Source of Income – A Protected Class?

When it comes to Source of Income, determining if it’s a protected category can prove to be challenging. Thorough working knowledge of your local laws is imperative. Terry Kitay, a fair housing and civil rights attorney at Baker Donelson joins us to share insights on what properties need to be aware of.

A man pointing at a question that asks if income is a protected category.

Estimated reading time: 3 minutes

What Is Source of Income?

Source of Income is an additional protected class in housing discrimination, but it is not part of the Fair Housing Act. This is because currently, discrimination based on your source of income isn’t a federal issue. Still, it is a commonly added protected class under state and local fair housing laws and ordinances.

When source of income is considered protected, a housing provider cannot refuse to rent to someone based on the source of their lawful income. Typically we see this regarding rental assistance programs or housing subsidies like Section 8.

Who Should Be Concerned With This as a Protected Category?

Regardless of where you are located, if you operate a federally assisted housing program, i.e. 202, 811, or if you have a tax credit property, you typically cannot refuse to accept housing subsidies as a source of income.

Suppose your property doesn’t fall under that umbrella. In that case, you need to dig deeper into your city or county laws and ordinances to determine if source of income is a protected category.

Source of Income is Protected – How Do I Screen Income?

Most housing providers have an income level required to be successful applicants. This can look different if your state protects your source of income or your property is federally assisted. What you are looking to qualify somebody for is the tenant-paid portion of the rent. The first thing you need to determine is how much rental assistance the applicant is receiving. Secondly, what is the difference between the amount of assistance and the market rent you are charging? Once you have those figures, you can apply them to your property’s income standards to see if they meet them.

Source of Income – A Growing Protected Category

In the last few years, there has been a big push for more states to adopt this law. Also, we have seen different bills for it to be included on a federal level. Two main reasons why so many states, cities, and counties are adding source of income as a protected category is the ongoing struggle with housing affordability and availability. By adopting measures like this, more people have an opportunity to better their living situations.

This article has shown the importance of knowing your state and local laws. It’s not enough to just be familiar with the federal housing laws. In addition, you need to be aware of how your property is funded. All of these details are critical when it comes to reviewing income on a tenant’s application.

Jonathan (00:12): Hello everyone,a nd welcome to the Fair Housing Insiders. This is episode 51, and in just a moment, I'm going to welcome another very special guest to our program today. We are looking forward to hearing from her about source of income, but just as a quick reminder, if you haven't done so already, please subscribe to our newsletter, subscribe to our YouTube channel, and you can also follow us on Instagram at Fair Housing Institute where we post a lot of other fair housing tips and other content related to that. So be sure to connect with us on those channels. So let's welcome to our show today, Terry Kitay from Baker Donelson, Bearman, Caldwell, and Berkowitz. So Terry, welcome to the show. It's so nice to have you, and you're a partner with the firms. We really, really appreciate having you with us today.

Terry (01:09): Thanks very much, Jonathan. I'm glad to be here. I appreciate the invitation. Yeah. I'm gonna talk today about source of income discrimination. If you're ready for me to get started?

Jonathan (01:19): Go for it. Give us the overview. I know, you know, just in prepping for this show, you mentioned something that was interesting how source of income, what it's actually related to, and it's not so much on a federal level. So yeah. Give us an overview on source of income and what we're gonna be talking about today, please.

Terry (01:36): Sure. Source of income is an additional protected class in housing discrimination, but it's not part of the federal fair housing act. So in other words, discrimination based on your source of income is not a federal issue issue at all. It is a very common, additional added protected class under state and local fair housing laws and ordinances. So if you are in California, if you are in the Northeast, if you are in certain counties in Florida, if you are in the state of Texas, you need to know about whether source of income is something that you need to be concerned about in terms of accepting applicants and for housing and qualifying people for housing. So what source of income means is it is if it is a protected class, it means you can't discriminate against somebody. You can't treat them differently. You can't refuse to rent to them because they intend to pay for housing with any particular lawful source of income.

That's the broad definition. It covers any lawful source of income. So for instance, if source of income is a protected class, you would not be allowed to say, I don't wanna rent anyone who's a lawyer, which I hear all the time. It's perfectly legal under the fair housing act because source of income's not protected. But if you are in, for instance, the state of California that says you cannot discriminate based on source of income, somebody who earns their lawful income by being a lawyer cannot be discriminated against based on that fact. So that's what source of income discrimination means. But of course it's typically, and most often used with regard to rental assistance programs, people who receive housing subsidies most commonly of course, is the so-called section eight program. And what happens with source of income with it being protected, the section eight program becomes mandatory. You can't refuse to consider somebody's application just because they intend to pay for their housing with, for instance, section eight housing voucher or other kinds of governmental rental assistance. There's, you know, a nber of different programs for rental assistance, but you can't simply say, no, we don't accept third party payments. That's not, that would not be allowed if source of income is a protected class.

Jonathan (04:07): Very good. That's a nice, nice overview. Appreciate you kind of highlighting some examples too, from across the country. And I meant to ask this at the outset. How many years have you been practicing law when it comes to fair housing? I know it's been a fair bit, right?

