Title
Approval of an Ordinance Amending Olympia Municipal Code 5.82 Relating to Rental Housing to Address Income to Rent Ratio Screening Practices
Recommended Action
Committee Recommendation:
Move to approve on first reading, and forward to second reading, an ordinance amending Olympia Municipal Code 5.82 relating to Rental Housing to address income to rent ratio screening practices.
City Manager Recommendation:
Move to approve on first reading, and forward to second reading, an ordinance amending Olympia Municipal Code 5.82 relating to Rental Housing to address income to rent ratio screening practices.
Report
Issue:
Whether to approve an ordinance amending Olympia Municipal Code 5.82 relating to Rental Housing to address income to rent ratio screening practices.
Staff Contact:
Christa Lenssen, Senior Housing Program Specialist, Community Planning and Economic Development, 360.570.3762
Presenter(s):
Christa Lenssen, Senior Housing Program Specialist, Community Planning and Economic Development
Background and Analysis:
Development of Olympia tenant protections
In 2021, the City hired consultant Jason Robertson to assist in developing an outreach and engagement plan to solicit feedback from renters, landlords, and other interested third parties regarding the rental climate in Olympia. Through 1-on-1 stakeholder interviews, focus groups (with renters, renter advocates, local landlords and larger property management companies), and community surveys; staff learned about challenges faced by renters, gathered insights from landlords about potential unintended consequences of policies, and relative support from stakeholders for various policy options.
Staff researched and interviewed other Washington cities about their tenant protection policies. The Land Use & Environment Committee reviewed stakeholder input and staff research to prioritize policies for adoption. Since 2022, the Olympia City Council has passed several tenant protection measures under Olympia Municipal Code Chapter 5.82 (known as the Rental Housing Code) that have been referred by the Land Use & Environment Committee. The Olympia City Council held a public hearing in March 2024 to solicit community input regarding tenant screening practices.
At its November 2024 meeting, the Land Use & Environment Committee directed staff to develop the proposed ordinance after reviewing sample policies passed in other jurisdictions.
The City Council held a study session on March 11, 2025, where staff presented proposed income to rent ratio policies.
Local data and housing challenges
As housing prices continue to rise, it becomes increasingly difficult for tenants to qualify for a rental unit, with common practices of requiring tenants to demonstrate that their income is three times (or more) than the monthly rental rate. Local tenants have reported that some landlords require each applicant to demonstrate their earnings are triple the cost of rent (even if they are applying as a couple or as roommates).
The National Low Income Housing Coalition (NLIHC) releases annual data on rents and wages to demonstrate the disparity between housing supply and rent that is considered affordable based on tenant incomes. According to 2024 NLIHC data, an Olympia renter working full time at minimum wage would only be able to afford monthly rent of $846 if they spend one third of their income on rent. A minimum wage worker would need to work 73 hours per week to only spend one third of their income on a 1-bedroom unit at Fair Market rent ($1,554). If a household spends more than one third of their income on rent, they are considered housing cost burdened.
According to The US Department of Housing and Urban Development (HUD), Comprehensive Housing Affordability Strategy (CHAS) data, 52% of Olympia renters spend more than one third of their income on rent. These Olympia renters will be unlikely to qualify for rental housing where they must earn three times the monthly rent. This creates reduced housing options and payment of multiple application fees as these renters search for replacement housing. If renters cannot find new housing, they may also experience housing instability and displacement if they are forced to broaden their search to other geographic areas, or more tenuous housing situations.
Similar policies in other jurisdictions
In the past five years, other cities and states have enacted policies which limit the amount of tenant income that may be required to qualify for a rental unit. In Colorado, a landlord may not require the tenant’s income to be more than two times the rent. Tacoma and Portland have different income to rent ratio limits if the rent is considered affordable or under fair market rent.
