Title
Renter Protection Measures Discussion
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Discuss renter protections related to tenant screening, manufactured homes, and rent to own arrangements.
Report
Issue:
Whether to Discuss renter protections related to tenant screening, manufactured homes, and rent to own arrangements.
Staff Contact:
Christa Lenssen, Senior Housing Program Specialist, Office of Community Vitality, 360.570.3762
Presenter(s):
Christa Lenssen, Senior Housing Program Specialist, Office of Community Vitality
Background and Analysis:
Income to Rent Ratios
As housing prices continue to rise, it becomes increasingly difficult for tenants to qualify for a rental unit, with current practices of requiring tenants to demonstrate that their income is three times (or more) than the rental rate. Staff have heard from local tenants 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).
Using a rent to income ratio of three times the rent, an applicant would need to earn at least $54,000 annually to qualify for an average 1-bedroom rental unit at a rate of $1,500/month. The average annual income of an Olympia renting household is just under $50,000. A renter working full-time at minimum wage earns just under $34,000 annually and would only qualify for rents below $950 per month.
At a public hearing in March 2024, staff included information on tenant screening policies adopted by other local and state governments. 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 separate limits if the rent is considered affordable or under fair market rent. Minneapolis landlords must consider an applicant’s history of successful rent payment if their income is less than three times the rent.
Staff recommends that if a landlord screens tenant income for eligibility, either a financially responsible applicant’s income OR combined household income may be used to determine financial eligibility. Landlords may not require the applicant income to be more than 2.5 times the amount of monthly rent for the unit. 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.
Rent to own arrangements
Council passed an ordinance to establish a rental housing registry and inspection program in November 2023. In April 2024, Council approved an exemption to the rental registry and inspection program for property owners who rent to immediate family members. When Council passed the exemption for immediate family members, Council directed staff to explore options for a pilot project to exempt lease to own rental arrangements from some or all of the provisions in the City’s rental housing code.
Staff conducted research and contacted local tenant advocates who have experience with rent to own agreements. Staff has noted concerns and included suggestions to mitigate these concerns.
Staff recommends that if a pilot program is explored further, that the City contract with a qualified legal service provider to aid in developing a written agreement between the landlord and tenant. Staff recommends requiring completion of a home inspection, appraisal, and title search, and a written agreement in order to qualify for an exemption from the rental registry and inspection program.
Tenant protections for Manufactured Home residents
Manufactured homes comprise between 2 and 3% of the city’s housing units but represent an important naturally affordable housing option. According to a report by the Consumer Financial Protection Bureau, manufactured housing is the largest source of unsubsidized affordable housing in the country.
Olympia’s current rental housing code does not apply to residents who own their manufactured home but rent a lot space in a manufactured home community. This mirrors state landlord-tenant law: there is a Residential Landlord-Tenant Act for most rental housing (which also applies to tenants who rent both the home and the lot space in a manufactured home community) and a Manufactured/Mobile Home Landlord-Tenant Act for residents who own their manufactured home and rent a lot space in a manufactured home community.
Staff were contacted by manufactured home residents after the April 2024 updates to the Olympia Rental Housing Code for clarification about whether the code applied to their situation. In May 2024, staff were also invited to a community meeting at a local manufactured home community, along with local state legislators, to discuss challenges at their particular community, as well as provide a policy update. The Regional Housing Council staff technical team also formed a manufactured home workgroup to brainstorm solutions after receiving a funding request from a local manufactured home community that was seeking assistance to purchase their manufactured home community as a cooperative. The Regional Housing Council created a new ‘Opportunity Fund’ that sets aside a portion of funding each year for emergent funding needs, such as sale of a manufactured home community. There is a rising trend, both locally and nationally, of manufactured home communities being sold at inflated prices to investment groups, who increase lot rents significantly, displacing low-income residents.
Staff hosted a community meeting in September 2024 for residents who own their manufactured homes and rent in a manufactured home community. Staff solicited input from residents on their housing challenges and proposed solutions. A summary of the discussion is attached. Staff has included some potential policy considerations for the Committee to review.
