In late January 2023, the Biden administration released a Blueprint for a Renters Bill of Rights. This blueprint describes federal actions around five guiding renter protections: Safe, Quality, Accessible, and Affordable Housing; Clear and Fair Leases; Education; Enforcement and Enhancement of Renters Rights; the Right to Organize; and Eviction Prevention, Diversion, and Relief.
The Federal Housing Finance Agency (FHFA) announced it will identify the opportunities and challenges of adopting and enforcing tenant protections, including policies that limit egregious rent increases at properties with Government Sponsored Enterprise (GSE) backed mortgages going forward.
FHFA is also going to publish a GSE Look-Up Tool to determine if a property is backed by Fannie Mae or Freddie Mac financing and requires a 30-day notice to vacate for non-payment of rent. HUD will also issue a notice of proposed rulemaking requiring that PHAs and owners of project-based rental assistance properties provide no less than a 30-day notice of lease termination due to nonpayment of rent.
The blueprint also recommends that local governments take the following actions: (1) immediately seal eviction filings and only unseal them in the case of a decision against the tenant; (2) provide the right to counsel in eviction proceedings; and (3) prohibit source of income discrimination.
Following is a description of the “five principles” outlined in the Blueprint.
First Principle: Access to Safe, Quality, Accessible, and Affordable Housing
Renters should have access to housing that is safe, decent, and affordable and should pay no more than 30 percent of household income on housing costs. Owners of rental housing and state and local governments should ensure that homes for rent meet habitability standards and are free of health and safety hazards, such as lead or mold. In addition, owners should provide services and amenities as advertised or included in the lease (such as utility costs and functional appliances) and ensure that the residential housing unit is well maintained (including common areas). Renters should face minimal barriers when applying for housing and receiving housing assistance, which includes minimally burdensome application and documentation requirements and fair and equal tenant screening. Increases in rents should be reasonable, with the acknowledgment that rents may need to increase to cover operating costs. These increases should be transparent and fair to protect against gouging.
In 2019, almost 25% of renters spent half their income on rent. Nationally, rents rose 26% during the pandemic. Limited housing supply has created more competition for fewer available units, which gives owners even more leverage in deciding to whom to rent to, what lease terms to offer, and whether and how much to raise rents. At the same time, the housing stock in America is aging, and more rental housing is facing obsolescence or poor housing conditions.
Perhaps in recognition of the fact that private owners who do not operate under any programmatic regulations (i.e., conventional housing) are not responsible for making housing affordable. These owners operate rental housing for the profits that can be made from such housing. Offering incentives for affordability is the responsibility of the government, at the federal, state, and local levels. To accomplish this, the Biden Administration has proposed the largest expansion of the Housing Choice Voucher program in decades. In addition to this step, the Administration has proposed the following:
- The Federal Trade Commission (FTC) will explore ways to expand the use of its authority under the FTC Act to take action against acts and practices that unfairly prevent consumers from obtaining and retaining housing.
- As announced in November, the Federal Housing Finance Agency (FHFA), an independent agency, will increase affordability in the multifamily rental market by classifying multifamily loans with loan agreements that restrict rents at levels affordable to households with incomes between 80 and 120 percent of Area Median Income as “mission-driven.” In 2023, FHFA required that at least 50 percent of all Freddie Mac and Fannie Mae purchases of multifamily loans be mission-driven. In 2022, Freddie Mac and Fannie Mae purchased a combined $142 billion in multifamily loans supporting over one million units. If the same activity holds in 2023, this will mean an investment in approximately 700,000 affordable units.
Second Principle: Clear & Fair Leases
Renters should have a clear and fair lease that has defined rental terms, rights, and responsibilities. Leases should not include mandatory arbitration clauses, unauthorized terms, hidden or illegal fees, false representations, or other unfair or deceptive practices. A lease should provide a transparent policy regarding security deposits, with those deposits being appropriately sized and placed in an interest-bearing account for the duration of the lease. The lease should also provide reasonable advance notice of actions related to the unit, including notice of entry for inspection by the housing provider and significant changes to the unit. Finally, the lease terms should be written in simple and clear language accessible to the renter, and the leasing process should ensure tenants understand the terms of the lease through a plain-language briefing.
A lease establishes the foundation for the housing provider and tenant relationship, highlighting the rights, responsibilities, and recourse that exists for both parties. A lease covers the terms for what is likely the largest single expense a household makes each month and over the course of a year. The trend of more leases with problematic provisions can be partially attributed to the increased use of shared forms, which are easily accessible through the internet and may include terms that are not legally enforceable in the state or locality in which the property is located.
To ensure fair leases to the greatest extent possible, the Administration is announcing the following new actions:
- USDA will institute a broad set of actions that will advance clear leases and ensure tenants can seek compliance with lease terms without facing retaliation across its portfolio of 400,000 units of multifamily rental housing.
- Specifically, USDA is developing a clear and fair lease that is similar to the model lease used in HUD Section 8 properties.
- USDA will also create a tenant grievance FAQ outlining clear steps for tenants appealing a management decision and will distribute it to owners and management agents, and ask for distribution to tenants and tenant advocacy groups.
- Further, USDA Rural Development is working to create a Tenant Rights and Responsibilities brochure modeled after the HUD Multifamily brochure for assisted housing residents, increasing consistency between the two agencies and clarifying Rural Development tenants’ rights and responsibilities.
- USDA will explore updating its regulations to require borrowers with federal credit from the department’s Rural Housing Service to utilize the brochure.
Owners and managers in the RD Section 515 Program should be prepared for this upcoming change. A good starting point is a review of the current HUD Model Lease for Multifamily Housing and the HUD Rights & Responsibilities Brochure. This will give operators of Section 515 housing an idea of what may be coming down the road.
