New Source of Income Law

A new law affecting rental housing in the City of Seattle only was unanimously passed by the City Council on Monday August 8, 2016. The law becomes effective September 16, 2016. WMFHA participated in the original stakeholder group pertaining to source of income legislation only, and provided public comment at three committee hearings and Full Council, and written comments on multiple occasions at various stages of the process on the entire ordinance. Those comments expressed concerns over the unintended consequences of this legislation and the lack of direct impact in solving the City’s housing supply problem.

The law is multi-faceted and includes three distinct parts. This law can be viewed HERE. The third piece of this new ordinance, the first-in-time provisions, will be addressed separately, as it does not take effect until next year.

Preferred Employer Programs: The use of “preferred employer” programs is now prohibited within the City of Seattle limits. This means that discounts on fees and security deposits provided to employees of certain companies (Amazon, Microsoft, etc.) can no longer be offered to incentivize these prospective residents to rent in your communities. However, any resident currently residing in your community, who received a “preferred employer” discount when they moved in, may keep that discount until they (the resident) terminate the lease and vacate the property. Exceptions to the new law include employer owned housing offered to employees of the employer, publicly funded housing, and housing for the benefit city or public employees. For more information about these limited exceptions, please contact Brett via email or at (425) 656-9077.

Source of Income Protections: The new law expands the Section 8 protected class of individuals and requires rental housing providers to accept a prospective resident whose income is derived from any lawful and verifiable source, other than compensation for employment. Verifiable income is income that can be confirmed as to amount and receipt. This includes social security benefits and other retirement programs, child support, and any federal, state, local government, private or nonprofit-administered benefit program. It is a best practice to accept income from a prospective resident when you can verify the source the income is derived from.

Rent to Income Ratio: The law requires a rental housing provider to deduct any subsidy benefit the resident receives from the total monthly rent prior to determining whether the resident meets a pre-determined rent to income ratio. The law also requires the rental housing provider to include all legal and verifiable sources of income in calculating the prospective resident’s total monthly income.

See example below:

Community Pledge: The new law requires a rental housing provider to accept a written community pledge for past due rent, housing costs and any attorney fees and legal costs owed, if the pledge itself or in combination with any other payments by the resident satisfies the entire outstanding balance owing. A community pledge must be accepted by a rental housing provider prior to the expiration of a three-day pay or vacate notice.

The community pledge must not commit the rental housing provider to any conditions and the provider of the pledge must commit to paying the pledge within 5 business days. A community pledge is a commitment by a local government or community organization that commits to paying all of or a portion of a resident’s past due rent.

The final piece of this ordinance regulates a long time best practice, accepting the first applicant to submit a completed application who qualifies. We will address the requirements of first-in-time in a separate notice to our members shortly.

Again this law takes effect September 16, 2016.