Kansas City Ordinance 231019: Compliance and the Strategic Approach
Kansas City Ordinance 231019 aims to eliminate housing discrimination based on source of income, rental history, credit score and criminal history. This ordinance does not require landlords to change their current rental screening standards. It does significantly impact how landlords are required to process residential rental applications and how they can lawfully deny residency to prospective tenants. This guide provides a detailed explanation of compliance requirements, the consequences of non-compliance, permissible actions, and recommended practices for landlords, with a focus on risk mitigation strategies and potential opportunities within the ordinance.
Key Provisions
Kansas City Ordinance 231019 introduces changes to how Kansas City landlords must handle tenant applications. The key provisions of the ordinance include:
- Elimination of Pre-Screening: Landlords may no longer advertise or provide their rental screening standards prior to a prospective tenant’s submission of a written application.
- Non-Discrimination Statement: All rental applications must include the following non-discrimination language: “The landlord does not discriminate based on source of income.”
- Source of Income Protection: The Ordinance defines “source of income” as any lawful, verifiable source of money paid directly or indirectly to a tenant, including but not limited to wages, rental assistance, SSI, SSDI, child support, alimony and eligibility for a government issued voucher.
- Prohibited Criteria for Denying Tenancy:
- Rent-to-Income Ratio: Landlords must account for all lawful and verifiable sources of income when calculating rent-to-income ratios. If a prospective tenant has a voucher, Landlords must apply the rent-to-income ratio as to only the portion of rent covered by the voucher and not to utilities or other charges and fees.
- Credit History: Adverse credit or lack of credit history cannot be the sole reason for denying tenancy.
- Evictions or Property Damage: A history of evictions or property damage occurring more than one (1) year before the proposed rental date cannot be used as sole criteria for denial.
- Prior Convictions or Arrests: Prior convictions or arrests cannot be the sole reason for denying tenancy.
Landlords may deny an application outright if the prospective tenant does not qualify based on two (2) or more of the above criteria. To deny tenancy based on any one (1) of the above factors, landlords must review and consider additional mitigating information provided by the prospective tenant.
Consideration of Additional Mitigating Information
- Personal References: Landlords should consider testimonials or character references from individuals who can vouch for the prospective tenant’s reliability and character.
- Recency and Status of Evictions: Detailed information on recent evictions should be reviewed, including dates, reasons, and steps taken to resolve issues, such as paying off past due amounts or addressing problematic behaviors.
- Actions Taken to Resolve Credit Challenges: Landlords must consider documentation showing efforts to improve credit scores or resolve financial issues, such as payment plans, credit counseling, or evidence of improved financial management.
- Severity and Recency of Convictions: The nature and timing of past convictions should be weighed, with consideration given to non-violent offenses from many years ago versus recent, severe offenses. Evidence of rehabilitation efforts, such as completion of programs or consistent employment, should also be considered.
- Overall Tenant History: The prospective tenant’s entire rental history should be evaluated, not just problematic periods, to assess long-term patterns of behavior.
Compliance Requirements for Landlords
To comply with Ordinance 231019, Landlords must undertake several key steps:
- Update Rental Advertisements: Advertisements should describe only the property and not the qualities or criteria of an ideal tenant. Landlords should not publish or reveal their screening standards prior to the submission of a rental application, even upon request.
- Update Rental Applications: Ensure all rental applications include the non-discrimination statement “The landlord does not discriminate based on source of income.”
- Implement Non-Discriminatory Policies: Develop and enforce policies that prevent discrimination based on source of income and other protected criteria. This includes revising existing policies that might inadvertently discriminate against tenants with non-traditional income sources or other factors listed in the ordinance.
- Revise Rent-to-Income Ratio: Landlords are discouraged from using a rent-to-income ratio and alternatively setting a standard rental value for each unit taking into consideration the amount of income that a tenant would need to be successful in the unit considering their utilities, insurance, entertainment and necessaries (food, clothes, personal hygiene etc…).