Staff recommends Olympia prioritize the following policies, based on impact and responsiveness to resident concerns, complication and legal risk:
1. Require 6 months’ notice for rent increases over 5% and 9 months’ notice for rent increases of 10% or more in a 12-month period.
2. Adopt similar language to OMC 5.82.030(A), (B), and (C), which requires landlords to specify a rationale for a rent increase in notice provided to the tenant.
3. Require landlords to provide information from the City of Olympia about policies and resources at lease renewal or annually.
4. Adopt zoning amendments to limit redevelopment of existing manufactured home parks.
The City could also explore enacting an Economic Displacement Relocation Assistance program but would need to exercise caution in the amount of funds required to be paid by park owners.
Staff recommend that the policy options presented are shared at another community meeting for manufactured homeowners, to take place in early 2025. Residents also expressed interest in a training on their rights under the State Manufactured/Mobile Home Landlord Tenant Act. Staff can invite a presenter to cover this information.
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.”)
Climate Analysis:
The proposed rental housing policies are not expected to have an impact on greenhouse gas emissions.
Equity Analysis:
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. About 82% of Olympia households with a single mother rent rather than own their homes. Creating a rent to own pilot project may assist more BIPOC and single parent households in accessing homeownership who are currently renting. Staff have recommended City support to ensure that potential harm is mitigated.
BIPOC households are more likely to be extremely low-income than white households. In Olympia, 24% of households of color and 22% of Hispanic/Latinx households earn less than 30% of Area Median Income, while 15% of white households earn less than 30% of Area Median Income. In 2020 in Olympia, 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. Requiring rental applicants to demonstrate their income totals more than three 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.
Adults over age 65 are more likely to live in a manufactured home than the general population, according to the Regional Housing Needs Assessment. About 12 percent of seniors countywide live in manufactured housing or mobile homes compared to nine percent for the county population as a whole. Nearly 17% of adults over age 65 in Olympia have income below the federal poverty level, which is about 1.5% higher than the general adult population. Staff was not able to locate the racial demographics of Olympia residents who live in manufactured homes.
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. Landlords are burdened by additional requirements or restrictions put in place by the City. Some landlords may find a mutually beneficial arrangement can be reached by entering a rent to own agreement with their tenant.
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. Many survey respondents in the 2022 Engage Olympia survey 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 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.”
In the countywide Assessment of Fair Housing, increasing access to homeownership was identified as the second highest priority (following increasing affordable housing and/or financial assistance for housing for low-income households) by community members to increase equity and reduce disparities among protected classes. Measures to increase access to homeownership, particularly for renters who do not have the means to save for a large downpayment or may have difficulty qualifying for a traditional mortgage, are of significant interest to community members.
The primary concern of manufactured home residents raised at the community meeting held in September 2024 is increasing lot rents. Residents are also concerned about being displaced if the owner sells or redevelops the property. Residents also expressed frustration due to enforcement of rules and confusion around who should be responsible for certain maintenance costs. Residents suggested they would need 8-9 months’ notice if they were forced to sell their home and find alternative housing, due to a large rent increase.
After the community meeting in September, staff were contacted by several residents in a large manufactured home community who were informed that their lot rent would increase from $800 to $1,600 in five years. Some of these residents were informed their lot rents would increase to $1,300 next year, with a gradual increase to $1,600 by the end of five years.
Financial Impact:
Additional costs are not anticipated if the City adopts policies related to income-to-rent ratios or manufactured homes. If the City pursues a pilot project to support more transitions to tenant ownership, staff recommends that the City contracts with a legal services provider who is familiar with these arrangements and that the City provides funding support to complete an inspection, appraisal, and title report. Staff recommends budgeting at least $2,000 per transaction, not including contracted legal services support.
Options:
1. Direct staff to pursue next steps per staff recommendations.
2. Modify staff recommendations.
3. Take no additional action.
Attachments:
Income to Rent Ratio Sample Policies
Rent to Own Overview
Potential Manufactured Housing Policy Options
Summary of September 14 Manufactured Homeowner Community Meeting