Tacoma prohibits landlords from requiring an applicant’s income to be more than two and a half times the rent if the unit’s rental rate is above HUD Fair Market Rent and three times the rent if the unit rent is under HUD Fair Market Rent. Portland uses a similar calculation to Tacoma. If a monthly rent amount is less than what is considered affordable for households at 80% of the median family income (MFI), a landlord may require a monthly gross income of up to two and a half times the rent amount. If a monthly rent amount is more than what is considered affordable for households at 80% of the median family income (MFI), a landlord may require a monthly gross income of up to two times the rent amount.
In Tacoma and Portland, the applicant household may choose the financially responsible tenant(s) for screening purposes and use the cumulative financial resources for screening. Minneapolis landlords must consider an applicant’s history of successful rent payment if their income is less than three times the rent.
Alignment with work plans
Establishing tenant protections to address housing stability is addressed under Strategy 2.a. of the City’s Housing Action Plan (“Identify and implement appropriate tenant protections that improve household stability”). These measures also align with strategies included in countywide workplans, such as the Thurston County Homeless Crisis Response Plan (“enact and implement tenant protection laws and fund enforcement”) and Thurston County Assessment of Fair Housing (“reduce barriers to accessing housing.”)
Staff recommendations
For clarity, staff recommends adopting just one income to rent ratio limit rather than separate limits based on whether the unit rents at an affordable rate or market rate. Staff recommends an ordinance that prohibits landlords from requiring the applicant’s income to be more than two and a half times the amount of monthly rent for the unit. A ratio that exceeds two and a half times the monthly rent is beyond the reach of many renters due to wages not keeping up with housing costs.
At the same time, if a ratio lower than two times the monthly rent was adopted, it could lead to an environment where renters could access housing more easily but could be spending more than 50% of their income on housing costs and would be considered severely cost-burdened. If 50% or more of a tenant’s income is used to pay housing costs, they may be at higher risk of not being able to pay rent if they face an emergency, rent increase, or other unexpected cost. Per state law, if a tenant uses a voucher to pay their rent, only the tenant’s portion of rent should be used for screening purposes.
Staff has heard from Olympia tenants whose household members have been rejected during the screening process due to having insufficient income or low credit scores. Like Tacoma and Portland, it is staff’s recommendation that tenant screening policies adopted in Olympia permit the tenant household to choose which income(s) should be considered for eligibility screening and that cumulative income be calculated.
Staff has also included language in the proposed ordinance that allows a landlord to require additional and documented security from a guarantor (often referred to as a co-signer) or allow the applicant to demonstrate a history of successful rent payment (or both) if they do not meet the minimum income requirements.
Other amendments
Staff has added some clarifying information to the definitions section of the code chapter. Due to input from community members and rental registry program staff, staff recommends updating the definition of immediate family member to include ‘first cousin.’
Enforcement
The proposed ordinance amends Chapter 5.82, adding a new section to address income to rent ratios in tenant screening. The same enforcement mechanisms and penalties for violations applies in the proposed ordinance as the rest of the chapter.
These enforcement mechanism include civil infractions carrying a monetary penalty, right of private action by the tenant, defense in an eviction proceeding, and suspension, denial or revocation of a business license. Enforcement actions are responsive to tenant complaints and potential violations are investigated by housing staff. Typically, these complaints can be resolved through education and communication between City staff and property owners. If a violation is found and a resolution cannot be reached, City housing staff refers the case to Code Enforcement, who may issue a civil infraction.
Effective Date:
Staff recommends the ordinance takes effect on October 1, 2025. Staff will be presenting additional tenant screening policy options to Council’s Land Use & Environment Committee (LUEC) on May 22, 2025. Pending direction from LUEC, staff will develop an ordinance to bring to Council in Quarter 3 of 2025. Aligning these code changes will help streamline the outreach and communications process, so staff can inform the community of these changes to tenant screening requirements at the same time.