Terry (04:21): over 30 years.

Jonathan (04:23): Yeah. Yeah. So, wow. It's an amazing amount of experience and I'm sure you've seen a lot of things change over the years when it comes to this particular and you know, with this topic and how it's changed in different parts of the country.

Terry (04:36): Well, there's always, it seems like there's always something pending in Congress, right? On the federal level to add source of income as a protected class to the fair housing act, but it hasn't passed yet.

Jonathan (04:46): Right, right. Yeah. It keeps you, it keeps you hopping just to see what's coming down the pipeline for changes in laws and so forth. So again, thank you for being on the show. This is gonna be an awesome conversation. So, any other details, I know you kind of highlighted specifically, you know, what the overview of source of income, any other besides state or anything else that you can share on who needs to be paying attention to this, like from a property management level?

Terry (05:22): Sure. Yeah. Regardless of where you're located, if you operate a federally assisted housing program, you know, a 202, an 811, or if you have a tax credit property, typically you are not permitted to refuse to accept a section eight voucher for an otherwise qualified applicant. So while source of income may not be a protected class in your jurisdiction if the participation in those programs makes it mandatory, makes the section eight program mandatory for you. Now that doesn't mean that source of income in general is protected. You could probably still have that prohibition against lawyers if you wanted to. But you would be required to accept the section eight assistance as part of part of the income that is considered to qualify somebody.

Jonathan (06:15): Very good. Okay. So it is, it, it does cover a, a lot of scenarios. So that thank you for highlighting that we have a pretty big audience that listened to this show. So you know, sometimes we hear from students, you know, how does that apply to me? You know, I'm in this type of property or I'm in this type of property, but you know, who knows you may be in a type of property today, but that doesn't mean where, you know, with the, how much things change with portfolios, what you might be in tomorrow. So this is valuable information for everyone in our community to pay attention to. So you're prepared if you're in that situation right now that your property is subject to that or in the future. So thank you, Terry. That was great. Yeah.

Terry (06:59): I think as with any issue with regard to housing discrimination, you always have to be aware of where you are, you know, what are your state and local laws, because it's not enough just to know the federal law. And you also need to know how the property that you, the community that you're working with, how it's funded, because that's gonna make a difference in a lot of things. Not just whether you have to accept section eight.

Jonathan (07:23): Right, right. Very good. Very good. And so that's, you know, that's what we hear from a lot of our property management clients, you know, the amount of work that they have to do. I mean, you just mentioned a couple of examples of things that are in the pipeline for potential legislation and, you know, so every property management company has to make sure that they understand and if they don't have legal counsel to make sure that they do understand what's required of their state or their local city or whatever.

Terry (07:53): Right. Right.

Jonathan (07:54): Yeah. Okay. So let's look at a, a specific scenario now to get your comments on this. So when a landlord can't refuse to consider an application from section eight housing choice voucher holder, how should they conduct income screening of a voucher holder? Interesting scenario there?

Terry (08:15): Sure, sure. Most housing providers do have an income level that they require to be a successful applicant, whether it's a maximum income in a tax credit property or more commonly, a minimum income. So they have some assurances that you'll pay the rent when source of income is protected. Or if you work on a federally assisted property where you must accept section eight vouchers, the qualification of income is a little bit different. In that what you're looking at to qualify somebody is the tenant paid portion of the rent. So you need to know how much of, how much rental assistance the applicant is gonna get. Number one, and number two, what's the difference between that amount of rental assistance and the market rent that you're charging for the particular housing. So for instance, if the rent is a thousand dollars a month, and somebody has a section eight voucher that typically will pay, will require the holder of the voucher to pay 30% of their income.

And which usually works out to 30% of the housing cost. So, the tenant paid portion on a thousand dollars apartment with the typical section eight voucher is probably around $300. So that is the amount that you would use to qualify. That's the amount of rent that you would use to qualify a section eight applicant. And so if your requirement is that they have three times the monthly rent to qualify, then they would have to have three times the tenant paid portion, which is $300 or $900 a month in income.

Jonathan (10:09): Okay. All right. Very good. Thank you for that nice example and appreciate your explanation of it. So it's interesting to hear, you know, besides the federal fair housing act and, you know, we have different state laws and local laws and it's intriguing that that's where it begins and then federal legislation at times kind of picks up the pace afterwards. So what makes you know, income so unique? Why are so many like local governments focusing on protecting that category? What are your thoughts on that?

Terry (10:55): I think there's been a big push in the last five to 10 years, particularly on the part of local governments to add source of income as a protected class. You know, 30 years ago it may have been protected in one or two states. But really within the last few years, we've had California as a big one. I mean the entire state of California now, the section eight program is mandatory because source of income is a protected class under California state law. And there's a lot more states now and in even more localities. And so it's so important to dig down below the state level to your actual county or city ordinances. Why is that? I think a lot of it has to do with housing affordability and housing availability. A section eight voucher, the section eight program is a wonderful subsidy program for people who are having difficulty paying for housing and need to obtain safe and sanitary housing.