- Verification Processes: Landlords must establish clear, consistent procedures for verifying various income sources. Accepting official documentation, such as award letters for SSI or SSDI, child support orders, or rental assistance agreements, is critical. The ordinance does not prevent landlords from verifying income; it simply mandates that verification processes be consistent as to all prospective tenants and non-discriminatory.
- Staff Training: Landlords should provide comprehensive training for property management staff to ensure they understand and comply with the new requirements. Employee training should cover recognizing and preventing discriminatory practices, understanding the ordinance’s requirements, and implementing non-discriminatory policies that focus on tenant reliability rather than source of income. Staff should work from a telephone and site visit script to ensure that rental screening standards are not disclosed in writing or verbally prior to a prospective tenant’s submission of a written application.
- Record-Keeping: Landlord must maintain detailed records of rental applications, complaints received, and actions taken to address these complaints. This is crucial for demonstrating compliance during potential audits. The ordinance mandates that landlords keep records of all rental applications (whether accepted or rejected), including the prospective tenant’s income source, for a minimum of three (3) years.
- Denials: Landlords are not required to provide their analysis or rational for denying an application unless a prospective tenant requests a response verbally or in writing. Landlords must affirmatively state that the denial “was not based on your membership in a protected class or protected trait as defined by the law”. It is not advisable for landlords to elaborate further or provide additional details.
Strategic Alternatives and Mitigation Strategies
While Kansas City Ordinance 231019 imposes new restrictions, landlords can strategically navigate these rules to maintain their current rental screening standards. Below are detailed approaches to address the ordinance’s language and requirements in a way to uphold your interest in preserving property values and high community standards:
Emphasize Credit History: Although the ordinance states that adverse credit or lack of credit history cannot be the sole reason for denial, it can be used in conjunction with other factors. If a tenant has a low credit score and a history of late payments, these combined with insufficient rental references can justify denial. Consistent documentation of such evaluations ensures compliance. Poor credit often correlates with financial instability, which can be linked to broader reliability issues.
Holistic Evaluation of Evictions: The ordinance prohibits using evictions older than one (1) year as the sole criterion, but landlords can consider the context of multiple evictions over several years. Even if each eviction is older than one (1) year, demonstrating a pattern of behavior can raise legitimate concerns. Evaluating and documenting the severity and frequency of past evictions, landlords can emphasize patterns in behavior that suggest a tenant is likely to repeat problematic conduct.
Consistent Screening Criteria: The ordinance emphasizes non-discrimination in application evaluations. Applying strict and consistent screening standards to all prospective tenants, such as credit score thresholds, rental history standards, and income verification, ensures fairness and protects against discrimination claims. Keeping detailed records of each evaluation and applying criteria uniformly can be justified as maintaining high standards for all tenants, thus preserving property values and community standards.
Leverage Rent-to-Income Ratios: The ordinance requires considering all lawful income sources, but landlords can still uniformly apply stringent rent-to-income ratios or preferably, pre-determined rental rates for each unit. If a prospective tenant’s total verified income, including all lawful sources, does not meet the required rental rate, this is a valid reason for denial. Ensure any ratio is applied equally to all prospective tenants or the set rental value is applied equally to all units of the same size and location. Then, document the calculations, highlighting the importance of financial stability and ability to consistently meet rent obligations.
Severity and Recency of Criminal Records: The ordinance prevents denying tenancy solely based on past convictions, but landlords can weigh the severity and recency of offenses. Recent severe offenses or a pattern of criminal behavior can be combined with other factors like poor credit history or unstable rental history to justify denial. Document how each factor influenced the decision, as a combination of poor credit and recent criminal activity indicates a higher risk to property and other tenants.
Documenting Additional Information: The ordinance requires considering additional prospective tenant information. Thoroughly document evaluations of personal references, actions taken to resolve past issues, and evidence of rehabilitation. If references are weak or rehabilitation efforts insufficient, use these as part of a comprehensive rationale for denial. Emphasize the thoroughness of your evaluation process, showing that you considered all aspects but found them collectively insufficient.
