tenants face in both obtaining and using vouchers. Demand for vouchers is about eight times higher than supply, and a limit on the number of vouchers means a 2- to 3-year waitlist for applicants. The 60-day time period during which a tenant must find housing after receiving a voucher further lowers the chance of success. Once the voucher has expired, the recipient must start over. Other significant obstacles to using the vouchers are:

• A constrained housing supply/competitive housing market
• Misinformation from landlords and property managers about availability
• Perceived and actual red tape or other requirements landlords must follow when renting to HCV recipients
• Public misperceptions about what HCVs are, who uses them, and where they can be used

Administration of the housing choice voucher program is delegated to local Public Housing Authorities (PHA’s). When tenants fail to find housing that will accept their voucher it has a ripple effect, causing a PHA’s voucher program to affect their utilization rate. This in turn can limit the PHA’s ability to add new vouchers and/or increase the Authority’s HUD fees, placing yet another barrier for low-income tenants to find housing.

Evidence to Support SOID Laws

A 2018 study by the U.S. Department of Housing and Urban Development on landlord acceptance of vouchers and treatment of voucher holders found a variety of discriminatory actions on the part of landlords once they knew a prospective tenant was an HCV holder. The study also found significantly lower rate of voucher denial in jurisdictions with SOID laws, and that the legislation is more effective if proximal jurisdictions also have SOID laws. With this in mind, Washington’s new SOID legislation could help HCV recipients get housing more quickly and expand their choice of neighborhoods. Up until now, only a handful of Washington cities had enacted SOID laws, to unknown results.  

Protected Sources of Income Under the State’s New Law

Washington’s new legislation names more than just federal housing assistance vouchers as a covered source of income. RCW 59.18.255(5) also includes the following:

• Housing assistance
• Public assistance
• Emergency rental assistance
• Veterans benefits
• Social security
• Supplemental security income or other retirement programs
• Other programs administered by any federal, state, local, or nonprofit entity.  

A landlord discriminating against a current or prospective tenant based on source of income may be penalized up to 4.5 times the unit’s monthly rent and be responsible for court costs and attorneys’ fees.

Landlord Mitigation Fund

The second main part of this legislation establishes a landlord mitigation fund. The HCV program requires that a voucher holder’s prospective housing pass inspection prior to leasing. If a property fails inspection, the landlord is not required to make the repairs and may refuse to rent to the tenant without penalty.

To encourage landlords to rent to HCV holders, the mitigation fund will cover a landlord’s cost of repairs from $500 up to $1,000 for any prospective tenant who uses a source of income included in the law. The fund also offers reimbursement of up to $5,000 to landlords for lost rental income and/or damages that result from renting to a low-income tenant with a subsidy.

The program is funded by increasing the existing document recording fee charged by county auditors from $10 to $13. A portion of the surcharge is placed in the state’s Affordable Housing for All Fund; the Department of Commerce uses those funds for extremely low-income households. Another portion is placed into the landlord mitigation program and the remainder is placed in a fund for eligible housing activities for use by counties and cities, as described in RCW 36.22.178(2).

In 2021, the Department of Commerce is required to submit a report to the State Legislature on the program’s effectiveness, and any recommendations for changes.

Improving Housing Acquisition and Retention, and Reducing Homelessness

With the source of income tenant protections and the landlord mitigation fund, more low-income families, elderly people, and people with disabilities should be able to rent and/or retain housing and expand their choice of neighborhoods. Much of this initiative’s success will depend on both landlord and prospective tenant education. Below is further information related to this legislation and resources for tenants and landlords. If your city, town, or county has a rental housing inspection program, a good practice may be to include some information on this new law in communications to landlords or other appropriate avenues. Any charges of discrimination under this new law would be handled as a civil case, under the Residential Landlord-Tenant Act, with the exception of those jurisdictions that apply a different remedy through their own local legislation.

More Information and Resources

Innovative Legislation from Washington Cities

Prior to passage of the State law, 10 Washington cities had passed SOID legislation. Most cities placed the code in their Fair Housing Regulation.

• The City of Seattle’s legislation is extensive.
• Of note is the City of Auburn’s 2017 legislation. The city placed SOID in their business licensing code and included a requirement that rental housing managers/owners take part in information sessions to obtain or renew their business license. These information sessions include education about source of income discrimination protections and may increase compliance rates.  

Studies

• A Pilot Study of Landlord Acceptance of Housing Choice Vouchers, U.S. Department of Housing and Urban Development, Office of Policy Development and Research, 2018
• State, Local, and Federal Laws Barring Source of Income Discrimination, Poverty & Race Research Action Council, 2018
• Why Homelessness is Increasing, Washington State Department of Commerce, 2017
• Homelessness in Washington State, Washington State Department of Commerce, 2017

Housing, Tenant, and Landlord Information

• Contact Information for Washington State Public Housing Authorities
• Washington State AGO's Landlord and Tenant Resources
• Center on Budget and Policy Priorities' 2017 United States Housing Choice Vouchers Fact Sheet
• Fair Housing Minnesota Rental Discrimination Videos

Questions? Comments?

If you have thoughts about this blog post, please comment below or email me. If you have questions about this or other local government issues, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772.