New Minneapolis Tenant Screening Requirements
What do Landlords Need to Know?
In a city where over 50% of the residents are renters, Friday the 13th brought more ire and anxiety to investment property owners and landlords throughout the city of Minneapolis. The city's council unanimously passed the "renter's protection ordinance" this past Friday after a months long rancorous debate between investment property owners, landlords and tenants.
The new ordinance goes into effect starting June 1, 2020 for large property owners and December 1st for property owners with less than 15 dwelling units. Many have asked why 2 different start dates?
Several of small rental property holders are apprehensive with the new ordinance and the burden it will place on them. Other small investment property owners understand the city's concern and want to be a good community asset, but expect rents to rise to cover the costs associated with managing less than desirable tenants. Many Landlords fear the neighbors and other tenants will backlash in the event they cannot screen out potential trouble makers.
The goal of this new ordinance is to "reduce barriers to accessing rental housing,'' according to the city of Minneapolis. Although the ordinance may well do this, it is, at the same time, a new financial burden for investment property owners and landlords. It may also bring new crime to properties that have enjoyed relative calm the past few decades.
We are sympathetic to the option of giving someone a second chance, in fact, at one time in my life I could have been screened out of a property due to at least one of the criteria in the ordinance. Many landlords concern is they are mandated to create a second chance for an applicant–and the financial risk of that second chance is their burden.
Many landlords want to know what happens when Jimmy "Three-Toes" Malone, skips out on paying months of rent or "Rita Rage" pops a few new holes into your plastered walls. Or worse, what happens when a drug dealer or violent criminal sets up shop in the 20 unit building and tenants start to flee. Will the City Council won't be around to fix those holes or make up for a financial hit. These burdens will have to be carried by the investment property owner and will ultimately increase costs and in-turn, bump up rents for everyone.
Please contact us with your perspective!
So Here's the Deal...
Investment Property Owners have two choices for screening new tenants–and are required to follow one or the other.
1) Use the city's inclusive screening rules
2) Conduct an individualized assessment
"Renter's Protection Ordinance" Screening Criteria
These are the new standards set forth by the renter's protection ordinance. Screening standards can not be more restrictive than the ordinance, but they can be less restrictive. The new ordinance limits the amount of time a property owner can consider the criminal and eviction history of the applicant. In addition, the ordinance bars investment property owners from screening tenants solely based on their credit score.
Limits on Criminal History Screening Considerations
Misdemeanors - sentencing dates older than 3 year
Felonies - sentencing dates older than 7 years
Certain Felonies* - sentencing dates older than 10 years
* First-degree murder, second-degree murder, third-degree murder, first-degree manslaughter, kidnapping, first degree criminal sexual conduct, first-degree assault, first-degree arson and first-degree aggravated robbery. 😧
Limits on Rental History Screening Consideration
Cannot screen for insufficient rental history
Evictions - Judgements entered 3 or more years before the date of application
Cannot consider dismissed evictions or evictions resulting in judgement for the applicant
Settlements – entered 1 or more years before the date of application
Minimum Income Requirements - If a property owner or landlord requires a minimum income equal to 3 times rent or higher, an exception must be allowed for the applicant to demonstrate a history of successful (on-time ?) rent payments with an income less than 3 times the rent.
Limits on Credit History Screening Consideration
Cannot screen for insufficient credit history
Cannot screen based on credit score, but can consider information in a credit report if it's relevant.
Individualized Assessment Option
If an investment property owner or landlord chooses to screen with stricter criteria than the city mandated renter's protection ordinance, they must consider all supplemental evidence provided by the applicant to describe, explain or invalidate the relevance of damaging information uncovered by the screening process.
Property owner's must consider:
The number and type of incidents uncovered
The nature and severity of the incidents that would lead to a denied application.
The time that has elapsed since the date of the incident occurrence.
The age of the individual at the time the incident occurred.
Yes, there are exceptions to the criminal history screening criteria. To find out what those are, download this PDF "Renter Protection Ordinance: Renter Screening" from the City of Minneapolis.
Will this new ordinance fix claims that tenant applicants with a troubled past are not automatically disqualified from housing? Perhaps. Will it be another burden for investment property owners and landlords to navigate? You betcha'.
This is going to happen whether we like it or not, so we're preparing to roll with the punches. No matter which route you choose, following the "Renter's Protection Ordinance", or developing your own individualized assessment, I'd suggest tracking the trends in your applicant screening process looking for new indicators leading to the success or failure of the tenant/applicant. That data will help guide you.
Needing a Property Manager?
Request a consultation with a Verde Property Manager - we will guide you through the process of transforming your home into an investment property.