A Real Estate Investor’s Guide: The Biden Administration’s Renters Bill of Rights

Biden Administration Releases “Renters Rights Blueprint”

It’s March of 2020, and the world is shutting down. 

Your sister has lost her job. Your spouse is out of work for the foreseeable future.  Everyone’s income is a bit less secure than it was yesterday. 

“My rental property will help make ends meet,” you think to yourself. 

What you don’t take into consideration is: everyone is being affected. 

Rent from your leased property keeps coming in later and later until it stops all together. In September you begin to think eviction might be the best solution. Instead, you are left footing the bill for your mortgage due to the eviction moratorium.

Investors and landlords were hit hard during Covid, and some have been feeling the punches ever since. The rumbles in the overall market, the anxiety of what is to come, will there be a recession or are we already in it?  You may feel like you are in a boxing ring with no plan for the fight.

In January of this year, the Biden Administration released the Renter Rights Blueprint. 

While some may see this as a sucker punch when they’re already down, there are a few key insights to this bill you need to understand before you start feeling like you’re dodging another hit.

The plan includes strengthening tenant protections and providing more access to affordable housing.

If you’re a landlord – don’t freak out yet. And if you’re a tenant – don’t get overly excited. 

Whichever side, take a breath and grab a snack because this is the legal starting line to a multi-year marathon.

We are not expecting any major changes in the Indianapolis property and leasing market within the immediate future. This bill will take years to become law, if it ever gets there. 

You may be following all of these five guidelines already, so seriously, take a breath, let’s go over it together.

The Guidelines are as Follows:

1. Safe, Quality, Accessible and Affordable Housing

The renter bill of rights emphasizes the importance of safe, quality, accessible, and affordable housing for all individuals and families. Affordable housing is classified as a tenant spending no more than 30% of their income on their rental home.

The proposal also calls for landlords and state and local governments to ensure homes for rent meet habitability standards, provide advertised services and amenities, and provide maintenance.

Our Perspective:

First off, remember this is a proposal.

And no, you won’t wake up tomorrow having to do the math of “what is 30% of my tenant’s income?”

30% of income is a federal standard of what may be deemed “affordable” for the average family.

They never say the words “rent control” or anything of the like. This plan supports transparent rental increases that can be explained to tenants. That’s it, at least for now. No one is trying to turn your investment property into a non-profit. 

Providing safe, quality, and accessible housing is a standard practice. We are curious to see if and how the federal government chooses to identify the thresholds for these practices in the future. 

As you grow your rental portfolio, it may seem daunting to keep track of each property and how it is maintained. We suggest investing in hiring an experienced team of helping hands, such as a property management company , to ensure that you are providing exceptional service to your tenants.

2. Clear and Fair Leases

The article states that all leases across different jurisdictions should follow minimum national standards.

This is one of the first times that the federal government has shown interest in promoting an umbrella of protection for tenants beyond the Fair Housing Act. 

The standards include:

• No mandatory arbitration for dispute resolution
• No hidden fees
• No false or unfair representations.

It is also suggested for leases to be in plain language or to be explained in plain language so that the prospective tenant is crystal clear on expectations.

Our Perspective:

We are the industry experts.

We wake up to property management: looking at numbers throughout Indianapolis, tracking our competitors, listening to our lawyers.

Your tenants are just trying to find a place to call home.

What is clear and fair to you, may not be to your tenant. We suggest having a lawyer look over your leases to ensure they are written in language that is fair and can be understood by your prospective renters.

Even if you think it makes sense, double check. 

It benefits all parties for a tenant to understand things such as rent collection, how to pay rent online, move out and move in expectations, how to handle maintenance requests, and more. If you are all on the same page, then the hope is that there will be less problems and therefore more money in your pocket.

Educating prospective tenants is an investment – invest your time to go over it now – and hopefully you’ll see less disputes and issues as your return. 

3. Education, Enforcement, and Enhancement of Renter Rights

The bill proposes expanding renter protections under the Fair Housing Act to prohibit discrimination based on source of income. This would mean including the following in income tests:

• Child Support
• Alimony Payments
• Housing Choice Vouchers 

The renters bill of rights also suggests addressing the potential for housing discrimination in credit reports and background checks, advocating for denied applicants to receive a notification of the reason for denial to correct errors in background checks and address deficiencies.

Our Perspective:

Sources of income are rapidly evolving. Many states, in fact, already require landlords to use Housing Vouchers, for example, as a valid source of income. 

This may create some challenges for landlords when screening potential applicants. 

More revenue streams would also mean more paperwork needing to be filed to be approved. That may cause some headaches for prospective tenants and landlords alike. We would like to see a streamlined process for this made available for property investors. 

