The outgoing Austin City Council generously left the real estate community one last new ordinance for Christmas. Beginning January 12, Austin landlords will be required to accept qualified Section 8 tenants.  Actually the ordinance does not specifically state that landlords must accept tenants in the government housing program; it amends the city’s fair housing ordinance to include a tenant’s of source of income as  a protected class . . . like race or nationality.  In other words, a tenant cannot be discriminated against if all or part of his or her income comes from a government housing support program.

One of the stated goals of the Council was trying to provide more “affordable” housing.  Yet, I believe the new ordinance will have a number of unintended consequences beyond Section 8.  First, many landlords will tell you that we occasionally see applications with very questionable sources of income. It is not at all uncommon to encounter an applicant we suspect is involved in drugs or other criminal activity.  Second, I can see a scenario where college kids may have income from the parents.  Personally, I quit accepting parental guarantees for college kids years ago.  I currently rent to a college student, but she is self-supporting, and it is reflected in her responsible mindset and credit score. Even when it has nothing to do with Section 8, the law may interfere with the landlord’s right to qualify tenants.

In my opinion the biggest unforeseen consequence of this new law, if it holds up in court, is the one that is so taboo that no one wants to mention it in the press.  I call it the “Section 8 Effect.”

In the early 1970s and 1980s, I sold a number of homes in a modest but desirable, middle-class neighborhood in North Austin.  During the 80s Bust, a nearby apartment complex fell on hard times and opted to become Section 8 housing.  The drugs and crime grew like a cancer until it became one of the main crime areas in the city.  Families left, stores closed, and the area has struggled ever since to regain its footing.  Was this disaster the result of Section 8 tenants, absentee ownership, or something else?  Ask someone who lived nearby.

We know that a lot of good people have to rely on Section 8 government assistance.  They genuinely need help, and Section 8 is how we as a society have decided to help them.  I absolutely support the idea of helping house deserving citizens that need assistance.  By the same token, I do not want to be forced into any government program that is not mandated by the state or federal government. What is the next step for the Austin City Council . . . Berkeley, California, style rent control?

Consequentially, according to its own press release, the Austin Apartment Association has sued the City of Austin challenging the law, stating that neither Texas nor the federal government recognizes “source of income” as a protected status and that the ordinance will impose “substantial legal and administrative costs.”

According to the City of Austin press release, a property owner will be exempt from the ordinance if he or she: “Owns no more than three single-family residences at any one time (and does not use the services of a Realtor or broker) OR Owns a dwelling that contains no more than 4 units and the owner actually maintains and occupies one of the units.”

This is far from over.

Jeff Stewart, CCIM, SRES

Stanberry & Associates, Realtors.

jstewart@stanberry.com