Illinois Fair Housing Law Adds "Source of Income" as a Protected Class

Illinois Fair Housing Law Adds "Source of Income" as a Protected Class

Effective January 1, 2023

The multi-family apartment industry has undergone significant changes over the last two years. One important and additional change that we want to make our members aware of is that, on May 23, 2022, Governor Pritzker signed into law House Bill 2775, an amendment to the Illinois Homelessness Prevention Act, that amends the Illinois Human Rights Act in ways that will be significant to your on-site operations.

Effective January 1, 2023, “source of income” is a protected class in the context of housing transactions state-wide in Illinois. This means that landlords and property management staff must accept all legal sources of income a prospective tenant may present in the context of an application to lease any given apartment. While there are many different types of legal sources of income any person may have, the most significant in the context of this change will be where prospective tenants hold and present a Housing Choice Voucher (or similar subsidy) as part of their income for purposes of their application. Please note that “source of income” is already a protected class in Cook County, and several other municipalities.

Effective January 1, 2023, landlords and their staff or agents will no longer be able to decline an applicant simply because they receive financial assistance through a Housing Choice Voucher (Section 8) or similar program. The topic of housing vouchers is multifaceted and expansive. Some of the highlights include, but are not limited to:

●      The Department of Housing and Urban Development (“HUD”) sets market limits on the amount a subsidy voucher may pay toward the rent demanded by the lessor (called fair market rents (or FMRs) that are published annually and are an estimate of the sum that would cover gross rents (rent and utility expenses) on 40% of the rental housing units in the area).

●      Lessors and/or their agents approving a prospective tenant carrying a housing voucher must also agree to and execute a Housing Assistance Payment (“HAP”) contract, which sets out the obligations of the housing authority paying the subsidy portion of monthly rent and imposes certain obligations on the lessor in connection with the tenancy and the lessor’s interaction with the subsidy payor.

●    Prior to approving any tenancy, the local housing authority will conduct an inspection of the unit in order to determine whether the unit fits within the livability guidelines established by the subsidy payor or relevant agency. Lessors may impose time constraints on completing any inspection so as to limit the length of time that a unit remains vacant while any inspection may be completed. Note: there is no set amount of time regarding how long a lessor may “hold” an apartment while waiting for an inspection to complete. The average time may vary depending on the county and/or housing authority involved but is common practice to have “hold times” match those of market units.

●      Lessors or on-site staff must adapt their screening process in terms of determining any rent-to-income such that first accounts for the total subsidy payment, and bases the rent-to-income ratio on the amount to be paid out of pocket by the tenant. Although there is no statutorily required screening method, the conservative approach to reaching compliance regarding the tenant's income qualification per the lessor's standard is to base the calculation on the tenant's portion of the monthly rent. For example, if the monthly rent charged is $2,000, and the subsidy pays $1,500 per month, the minimum income required of the tenant would be calculated by multiplying the difference, $500, by the multiplier established by the lessor (e.g., if a tenant’s “portion” of the monthly rent is $500, and the lessor uses a 3x multiplier of monthly income, the tenant must show at least $1,500 in monthly income in order to qualify for the apartment based upon their household income).

●    If the lessor or staff issues any termination notice, whether for non-payment, for cause, or to either non-renew a lease or terminate any existing month-to-month tenancy, the lessor (or staff) must also provide a copy to the housing authority. Note: certain notices may be subject to federal guidelines or other guidelines stipulated within the HAP contract.

●      Payments made by the subsidy payor do not constitute “rent” paid by the tenant. This is especially important in the context of issuing any notice to vacate or terminate the right to possession or tenancy for cause.

●      Housing vouchers may be portable provided that the prospective tenant is moving into or relocating into an area that has a housing authority that operates a voucher program. Depending on the subsidy payor, it may be mandatory that the prospective tenant “port” their voucher as some local housing authorities will cease making subsidy payments toward a tenant’s rent if they are outside of the geographical area that the housing authority covers.

●      At present, it does not appear that a prospective tenant can pay any difference between the maximum amount the housing authority will pay under the subsidy and the rent demanded by the lessor.

The principle behind this change in the law is to expand the availability of housing to all citizens of Illinois, including those in possession of a housing subsidy voucher. Planning for compliance now is crucial to ensuring that lessors and their on-site staff members are familiar with the new requirements and can avoid the pitfalls that accompany non-compliance. Inquiry on this topic may come not only in the form of applications received directly by prospective tenants but also in the form of direct or indirect inquiry from the relevant housing authority or tenants’ rights organizations. 

Please note that this communication is for informational purposes only and does not, and is not intended to, constitute legal advice. Members are strongly encouraged to work with their local counsel to review their current tenant screening practices so that complications surrounding the change in the law may be avoided and so that on-site staff may be prepared to navigate the anticipated increased activity regarding this issue.

Special thanks to CAA member Law Offices of David K. Barhydt.