4. The Right to Organize

According to the renters bill, occupants of rental properties should be able to form a tenant association and discuss rental property and maintenance issues, requests and concerns with the management and the owner without fear of retaliation.

Our Perspective:

Retaliation is never okay, especially if tenants are not being harmful or violent. We suggest having open and honest conversations with your tenants on a regular basis when problems do occur to build rapport. Building good, solid relationships is the best way to negate any future issues. 

When issues do arise, we suggest having a lawyer walk you through how to handle the situation, as they know the specific laws that will help you remain legally safe.

5. Eviction Prevention, Diversion, and Relief

The fifth blueprint principle advocates for just-cause protections and adequate notice for evictions and lease non-renewals. Non-judicial alternatives such as diversion and grievance procedures should be available, along with a resolutions process to address rent arrearages and lease violations. When an eviction proceeding is filed, the tenant should receive a 30-day notice, the right to counsel, and due process standards.

Our Perspective:

Most property management companies do not take joy out of eviction proceedings. It costs time, money, resources, and increases vacancy. However, tenants have a right to know the timeline for evictions, non-renewals, etc.

 

The industry standard throughout Indianapolis property management companies is at least 30 days notice for any of these types of situations. We do hope if this bill turns into law, that those in the real estate industry will receive resources and standardized approaches to handling things such as grievance procedures and resolutions processes.

After all we aren’t government mind readers, so we are interested to see in the future how they choose to uphold these standards from a federal level. Although, most of the state tends to adhere to at least a 30 day window, so not much should change. 

What Does this Mean for the Rental Market?

The renters bill discusses the need for transparent and fair rent increases. It suggests that property owners should provide tenants with written support for rent hikes.

The Biden Harris Administration proposes expanding the definition of mission-driven business to include loans for market rate apartments and properties that maintain affordable rents. These loans and available properties may receive pricing discounts or waivers, providing landlords a way to hopefully even out financially.

Key word throughout all of this?

Suggests. 

The renter bill of rights, is just that, a bill. It is not law, and has no clear timeline for progression to law, if at all. However, you will not be penalized for not following these standards, as long as you are following codified law within your region.

We cannot with any guarantee tell you how this would affect the rental market simply because the outlines are so broad. When and if updates are provided on concrete guidelines, we will update you. 

How would this effect Landlords and Property Management?

With new resident-centered housing legislation, landlords could be put in tight spots. No doubt, they’ll be  spending time, energy, money, and resources to facilitate these new terms. This bill is placing the weight of the housing market on owners and investors, instead of the root problem: lack of housing within all price points.

Individual landlords with smaller portfolios will be hit the hardest by this one-size-fits-all plan. While larger investors can take advantage of federal perks such as the ones listed above, smaller landlords will be stuck in the middle of trying to facilitate these changes, while not getting as many breaks since they have fewer properties. We hope to see amendments to the bill that facilitate help for all sizes of investors.

Indiana investors and property managers should not fret yet though, we imagine some highly revised versions of this bill before it becomes a law, if it becomes a law at all.

What Does this Mean for Indiana Property Management?

Indianapolis Property Management companies should not currently worry about this bill. This is the beginning stages of a process and a conversation never had before by federal government. 

Most rental agencies for properties in Indianapolis already adhere to most, if not all, of these standards. Indiana also, comparatively to other states, is a landlord friendly. This means, state agencies tend to favor with landlords rather than tenants when problems do arise.

How do I Protect My Investments Currently?

Property managers in Indiana can protect themselves against liability by taking certain precautions. One important step is to ensure that all properties are up to code and properly maintained. This can help prevent accidents and injuries that could result in liability claims.

It is also important to have a comprehensive insurance policy that includes liability coverage. Always document all communications and interactions with their clients and tenants, as this can help in the event of a dispute.

Always have a cash reserve if something goes wrong. If an HVAC system goes out, if a tenant refuses to pay rent, if you do get hit with a lawsuit, you will be covered financially.

Finally, staying up-to-date on Indiana’s landlord-tenant laws and regulations can help your property owner and managers avoid legal issues that could lead to liability.

The Bottom Line

Now that we are all caught up, it doesn’t seem so scary, right?

Around 4.5% of bills turn into laws, meaning there is only a 4.5% chance of this actually going into place. 

It is important to remain up-to-date on all legislation revolving property management. However, this is just a bill, and the way the house and the senate currently sit, it is a bill that will likely fail many times before it is approved, if it is approved at all. The steps we suggest to protect your rental property from this, are steps we would always suggest, such as having a lawyer, a cash reserve, and good working relationship with your tenants.

If any changes arise we will post an update with all need to know information for Indianapolis property management services.