Third Principle: Education, Enforcement, and Enhancement of Rights
The Administration position is that Federal, state, and local governments should do all they can to ensure renters know their existing legal rights and to protect renters from unlawful discrimination and exclusion that can take many different forms.
The Fair Housing Act (FHA) bans discrimination based on race, color, religion, sex (including sexual orientation and gender identity), disability, familial status, and national origin, including practices that have an unjustified disparate impact on a protected class. The Administration proposes to expand the FHA to prohibit discrimination based on source of income.
In order to implement this third principle, HUD is finalizing a rule to clarify that the Fair Housing Act continues to bar practices with unjustified discriminatory effects notwithstanding efforts to weaken its reach. In addition, HUD has published a proposed Affirmatively Furthering Fair Housing rule to strengthen and better align grantee planning efforts to advance fair housing goals.
The federal government has advanced other rights beyond those protected by the Fair Housing Act. For example, discrimination against a holder of a Housing Choice Voucher is banned in the federal Low-Income Housing Tax Credit (LIHTC) program, which is the largest affordable housing production program in the country. The Administration has announced the following new actions:
Tenant Background Checks:
- The Consumer Financial Protection Bureau (CFPB) has said it will identify guidance or rules that it can issue to ensure that the background screening industry adheres to the law and coordinate law enforcement efforts with the FTC to hold tenant background check companies accountable for having reasonable procedures to ensure accurate information in the credit reporting system.
- HUD, FHFA, FTC, and USDA have said they will work with CFPB to release best practices on the use of tenant screening reports, including the importance of communicating clearly to tenants the use of tenant background checks in denying rental applications or increasing fees and providing tenants the opportunity to address inaccurate information contained within background screening reports. HUD, FHFA, and USDA have said they will strongly encourage property owners in their respective portfolios to align with these best practices and inform them of any additional relevant legal requirements in their respective portfolios. HUD will also release guidance addressing the use of tenant screening algorithms in ways that may violate the Fair Housing Act.
Source of Income Discrimination:
- Discrimination based on a person’s source of income is not expressly prohibited under the Fair Housing Act. There are several ongoing agency actions that will be enhanced, consistent with agency authorities, to reduce such discrimination going forward. Consistent with existing LIHTC rules, the Treasury Department reiterates that LIHTC building owners should lease units in a manner consistent with HUD’s nondiscrimination rules and are prohibited from refusing to lease units to prospective tenants due to their status as holders of Housing Choice Vouchers or certificates of eligibility. The Treasury Department will meet with tenants, advocates, housing providers, and researchers to discuss ways to further the goals of tenant protections, including those around source of income, as well as broader issues of affordability and eviction prevention with respect to the LIHTC incentive. HUD will explore opportunities to address source of income discrimination through guidance.
Fourth Principle: The Right to Organize
The Administration believes that renters should have the right to organize without obstruction or harassment from their housing provider or property manager and should not risk losing housing over organizing.
Tenants in different types of HUD and RD programs have recognized rights to organize. The Administration is not proposing that the government impose this requirement on non-assisted properties. They are taking the following steps:
- The Department of Defense (DoD) commits to ensuring that military members living in DoD’s government-owned, government-controlled, or privatized housing have the right to organize and affirms their right to report housing issues to their chain of command and/or Military Housing Office without fear of retribution or retaliation.
- HUD’s Office of Multifamily Housing is developing a Notice of Funding Opportunity (NOFO) to distribute appropriated funds to support tenant capacity-building activities, including tenant education and outreach.
- HUD’s Office of Multifamily Housing will build on existing training and technical assistance strategies to promote engagement with residents and implementation of the Rental Assistance Demonstration (RAD) resident protections, including grievance procedures, by owners of RAD-converted properties. This will include fact sheets and similar public resources, targeted outreach to owners of recently converted properties, and measures to refresh awareness of program expectations following the completion of the conversion process.
It should be noted that these actions will not apply to LIHTC properties.
Fifth Principle: Eviction Prevention, Diversion, and Relief
Before the pandemic, roughly 900,000 evictions were completed against tenants every single year. In order to reduce the number of evictions, the Administration is taking the following actions:
- HUD will issue a notice of proposed rulemaking, to build upon the previously issued Interim Final Rule, which will propose to require that PHAs administering a public housing program and owners of project-based rental assistance properties provide no less than 30 days advanced notification of lease termination due to nonpayment of rent.
- HUD will award $20 million for the Eviction Protection Grant Program in fiscal year 2023, which will fund non-profits and governmental entities to provide legal assistance to low-income tenants at risk of or subject to eviction.
- FHFA, Freddie Mac, and Fannie Mae have indicated their commitment to publishing information about the Enterprise Look-Up Tools, which allow tenants to determine if their property is backed by Fannie Mae or Freddie Mac financing and requires the 30-day notice to vacate for non-payment of rent. The Enterprises will continue to publish this information and assess how the individual tools might be enhanced to improve utility.
Bottom Line – This “Renters Bill of Rights” will have a direct impact on federally assisted housing, with some minor effects across the non-federal universe of rental housing. The most immediate impact will be felt in the rural housing community due to the Rural Development Service development of a Model Lease and “Rights & Responsibilities” brochure. At the same time, the push to create “best practices” relative to applicant background screening should lead landlords to examine current practices – before they are forced to do so by state or local agencies.
With regard to the LIHTC program, The Treasury Department will meet with tenants, advocates, housing providers, and researchers to discuss ways to further the goals of tenant protections, including those around source of income, as well as broader issues of affordability and eviction prevention with respect to the LIHTC incentive.