The Future of Multifamily Housing: More 2018 Regulations and Legislation

2017 was undoubtedly a busy year for multifamily legislation. With bills like California’s immigrant housing protections and the City of Seattle’s ban on criminal records within background reports, you’ll start to feel the effects of these passed bills this year. Take a look at pending and future multifamily housing legislation that could affect properties across the U.S. in 2018, and be aware of legislative trends that surfaced last year. One prominent bill in one state could very easily turn up in another state down the road.

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NATIONWIDE

IN EFFECT AND FUTURE: Tax Reform Bill (see enrolled bill text)

While some provisions within Congress’s and the Senate’s tax reform drafts were concerning for the rental housing industry (like the removal of private activity bonds within the low-income housing tax credit), the aforementioned provisions did not make it into the final, enrolled bill. The National Multifamily Housing Council and National Apartment Association have issued a joint statement applauding Congress for removing passages that restricted the growth of the multifamily industry. While it appears that this bill will not drastically impede the rental housing industry, we suggest you talk to your accountant about how this bill will affect your personal and rental property’s taxes in the coming year. Parts of the tax reform bill should take effect January, 1, 2018; however, other elements will not take effect until 2019 and beyond.

PENDING: Tenant Protection Act (S. 1758)

The Tenant Protection Act will amend the Fair Credit Reporting Act (FCRA) with further requirements for landlords and consumer reporting agencies (your tenant screening provider). The use of eviction records, or “housing court records”, will become more limited under this bill. Tenant screening providers will be prohibited from using eviction records (or any other court records pertaining to housing) in their resident screening report unless 1) the record resulted in a judgment of possession; 2) the decision of the court in the record’s case is not being appealed; and 3) the record is no more than 3 years old. Since being introduced on August 3, 2017, this bill has not made any progress. You can expect to hear more about this bill this year.

Presently, eviction records are allowed to date back up to 7 years, and may include both judgments and filings so as to inform properties about applicants who demonstrate a trend of poor residency.

PENDING: FCRA Liability Harmonization Act (H.R. 2359)

Introduced in the House on May 4, 2017, this bill aims to amend the civil liability requirements under the FCRA, specifically the requirements with class actions. As currently proposed, this act would prohibit courts from applying a minimum amount of damages for each member of the class, with fees (excluding attorney’s fees) not exceeding $500,000. Since its introduction to congress this bill has had hearings held by the Subcommittee on Financial Institutions and Consumer Credit on September 7, 2017. You can expect to hear more about this bill this year.

FUTURE: NFIP Reauthorization (H.R. 2874)

The National Flood Insurance Program (NFIP) enables rental property owners, operators, and developers to get flood insurance coverage through the Department of Homeland Security (FEMA). While this program was set to expire on December 22, 2017, the reauthorization is now extended to January 19, 2018. The House passed their own revision (21st Century Flood Reform Act, H.R. 2874) on November 14, 2017, however it seems that the Senate will be drafting their own NFIP reauthorization bill.

 

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CALIFORNIA

IN EFFECT: Immigrant Tenant Protection Act (AB 291)

AB 291 goes into effect on January 1, 2018. This bill prohibits landlords and properties from disclosing the tenant’s immigration or citizenship status to any immigration authority, law enforcement agency, or local, state, or federal agency unless obligated under federal law, a subpoena, warrant or order issued by the court. You are also prohibited from making inquiries into the immigration or citizenship status of a rental applicant or tenant. This includes requiring to see Social Security numbers (or any other documents) after you’ve already approved the tenant for occupancy. Violators could pay up to $2,000 in damages for each violation.

Quick Tip: Make sure your online rental application does not specifically use the language asking if the applicant is a U.S. citizen.

IN EFFECT: Flood Hazzard Disclosure (AB 646)

On July 1st, 2018, landlords with “actual knowledge” that their property is in a flood-hazard area are required to add to their lease a flood risk disclosure. Owners with “actual knowledge” include those who are notified by a government agency and owners that are required to carry flood insurance.

IN EFFECT: Recreational Marijuana Legalization (Proposition 64)

Be aware that on January 1, 2018, the legal sale and taxation of recreational marijuana will go into effect. Recreational marijuana vendors with temporary licenses will become valid on the 1st. Property owners may prohibit the use of smoking marijuana and any other types of smoking on the property within the lease agreement, if they choose to do so.

IN EFFECT: Housing Accountability Act (AB 678 and Companion Bill, SB 167) and Other Affordable Housing Bills

Aiming to boost California’s housing supply, these bills financially penalize local governments that deny or conditionally approve housing projects in “a manner that renders infeasible”. Local governments will now have to follow legal mandates before denying housing projects that comply with the law’s general plan and zoning rules. Money gained through fines would be later used to construct affordable housing. This is effective January 1, 2018.

