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Certain Landlords Must Adapt Screening Policies Due to Source of Income Laws - November 24, 2019

Effective September 1, 2019, the Des Moines City Council enacted an ordinance making it illegal for landlords to deny tenant-applicants based on the applicant’s utilization of governmental assistance or otherwise based upon the applicant’s source of income. The Des Moines ordinance (Chapter 62) follows the enactment of similar local laws in both Marion and Iowa City. The popularity of these laws is spreading to other major Iowa cities.

As of the date of this article, Des Moines, Marion, and Iowa City have source of income laws. Further, as of November 2019, the Dubuque City Council has formed a committee to investigate a possible source of income ordinance and may have a law on the books as early as spring of 2020.

What does this mean for landlords in Des Moines, Iowa City, and Marion?

Landlords in these cities must revise their screening policies to avoid paying heavy fines and getting caught up in expensive discrimination lawsuits.

What is a Source of Income Law?

The Des Moines ordinance and similar source of income laws are aimed at preventing housing discrimination against renters on government assistance--namely Section 8 vouchers.

Generally speaking, a source of income law lists “source of income” as a protected class under the city’s anti-discrimination fair housing laws. Thus, these ordinances mandate that landlords cannot refuse to rent to, discriminate against, or otherwise treat differently tenants or applicants solely because of the source of the applicant/tenant’s income used to pay rent, including Section 8 vouchers, other governmental assistance, and other sources of income (e.g., federal or state financial aid programs, alimony, pensions, grants, vouchers, and/or social security/disability payments). These laws add another layer to what landlords must consider in writing and establishing screening policies. As most landlords already know, discrimination against potential tenants on the basis of race, color, sex, religion, national origin, disability, sexual orientation, gender identity, and familial status are prohibited by both the Iowa Civil Rights Act (Iowa Code Section 216) and/or the Federal Civil Rights Act of 1968.

What about the affirmative obligations imposed upon landlords who rent to tenants with Section 8 vouchers?

Unless and until these local ordinances are invalidated, landlords in those cities can no longer refuse to rent to section 8 voucher tenants and, instead, have no choice but to comply with these affirmative obligations. Unfortunately, source of income laws do not take in account that HUD and local authorities require participating landlords to adhere to additional regulatory requirements, including additional lease and maintenance requirements.

However, there have been successful judicial challenges to source of income ordinances on the above-noted basis in parts of the country, including a 2019 decision by a Pennsylvania appellate court that invalidated a local source of income ordinance as it placed affirmative duties and requirements on rental property owners and operators, which was expressly prohibited by the state’s Home Rule Law.

In addition, at least one state, Texas, has passed a state statute expressly prohibiting cities from passing source of income laws.

What can landlords in cities with source of income laws do to avoid these legal pitfalls?

Landlords must end any policy or practice of “No Section 8 Vouchers.”

Landlords must not refuse to rent to an applicant because the applicant’s income used to pay rent is based, in whole or part, upon Section 8 vouchers, other governmental assistance, or any other specific source of income (e.g., federal or state financial aid programs, alimony, pensions, grants, vouchers, and/or social security/disability payments).

Further, if a landlord has a minimum income policy in screening tenants, an applicant’s governmental assistance must be included in the “income.”

Do landlords have to give a preference toward applicants on governmental assistance?

No. Source of income laws do not require a landlord to rent to a potential tenant simply because the potential tenant has public assistance, and no preference should be given to such prospective tenants.

Landlords should contact an experienced real estate attorney to discuss revising and/or drafting new policies that protect their financial interests while still complying with the most recent anti-discrimination laws.

If you or your company owns or operates rental properties and you have questions about this area of law, please contact your attorney.

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