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Owner’s Property Rights vs Renter’s Protection

Property Rights vs Renter's Protection

Many areas, like Boise, Idaho, saw unbelievable real estate value increases and double-digit market rent growth. This recent run has local municipalities dealing with the ramifications that this lack of housing affordability has created. The result? It has forced them to decide between the owner’s property rights and the renter’s protection.

Housing Affordability

Housing affordability has become a hot topic in the past few years. Looking at the increase in values for single-family homes, it’s not hard to see why. We had consistent double-digit growth for sales and rents in our Boise Metro Area, and buyers and renters have struggled lately.

Solving the Rental Problem

Early last year, the City of Boise began establishing new tenant protections. One of those ordinances prohibits landlords from denying rental applications based solely on the source of income, precisely Section 8 housing assistance, but also things like child support and alimony.

In a conservative state, where property rights are crucial to the people, being told as a landlord that you must accept a government program did not go over very well. It was only a short time before state officials drafted a bill that kept local municipalities from passing these ordinances. Their issue is that it infringes on property rights and moves our area toward a more Left-left-leaning approach.

Section 8 Housing Background

The current Section 8 low-income housing program has two programs: project housing assistance and vouchers.

The original Housing Act of 1937 was signed into law by President Roosevelt. This new law established the US Housing Authority (USHA), which provided 500 million dollars in loans to construct low-cost housing projects. Thus, the infamous ‘projects’ were born.

Unfortunately, these housing projects created a high concentration of poverty within the areas where the housing units were being built. In 1974, the government started directly offering financial subsidies to landlords in exchange for setting aside their units for low-income families, also at below-market rents.

Housing Voucher Program

Again, it did not alleviate the problem of keeping low-income families in these high-poverty areas. So, Congress stopped funding new housing projects in 1983 and instead developed the housing voucher program. It provides funds directly to the renter that they can use to rent where they choose, no longer restricting them to poverty-ridden areas of town.

Qualifying for Vouchers

To qualify for a housing voucher, a tenant’s income has to be 80% below the median income in the area. Recipients of housing vouchers contribute about 30% of their adjusted income toward the rent. The rest is covered by their voucher and is sent directly to the landlord.

Today, over 9 million Americans take advantage of Section 8 housing assistance through project housing or vouchers. In the state of Idaho, 11,544 households receive assistance. As of 2022, 2800 households in the Boise Metro Area receive assistance. Section 8 is typically administered at the local level through Housing Authorities. In the Boise Metro Area, we have one in Boise and one in Nampa. Both have waiting lists.

You can choose whether to accept Section 8 vouchers in your rentals. It is not uncommon to see Zillow rental posts that state, “No Section 8 vouchers accepted.”

Accepting Section 8 Vouchers

What does this mean for you as a landlord, should you choose to take part? Many investors have rented to Section 8 tenants because a significant portion of the rent is mailed directly from the government agency, ensuring that rent is paid consistently and on time.

Plus, statistics show that once Section 8 tenants have moved in, they tend to rent long-term (up to 10 years). Of course, it reduces a landlord’s vacancy and eliminates the costs associated with higher turnover. So, you might say, “I’ve got a tenant who pays on time every month and wants to stay for a long time. What’s the problem?”

How Local Housing Authorities Work

Local housing authorities determine the fair market rent the program will allow. To use their voucher, the tenant’s chosen unit cannot exceed the market rent determined by the housing authority. If you want to accept Section 8 in your unit, your rent could be dictated by the Housing Authority. Section 8 has also been known to cap yearly rent increases, thereby instituting a form of rent control for those who accept Section 8.

If you have a rental in our market, consider more than the usual 3% annual increase to cover your costs. However, if you have a Section 8 tenant, that might not be possible. Additionally, housing authority personnel conduct yearly house inspections. Should they find your unit lacking, they will require prompt repair.

Rumor has it that the housing authority has withheld voucher rent money until the repair has been made. The apparent problem with rising costs is there might be little left in reserves with capped rents to make these repairs.

However, consider Section 8 if you want to have the security of consistent rent and can afford to keep your yearly increases at a more steady rate. Many people do.

What About Your Right to Choose?

In this blog, we address your right to choose or deny a tenant who expects to pay you with government assistance money. It tethers you to restrictions you would not have with a conventional tenant.

Rent control on a statewide basis is not a thing in Idaho. So long as the landlord and tenant have a contractual agreement on the rental amount, you can charge whatever the market will bear. Basic laws of supply and demand will dictate whether you get your price or not. Remember: Idaho has long been a proponent of minimal government regulation, promoting business and personal freedom.

One major reason people have made Idaho their home is that as long as you operate within your rights, the government will stay out of your business. Thousands have flooded the Boise Metro Area from three main states: California, Oregon, and Washington. Unfortunately, these are the states where many of these regulations begin.

House Bill 545

In direct response to the City of Boise’s new ordinance stating that you could not deny a tenant based on Section 8 income, Representative Brandon Mitchell from Moscow drafted this bill, which bars any Idaho city from passing regulations requiring property owners to participate in federal housing programs. It would also prevent landlords from being required to comply with any programs from a local government regulating fines, fees, or deposits.

Idaho is looking down the road at where these city ordinances might lead, and it doesn’t seem they like what they see. Rep. Mitchell emphasized that this legislation is so important because ordinances like this hurt an already tight rental market. In fact, he pointed out that in other areas where similar programs have been passed, property owners have resorted to keeping their units vacant.

In NYC, for example, over 13,000 units are currently vacant because the landlords do not have enough money to repair the older buildings at the current rents they are forced to take. This type of rental regulation could also reduce the incentive for developers to come in and build new housing. Of course, when rentals are hard to come by, these actions could only worsen things.

The bill has passed the House and is headed to the Senate. If it passes there, it will go to Governor Little’s desk. It will overturn the City’s ordinance on Section 8 if signed into law.

What Are Your Thoughts on the Matter?

Do you own rental property in one of these areas where local authorities govern rent? Do you have a trick for keeping your cash flow intact in these situations? And if you own rentals in Idaho, what do you think about this bill?

As a previous California landlord, I saw the writing on the wall in the town where I had my rental and shortly moved my money to Idaho. If you are in the same boat and want to make a change, please contact our team. We are ready to help you take your money where it treats you best. Let me show you how Idaho might just be that place!

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