While the Housing Accountability Act is one of the more noteworthy bills aimed at alleviating the affordable housing crisis, be aware of the following affordable housing bills:

  • IN EFFECT: The Development of Micro-Apartments (AB 352)
    This bill prohibits cities and counties from establishing a higher sq. ft. requirement than 150 sq. ft. and from limiting the number of efficiency units near public transit, car sharing vehicles, or UC and CSU college campuses. Read More.
  • IN EFFECT: Local Zoning Regulations Could Require Affordable Housing Units (AB 1505)
    AB 1505 authorizes cities and/or counties to adopt ordinances that require that the development include a percentage be dedicated to affordable housing.
  • IN EFFECT: A Streamlined Local Development Process (SB 35)
    SB 35 streamlines the development approval process state-wide by limiting local governments from imposing parking standards and other requirements on developments. It also places requirements as to the minimum amount of units the area must develop annually.
  • IN EFFECT: Workforce Housing Opportunity Zone (SB 540)
    This bill streamlines the development process by requiring local governments to establish a housing plan with all the necessary environmental reviews and public engagement already done.
  • IN EFFECT: The Building Homes and Jobs Act (SB 2)
    This bill adds a $75 fee to all real estate instrument, paper, or notices permitted by law (like mortgage refinances), which will be allotted to affordable housing. Fees will not exceed $225.
  • FUTURE: Veterans and Affordable Housing Bond Act of 2018 (SB 3)
    A $4 billion affordable housing bond will be on the ballot for voters on November 6, 2018. From the sale of these bonds, $3 billion will go to affordable housing programs; $1 billion will go to farm housing and veterans programs.

IN EFFECT AND FUTURE: Smoking Ban Ordinance in Redwood City

Effective on January 1, 2019 for all existing units and January 1, 2018 for all newly constructed units (after Jan. 1, 2018), Redwood City rental properties with more than two units are prohibited from allowing smoking inside the units and within all common areas.

PENDING: Uniform Tenant Relocation Fees Ordinance in Oakland City

The Oakland City Council will be voting on January 16, 2018 on the Uniform Tenant Relocation Fees Ordinance. If passed single-family, condo, and multifamily property owners who seek to move themselves or their family members into their rental property would be required to pay between $6,500 to $9,875 per unit (depending on size) in relocation fees to adversely affected tenants. An additional $2,500 is required if those displaced tenants are seniors, disabled, or are minors. Property owners with prior move-in agreements will be exempt and owners with short-term tenants will have reduced fees.

PENDING: Repeal of the Costa-Hawkins Act (AB 1506)

This bill would repeal the Costa-Hawkins Act, which currently prevents cities and counties throughout California from adopting restrictive rent control policies, such as: 1) regulating initial rates and rates established after a change in tenancy, 2) rent controls on newly constructed housing built after 1995, and 3) rent controls on single-family homes. While this bill hasn’t been touched since March 16, 2017, both Assemblymembers David Chiu (D-San Francisco) and Rob Bonta (D-Alameda) have announced that AB 1506 will likely be heard in committee on January 11, 2018.

Read our article to learn why we, and others in the multifamily industry, oppose this bill.

FUTURE: California Rent Control Initiatives

Alongside AB 1506, a ballot initiative to repeal the Costa-Hawkins Act (an act that prohibits local governments from regulating the price of rent) has been filed. The measure has not yet qualified to be put on the ballot on November 2018. Activists will have until June 28th, 2018 to collect valid voter signatures.

You should also be aware that tenant’s rights activists have made statements saying they are preparing to launch separate rent control initiatives (or these city councils are considering rent control ordinances) in the following cities: Burbank, Glendale, Inglewood, Long Beach, Pasadena, and Santa Cruz. Many of these activist groups have previously failed to get their provision accepted (either because they filed the petition incorrectly or there was an inadequate amount of signatures) in the fall of 2017, however, these groups are planning to refile again. Depending on how these tenant rights groups decide to qualify their initiatives (either with the random sample method or the full check method), the last day to file a petition is either April 24, 2018 or March 7, 2018.

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FLORIDA

PENDING: Landlord Employment Screening (HB 749)

This bill would allow rental property owners in Florida to require any of their current or potential employees to undergo a level 1 background screening check. If passed, the rental agreement must also include a disclosure stating whether the landlord has required their employees to undergo background screening. If employment screening is required, the disclosure must include the full name and job description of the employee/potential employee and if their criminal check indicated credit card theft, violent crimes, or sexual battery. As of December 8, 2017 this bill was still undergoing committee review.