Climate Analysis:
The proposed rental housing policies are not expected to have a significant impact on greenhouse gas emissions. If a household is able to qualify for more housing options and relocate close to their existing residence, they may have reduced commute times, resulting in a long-term reduction in greenhouse gas emissions.
Equity Analysis:
Requiring rental applicants to demonstrate their income totals three or more times the rent creates barriers to housing access for BIPOC, people with disabilities, and single parents who are more likely to have lower incomes. These community members benefit from the City lowering these thresholds and increasing the housing options available to them. One of the goals identified in the Assessment of Fair Housing is to explore and enact policy solutions to reduce barriers to accessing housing, such as barriers in the tenant screening process.
BIPOC households are more likely to rent and less likely to own their homes than white households in Olympia. According to HUD CHAS data (retrieved from Department of Commerce), 50% of white households in Olympia rent, while 61% of BIPOC households and 73% of Hispanic/Latinx households rent. According to American Community Survey data (retrieved from the Thurston County Assessment of Fair Housing), about 82% of Olympia households with a single mother rent rather than own their homes.
As indicated in the Assessment of Fair Housing, income disparities contribute to difficulty in paying for housing and limit housing choice. Economic disparities and lack of intergenerational wealth have contributed to income gaps between BIPOC and white households. According to HUD CHAS data, 24% of households of color in Olympia and 22% of Hispanic/Latinx households in Olympia earn less than 30% of Area Median Income, while 15% of white households earn less than 30% of Area Median Income. According to 2020 ACS data (retrieved from the Assessment of Fair Housing), a person with a disability earned on average $26,075, compared to $37,168 earned by a person without a disability. Just over 33% of single mother households in Olympia had income below the federal poverty level, compared to 11% of the total population.
Alternatively, landlords are burdened by additional requirements or restrictions put in place by the City. There is limited data on landlord demographics. City of Olympia surveys include demographic data, but not all respondents provide demographic information and there is a limited sample size. Approximately 71% of landlords who completed the landlord survey (part of the Olympia rental housing code update in 2022) identified as white, which is similar to the general population of Olympia overall.
Neighborhood/Community Interests (if known):
Potential changes to Olympia Municipal Code’s Rental Housing Code (OMC 5.82) are a topic of significant interest to renters and rental housing owners/operators within the city and around Thurston County. Over 400 community members participated in the 2022 Engage Olympia survey for renters, landlords, and interested third parties. Many survey respondents added comments regarding the barriers to accessing housing presented by requiring income to rent ratios that are beyond what many renters can afford. Some experiences shared by survey participants are included here:
• “Remove the income requirement of having 3x the monthly rent. I would be homeless if my father, a doctor, didn't cosign for me. I have never missed a rent payment in 6+ years of renting.”
• “Most apartments I see right now have monthly rents of $1500 or more and require that I make triple the rent in annual income. For me to move out of my current apartment, I would need to bring in an additional $20,000.”
• “Reducing the amount of money that needs to be earned in order to rent (for example making 3x the amount of monthly rent in income)-this is a huge barrier to students who can’t use student aid as income for getting a rental.”
Another renter submitted the following public comment at a public hearing in March 2024:
• “I am a homeless service provider where I provide outreach and case management services to the most vulnerable people in our community. I do this important work for $24 an hour, 30 hours a week and I work a part time job outside of that. My provider job is mentally, emotionally, and physically taxing and it by itself does not earn me enough money to rent a 1-bedroom apartment on my own. That should not be the case! I share a two-bedroom apartment with a roommate and I still pay over a third of my income on rent, before the cost for utilities.”
Financial Impact:
Additional costs are not anticipated if the City adopts the ordinance as presented to amend OMC 5.82. Additional staff time may be required to investigate and enforce the ordinance.
Options:
1. Approve the ordinance.
2. Modify the ordinance, which will have an impact on renters’ ability to access housing units.
3. Don’t approve the ordinance, which may restrict the ability of renters to access housing units.
Attachments:
Ordinance