Now is the time to get ahead of recent trends and start your new year off on the right foot:
Sticking Landlords with the Affordability Problem
Tenant screening restrictions
Affordable housing — or the lack of it — is the prevalent issue in many metro areas today. There are various theories as to why there is a shortage of rental housing. Some experts say it’s because millennials are not buying homes at previous rates and therefore not creating vacancies in rental housing. Others say it’s because boomers are choosing a more carefree lifestyle and grabbing up downtown loft apartments. Economists blame rent control initiatives and regulations for stifling new construction.
But the most troubling theory regarding affordable housing comes from local lawmakers who say that the problem is landlords who carefully screen their tenants.
This year, landlords around the country faced new restrictions on tenant screening that limited their ability to reject tenants on such disqualifying factors as violent criminal history or poor credit. These rules prevent landlords from minimizing losses, and in some cases, require landlords to select high-risk tenants to the detriment of low-risk renters.
Despite the lack of logic — if there are only so many vacancies, why give preference to problem tenants and push away the good ones — these rental regulations are very popular with lawmakers, many of whom use this pro-tenant rhetoric in their election campaigns. It is likely more cities will pass these ordinances before there is any real data available on the impact such rules have on vacancies, evictions, and safety.
Security deposit limits
In addition to the tenant screening restrictions, another increasingly popular strategy for city lawmakers is to limit a landlord’s ability to collect security deposits up front. The idea that a security deposit can be payable in installments over, say, six months, is ludicrous when you consider the risk that a tenant will damage a property before they pay up. If the tenant misses an installment, it is not clear whether that’s grounds for an eviction, or whether the only remedy is to cross your fingers and hope for the best.
The latest example of such a security deposit restriction comes from Cincinnati , where lawmakers want to do away with security deposits altogether and have tenants take out an insurance policy. A landlord seeking deductions to cover damage would then need to wrestle with the insurance company, and the tenant would have no incentive to avoid damage because they’re out their premium payments either way.
If your landlord rights are being eroded, look to the Landlord Credit Bureau to fight back. This tenant database includes both high- and low-risk tenants. While landlords in some cities may not be allowed to act on criminal history, in nearly every case the landlord can screen on rental history. It’s hard to imagine a scenario where landlords are required to rent to a person who didn’t pay rent or damaged a previous rental properties.
Tenants Want to Report Rent Payments
A surprising statistic was reported this year: the majority of tenants want to report rent payments to a credit bureau. These statistics also show that tenants who sign up to report rent payments pay on time. These tenants reap the rewards: better credit and better rental history. That makes buying a home — or car, or boat — a dream that’s within reach.
At the same time, reporting rent payments also keeps less-motivated tenants in check. They will think twice about missing a payment because reporting to a credit bureau is a serious consequence.
If you haven’t already, it’s time to sign up to report rent payments through TVS.
Tenant Fraud Tied to Online Rental Applications
Oh, the ease of automated rentals! Now, an applicant can spot a property, take a tour, complete and submit a rental application, sign a lease, and even pay rent, all without the landlord lifting a finger — or meeting the prospective tenant.
It’s easy to see why online rental applications are being blamed for the uptick in tenant fraud. Without oversight, it’s easy to fudge on the application, or create an entirely fictional persona. None of this would be a problem, of course, if the person is a good tenant. But how will you know?
Don’t wait for a skipped rent payment or a call from the police to find out the person living in your rental isn’t really the person who completed the application. Stick to in-person tenant screening, which includes prequalification and a demand to see a photo ID. Only provide a rental application to applicants you have met.
HUD and Others Pushing Lead Paint Disclosure Law
Lead poisoning is a serious matter. Exposure in children can cause lifelong disabilities.
At the same time, dinging landlords who fail to supply lead paint disclosures, even in the absence of lead hazards, is low-hanging fruit for HUD and other state health departments. With fines averaging between $3,000 to $11,000 per tenancy, failing to supply disclosures is a costly mistake.
HUD has issued announcements relating to lead paint prosecutions in recent months and has vowed to prosecute landlords who fail to comply with EPA rules. States are following suit. Yet, many landlords still are unaware of this requirement.
If you own a property that was built before 1978, take this issue seriously and research these mandatory lead paint disclosures. Visit this link for information that must be provided to tenants prior to signing a lease.
These simple tweaks will help make your 2020 a profitable and stress-free year.