 

GEORGIA

PENDING: Georgia Tenant Victim Protection Act (HB 281)

This bill would amend Chapter 7 of Title 44 of the Official Code of Georgia Annotated to allow tenants who are victims of family violence, sexual assault, stalking, or unlawful harassment to terminate the rental agreement and vacate the property.

PENDING: Inclusionary Zoning Ordinances in Atlanta

The Atlanta City Council’s approved inclusionary zoning ordinances will require multifamily developers to dedicate a portion of their units to affordable housing. 10% of units will be available to those with 60% area median income or 15% of units will be available to those with 80% area median income. This requirement will only apply to neighborhoods near Mercedes Benz Stadium and the Atlanta Beltline.

 

HAWAII

PENDING: Residential Landlord-Tenant Code Amendment (HB 223)

This bill allows property managers and owners to charge a tenant screening fee to cover the costs of the tenant screening. This fee shall not exceed $25.

PENDING: Residential Landlord-Tenant Code Amendment (SB 130)

Although similar, this bill is separate from the bill above. SB 130 would allow property owners to charge an application fee, but only the exact amount of the tenant screening cost. Landlords would be required to refund any unused amount of the application screening fee, and provide a receipt of the fee and a copy of the tenant screening report if requested.

 

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ILLINOIS

PENDING: Repeal the Rent Control Preemption Act (HB 2430)

This bill would repeal the Rent Control Preemption Act of 1997, which prohibits local governments from “controlling the amount of rent charged for leasing private residential or commercial property.” This would allow local governments to create rent control ordinances, and as the Illinois Realtors says, “the intent of the law is bad enough: to create rent control in Chicago.” Since its referral to the Rules Committee, Rep. Theresa Mah (D- Chicago) became a co-sponsor on October 28, 2017.

 

IOWA

PENDING: Criminal Record History for Landlords and Real Estate Agents (HF 502)

Although this bill is extremely early in the legislative process, if passed, HF 502 would prohibit employers, employment agencies, landlords, and real estate agents from inquiring into the criminal history of a job or rental applicant before an offer of employment or tenancy has been made.

 

MINNESOTA

PENDING: Tenant Screening Costs (HF 93 and SF 585)

These bills would prohibit landlords for charging tenants more than the cost of a tenant screening service.

 

NEW YORK

IN EFFECT: Emergency Consumer Protections (view regulations)

On December 12, 2017, Governor Andrew Cuomo issued new regulations for consumer credit reporting agencies to protect consumers. These regulations include requiring agencies to respond within 10 days to request made by the Department of State’s Division of Consumer Protection (on behalf of consumers) and requiring consumer credit reporting agencies to plainly disclose all fees associated with the purchase or use of identity theft protection products and services to New York consumers. Consumer credit reporting agencies are also required to file a list and description of all business affiliations and contracts with companies marketing credit monitoring and related products. Not to be confused with “consumer reporting agencies” (like your tenant screening provider), the regulations mentioned above apply to “consumer credit reporting agencies” (the three major credit bureaus: Experian, Equifax, and TransUnion). These new regulations were enacted in response to the Equifax data breach earlier this year and were adopted on an emergency basis.

PENDING: Annual Rent Registration Ordinance in New York City

The New York City Council approved on December 19, 2017 legislation that would require property owners who collect tax breaks and benefits for renting out homes at below-market rates (specifically the tax breaks 421-a and J-51) to annually register their properties with New York City’s Department of Housing, Preservation and Development (HPD). The city’s department would then list those affordable units online and applicants would be able to track the progress of their applications. It is uncertain whether Mayor Bill de Blasio will sign the bill.

PENDING: Landlord Data Ordinance in New York City

The New York City Council also approved legislation that would require HPD to create a website with up-to-date information on every New York City property owner, the properties they own and any prior information about tenant harassment and building violations at each rental property.

PENDING: Energy Efficiency Ordinance in New York City

This bill requires both residential and commercial buildings larger than 50,000 sq. ft. to post a federal energy efficiency rating (with a scoring system of A through D) starting in 2020. This ordinance has been approved by the New York City Council and awaits Mayor de Blasio’s signature.

 

NORTH CAROLINA

PENDING: Landlord Liability Changes (HB 803)

This bill would create a process for the collection and disposal of tenant property when a tenant passes away within the property. The law also establishes that property owners have no obligation to criminally screen potential tenants.