Multiple Criteria Denial: The ordinance allows denial based on multiple criteria. Landlords may deny tenancy based on a combination of factors. For instance, a tenant with a low credit score and recent property damage can be denied based on these combined criteria. Ensure each factor is well-documented and uniformly applied. Utilize the aggregate of smaller issues to present a stronger case for denial, making the decision appear balanced and justified.
Consult Legal Advice: Regular consultation with an attorney can help landlords navigate the complexities of the ordinance and ensure compliance. Use legal advice to identify legitimate reasons for denial and avoid potential legal pitfalls. Ensure that all decisions are backed by legal guidance, providing an additional layer of protection against disputes.
Leverage the Landlord Risk Mitigation Fund: The ordinance establishes a $1 million Landlord Risk Mitigation Fund. Utilize this fund to cover potential damage or losses, making it more feasible to accept higher-risk tenants without significant financial exposure. Use the existence of this fund to offset financial risks while maintaining high screening standards.
Denying Government Issued Vouchers: Landlords are required to accept government issued vouchers. Landlords are not required to wait for the government to complete their internal paperwork and processes. If another qualified prospective tenant can complete the landlord’s rental process (application, background check, security deposit, lease signing and move-in) prior to the prospective tenant with a voucher, the landlord is free to rent to the latter. Landlords are also permitted to raise their rental values above what a voucher may cover or raise their income screening standards above the government’s maximum level.
Clear and Comprehensive Documentation: The ordinance mandates maintaining detailed records for three (3) years. Keep meticulous records of all application evaluations and decisions, including how additional information was reviewed and considered. Proper documentation can protect against claims of discrimination and demonstrate a methodical and fair evaluation process.
Non-Compliance
Failure to comply with this ordinance may result in the following penalties:
- Fines and Penalties: Violating the ordinance can result in fines of up to $1,000 per instance or suspension of a landlord’s permit to conduct business in Kansas City. These fines can accumulate quickly, leading to substantial financial penalties over time.
- Probationary Status: Landlords with multiple violations within a twelve (12) month period may be placed on Special Probationary Status, requiring them to complete a corrective action plan.
- Legal Action: Persistent non-compliance can lead to legal action and up to 180 days in jail, increasing financial and reputational risks.
Examples of Violations
- Describing the qualities of an ideal tenant or posting your rental screening standards in your advertisements.
- Providing your rental screening standards to a prospective tenant prior to their submission of an application.
- Pre-screening any prospective tenant with verbal questioning prior to the submission of an application.
- Preferring tenants with employment income over tenants with other sources of income.
- Refusing to accept government issued vouchers.
- Charging some prospective tenants but not all prospective tenants an application fee or agreeing to waive the fee for some but not all prospective tenants.
- Discouraging prospective tenants with non-employment income, criminal history, or poor credit scores from applying to rent.
- Advertising or making statements such as “No Section 8,” “No Prior Evictions,” “No Felons,” or similar limitations.
- Screening out prospective tenants receiving Social Security or with poor credit histories.
- Rejecting prospective tenants who cannot provide paystubs or W2 forms.
- Refusing to process, or unreasonably delaying, a person’s application only because they intend to use a government issued voucher or have been evicted.
- Refusing to rent to someone because they are employed seasonally or part-time or rely on child support.
- Falsely telling a prospective tenant that a property is not available because the landlord wants to rent to another person with a different source of income or criminal history.
- Charging higher fees or requiring different terms and conditions because a person has prior evictions or receives income from non-employment sources.
How Anderson & Associates Can Help
Some of you may have heard that a group of landlords spanning a variety of asset classes have come together to discuss options on how to address this ordinance on a legislative level. If you would like more information regarding that group and how you could become involved, please send an email to julie@mokslaw.com and we will reach out to you.
Anderson & Associates is offering 30-minute consultations for $150.00 to assist landlords in understanding the ordinance, in applying the ordinance to their business and in training their staff. If you are interest in a consultation, please email julie@mokslaw.com.