And it's a great opportunity. The problem is if no housing providers will accept the vouchers, there is, you know, little opportunity for, you know, to establish safe housing. So if the section eight program becomes mandatory because of the inclusion of source of income as a protected class, there will be that many more opportunities for people to branch out and move to better neighborhoods, better schools, and just in general move up in life. So I think it's that's, I think the motivation behind most of the local ordinances and the state laws that are adding source of income. Yeah. It's to provide that housing mobility for people.

Jonathan (12:46): That's wonderful. That's so that's very, very cool to hear. And I appreciate that explanation. Yeah. It's like, it's such a, it's at the heart and soul and the principles behind the fair housing act is in equality. Right?

Terry (13:01): And freedom of choice. I mean, having the ability to live, where you wanna live, if you can afford it, and if you have rental assistance, you can afford a lot more than if you, if your rental assistance weren't accepted. So-

Jonathan (13:16): Yeah. Yeah. Very good. So, man, I, I learned a lot. I thank you so much, Terry, this has been an awesome conversation. So, appreciate all of your fantastic explanations of what source of income is and how it affects so many property management companies across our country. Okay, Terry, so we're at the point now where we're going to ask you our fast five questions, and you need to answer them in under one minute. And if you can do that, you're gonna get a, a herd of unicorns, you know, not just one unicorn, we're gonna get you a herd of unicorns and one quintillion quintillion dollars. But anyway, this is our fun component. We love it.

Terry (14:04): Big challenge for lawyers, you know, to answer questions quickly. all right. Yeah, I'm ready.

Jonathan (14:11): So not easy questions whatsoever, but we appreciate it. It's a fun part. So let me get my stopwatch ready here. And then we will ask our fast five questions. Okay. Can I limit use of amenities by people who pay with rental assistance?

Terry (14:29): Of course not if source of income is a protected class.

Jonathan (14:34): Is a preferred employer program a problem under the fair housing act?

Terry (14:39): It's not a problem under the fair housing act, cause the fair housing act doesn't protect source of income. It would be a problem if source of income is a protected class.

Jonathan (14:48): Can I still check credit and rental history on an applicant using a rental assistance?

Terry (14:54): Absolutely.

Jonathan (14:56): Do I have to permit co-signers if source of income is a protected class?

Terry (15:01): No you don't. If you don't allow co-signers normally you don't have to just because source of income is protected. Remember it's a protection for the source of the income, not the amount.

Jonathan (15:14): Can I insist an applicant have employment income?

Terry (15:18): Under source of income? No, of course you couldn't because it's any lawful source of income under the fair housing act though. You probably also couldn't because there are plenty of people with disabilities maybe who don't work and would have income that is not wage income, but could be considered to qualify them.

Jonathan (15:39): So close Terry. Cause that was really, really good though. So a minute, a minute 13. Okay. So that, that's absolutely amazing. So, sorry. Next time we'll get you those unicorns, but you know, maybe able to show up anyway. I don't know. We don't, they show up in our dreams at the very least that's where they show up. So that's, what's cool. Okay. So very, that was awesome. Very, very cool. Appreciate you. You having fun with us here today. Thank you so much for, for being available for this show. We are so grateful with your years of expertise and experience that you bring to the table that you can share a few things with our audience today and our, our fair housing community. So can you tell us a little bit about your firm and, and how people can connect with you?

Terry (16:22): Sure, sure. Baker Donelson is a national law firm. We have over 19 offices nationwide. And if you have any - we obviously multi, multi-subject, , multi-purpose law firm, but, I have a practice in fair housing, defense and accessibility. And if you have any questions on anything having to do with that, or having to do a source of income discrimination, be more than happy to talk to anybody. , my email address is tkitay, T K I T A Y, at Baker Donelson baker, D O N E L S O n dot com (tkitay@bakerdonelson,com). Love to hear from you.

Jonathan (17:03): Very good. Thank you so much. And we'll definitely put a link to the website in our show notes so people can check out more about the firm. So again, thank you so much and thank you everyone for-

Terry (17:13): Thanks for having me.

Jonathan (17:15): Thank you for, for being here, Terry. , and thank you for our community, you know, as always we are, boy, we just are so grateful for all of you. We receive constant, you know, little emails and people filling out things on the website, how much they appreciate this show, how you use this show for training and like with awesome interviews like we had with Terry today. And it is just, we, we can never take for granted the amount of education that we need on this topic. So thank you for being there. If you find this a value, please share it with your network. Please subscribe to our newsletter and to our YouTube channel. And if you have any questions, keep in mind that on a regular basis, we do an episode which is coming up very soon, where we address your questions. So on our YouTube channel, for any episode that we published, please post your question and we'll take note of that and it'll be answered on a future episode. So thank you again. Remember if you have any questions or topics or of any kind, feel free to reach us at our DMS, we'll be happy to consider those topics for our future show. So thank you for being here until next time. Take care. We'll see y'all soon.

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