Every inclusionary housing program restricts affordable units only to households earning less than some specified income. Most programs also impose additional criteria such as asset limits designed to prevent households with significant wealth from occupying scarce affordable housing. Some programs prohibit or restrict applications from full-time students.
In most cases, inclusionary rental units are in very high demand and cities must design a fair and transparent process for selecting from among the many qualified applicants.
In smaller communities, or where affordable rents are not much below market-rate rents inclusionary units are sometimes offered on a first come, first served basis. Applications are date stamped when they are completed, and property managers offer units first to the first eligible household that applied.
Where demand for units is higher, it is more common to allocate scarce units by lottery. Every complete application is assigned a number at random (either by drawing tickets from a jar or through an electronic random number generator). Applicants are screened for eligibility in random number order. Applicants with the lowest lottery number have the first chance to lease a unit, provided that they meet all eligibility criteria.
Staffing Tenant Selection
Most jurisdictions delegate the responsibility for income qualification and tenant selection to the rental property managers and conduct regular trainings to ensure program requirements are being met. A few localities couple this decentralized approach to monitoring with periodic auditing to ensure greater quality control over the process. Some jurisdictions conduct random, surprise inspections of leasing records to stretch their enforcement capabilities without needing more staff.
Some jurisdictions with moderate-sized rental portfolios have shifted to handling the tenant selection and income-verification process in-house. These jurisdictions report that a centralized, in-house approach is more efficient than working with dozens of property managers throughout the jurisdiction. In these instances, on-site property managers typically only retain the responsibility of annual income verification for tenants.
San Mateo, California
San Mateo found that high turnover of property managers meant many were not handling tenant selection and income qualification properly. The city shifted to managing a master waitlist for all inclusionary rental units in the city. When a vacancy occurs in an inclusionary rental property, the city provides the property manager the names of the first five people on the waitlist. If the property manager elects not to select a particular individual on the list, s/he must provide the city with an explanation. According to program manager, Sandy Council, “This has been so much easier for everyone. Applicants don’t have to get on 15 waiting lists, and the city doesn’t have to constantly train a whole bunch of people.”
The growing trend of inclusionary housing programs has meant that local governments are increasingly creating preferences for local residents or employees in their applicant selection criteria. But these types of preferences can violate fair housing laws, even when that is not the intent of the policy.
In order to ensure there is no discriminatory impact of such a policy and to reduce other legal challenges around freedom of movement, jurisdictions should consider the following guidelines:
- Residency preferences should not include a duration of residency (i.e. a minimum of X months or years)
- Residency preferences should be as broad as possible, such as extending beyond the jurisdiction
- Residency preferences should include alternatives such as “live and/or work” requirements, rather than just a residency requirement
Fair housing will likely be an issue with residency preferences if the jurisdiction is more white than its surrounding region. In those instances, city’s might consider expanding the residency preference outside the jurisdiction and use a partial preference approach, in which a percentage of the units are set aside for local residents, and the balance of units are available to anyone.* Because of the high potential for local preferences to lead to fair housing violations, it is essential that jurisdictions consult an attorney with fair housing experience before adopting a local preference.