The talk of this election season has rightfully been on affordable housing.
Simultaneously, I have heard this common refrain from eager homebuyers: “I qualify for an FHA (or VA) home loan, but I’m having a hard time getting my offer accepted by a home seller. Why?”
Have you ever heard that before or some variation? If so, then you probably know the answer can be summed up in four words: “Source of income” discrimination.
Affordability’s connection to varied “sources of income”
If this is news to you, perhaps you are wondering, “Wait a minute… “source of income” discrimination, really? I thought “source of income” discrimination had to do with rental properties like “section 8” (or what’s officially called the Housing Choice Voucher Program).
Yes, you are right. It is both.
“Source of income” discrimination does have to do with the rental market (here is the latest HUD map with “source of income” protections).
Additionally, note there is an increasing trend according to this recent report that documents (really probably for the first time) what we, as real estate pros, have known unofficially for decades in this industry, and that is:
If you have an FHA, VA, or USDA loan or are using downpayment assistance program funds, then your offer may not always be entertained by sellers.
That, my friends, is also considered “source of income” discrimination, which is not illegal everywhere. It may not be right (ethically), but it’s not illegal federally (one of the “big 7” of fair housing).
There are some local and state governments that have “source of income” protections of various forms. But, for many locales, there is no protection that just blanketly says, “If you’re renting or buying, then people can’t say no to you based solely on how you legally pay” (which is a simple way to define the category of “source of income”)… at least not yet.
How does this impact affordability?
Did you know that there are numerous programs that can help with housing affordability like FHA, VA (which helped to create the American middle class, building wealth and adding $4 trillion economically), and USDA loans and various down payment programs (there are over 2,400 across the nation)?
But if “source of income” discrimination continues to trend upwards as a legal way for people to say, “No, we don’t want to consider your offer to purchase this home simply because of how you are paying” we are going to continue to have an affordable housing issue.
Why?
Unfortunately, for prospective home buyers who encounter selective home sellers (whether their stance is grounded in fact or fiction), the different programs available that help to make homeownership (and renting) more affordable become nothing more than a locked glass door. In other words, buyers can see what is available but cannot actually access those programs.
The locked glass door of affordable housing: “Sources of income” exclusivity
As a preschooler, I remember excitedly running from the living room in order to catch the ice cream truck as its jingle blared through the neighborhood. Unfortunately, for me, that day the sliding glass door was so immaculately clean that I thought it was open and I cracked my noggin on it. Ouch! As a young child, I also did not have access to unlock the door – my parents (the homeowners) determined that. I never made it to the ice cream truck that day, but I could see through the glass door the other neighborhood children enjoying their cool treats. Humph!
Similarly, those who are being turned down legally due to their “source of income” (despite meeting all of the other qualifications of a particular housing program with sweet treats) experience these tempered opportunities as nothing more than cruel taunts of an out-of-reach dream.
We can change this. Let’s talk to our local, state, and federal representatives to make “source of income” discrimination a thing of the past.
In the meantime, let us proactively educate our home seller clients (who can unlock this glass door of housing) about pre-inspections, property disclosures, repair budgets, and the like to help all qualified homebuyers make informed choices without denying their access and opportunity to fair housing.
Lee Davenport is a real estate coach/educator and author.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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