 

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OREGON

IN EFFECT: Portland’s Rental Housing Commission (learn more)

Portland’s Rental Services Commission held its first meeting on November 22, 2017. Be aware that this advisory commission will make recommendations on rental housing regulations and serve as a forum for public discussion. While this commission was formed in October 2017 when the City Council of Portland extended their housing state of emergency, it is uncertain to what extent this commission will have on rental housing policy.

IN EFFECT AND FUTURE: Equal Pay Act of 2017 (HB 2005)

While this bill doesn’t only affect the rental housing industry, property management companies or property owners who employ staff members will be affected. Effective October 2017, Oregon employers are prohibited from seeking an applicant’s salary history. This law also requires an employer to post notices (a template will be supplied by the Oregon Bureau of Labor and Industries) and this will take effect on January 1, 2019. Civil actions against employers who seek an applicant’s salary history will not be permitted until January 1, 2024

PENDING: No-Cause Evictions and Rent Control (HB 2004)

This bill will prohibit landlords from terminating a month-to-month tenancy without cause and would permit local government to implement “rental stabilization” (or rent control) programs. HB 2004 passed the Oregon House in April and has moved onto the Senate.

 

PENNSYLVANIA

PENDING: Mandatory Inclusionary Zoning Ordinance in Philadelphia (Bill Number 170678)

Introduced on June 22, 2017, this ordinance would require developers to set aside 10% of the new units to be maintained as affordable housing for at least 99 years. This bill was last read by the Philadelphia City Council on December 14, 2017.

PENDING: Landlord and Tenant Act of 1951 Amendment (HB 514)

This amendment would prohibit property owners from inquiring about or requiring the disclosure of an arrest not leading to conviction, the participation or completion of a judgement program, a dismissed, expunged, or void conviction, juvenile convictions, or a conviction older than 7 years from a potential tenant.

 

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WASHINGTON

IN EFFECT: Seattle’s Fair Chance Housing Ordinance (CB 119015)

Signed by the mayor on August 23, 2017, the City of Seattle’s new housing ordinance restricts the use of background information for resident screening. Seattle property owners and management companies are prohibited from requiring an applicant to provide (or go and obtain) criminal record information on any rental applicant. The sex offender registry is the only exception, and the grounds to deny an applicant who is on the registry are limited. Unless there is a “legitimate business reason”, property owners are prohibited from denying an adult applicant on the sex offender list (who was an adult at the time of conviction). Property owners and management companies within the city are also required to provide their screening criteria in all advertising.

Click here to view the full changes

FUTURE: Seattle Relocation Reimbursement (see announcement)

Seattle city councilor Kshama Sawant has announced that she will introduce legislation that would require landlords to pay for their tenants’ relocation if they move out due to rental increases. Her proposal is that if the rent increases by 10% or more within a one year period, the property owner would be required to pay for 3 months of rent. This would only apply to tenants making under $50,000 a year. This ordinance is currently being drafted, and we’ll issue an update when the final draft is released.

FUTURE: State-Wide Rent Control Bill (see video clip)

State Representative Nicole Macri (D-Seattle) announced early December 2017 during a renters rally that she will be introducing a bill that aims to repeal Washington’s ban on rent control and allow individual cities to vote on whether to enact a rent control ordinance. The Seattle Times reports that the city of Seattle has not decided on whether they would enact rent control if this bill would succeed, however, based on the city’s prior track record with rental housing legislation and the fact that the Seattle City Council requested that the bill be removed in 2015, it is very likely they will enact a rent control measure.

 

WASHINGTON, D.C.

IN EFFECT: Credit Protection Fee Waiver Emergency Amendment Act of 2017 (A22-0155)

In response to the Equifax data breach in 2017, all credit bureaus were prohibited from charging consumers for enabling a credit freeze. This ends on January 21, 2018.

 

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WISCONSIN

IN EFFECT: The End of the Rental Weatherization Program

The Rental Weatherization Program has been eliminated with the passing of the state budget (2017 Wisconsin Act 57) on September 21, 2017. Originally passed in 1979, this law required all rental properties to be weatherized before being sold. This program officially ends on January 1, 2018.

 

Now that 2017 is finally done, and you’re ready to take on those 2018 New Year’s goals of yours, make getting involved in your national, state, and local legislation a priority. With rent control measures and initiatives rearing its ugly head on the West Coast, on top of the rising popularity of bills that limit access to your applicant’s criminal records, now is the perfect time to talk to your representatives.

What 2018 multifamily legislation are you the most worried about?

 

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Becky Bower is the Content Strategist here at the CIC Blog. She holds a degree in English, with a focus in creative writing, from CSU Channel Islands. Her biggest weakness is cake and favorite superhero is Batman.

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