Source Of Income Discrimination: Laws, Impacts, And Solutions

Photo by Nick Thomas on Unsplash

In North Carolina, state law permits landlords to refuse to rent to someone based on how they plan to pay their rent. This means a landlord can reject a tenant if they plan to pay their rent with a Housing Choice Voucher, Social Security Disability Insurance (SSDI) or other source of lawful income. This is known as Source of Income Discrimination (SOID).  North Carolina municipalities can encourage landlords to accept all forms of income through financial and other incentives but they are prohibited from requiring the landlord to accept a specific type of income.

This blog post explains what source of income discrimination (SOID) is and describes municipal policy solutions based on initiatives taken by North Carolina cities and counties.

WHAT IS SOURCE OF INCOME DISCRIMINATION (SOID)?

According to the U.S. Department of Housing and Urban Development, source of income discrimination (SOID) is a landlord’s practice of refusing to rent a home based on how a prospective renter plans to pay their rent. SOID usually occurs when a renter plans to use a Housing Choice Voucher, rental subsidy, or other source of  unearned income such as Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), or child support.

Section 8 or Housing Choice Vouchers (HCV) are government-funded vouchers that help low-income families afford housing. To be eligible, households must earn less than half of the area median income  which is $106,000 for the Charlotte-Concord-Gastonia Metropolitan Statistical Area. Voucher recipients are able to select a rental unit that is at or below the Fair Market Rent (FMR) for their geographic area. HCVs are federal subsidy that pay all or a portion of a household’s rent depending upon their income. The federal government funds these vouchers to assist low-income households, especially older adults, people with disabilities, and parents with children, afford housing in the private market. Vouchers provide an important pathway to stability for renters by helping them to close the gap between household income and high housing costs. The number of households that need HCVs to achieve housing stability greatly exceeds the number of HCVs available. The waitlist for HCVs in Charlotte is managed by INLIVIAN and is currently closed.

HOW DOES SOID IMPACT LOW-INCOME RENTERS?

SOID has a drastic impact on low-income renters, especially in North Carolina. In 1987, the General Assembly passed a preemption statute that forbade cities from requiring landlords to accept all lawful sources of income. Preemption is the practice of a State legislature prohibiting a local city or county within the State from enacting certain policy measures. Under this state law, cities aren’t allowed to forbid a landlord from rejecting a potential tenant simply because the tenant plans to use a voucher, unearned income, or child support to pay their rent. Some landlords may argue that these sources of income are less reliable than earned income from a job, but in reality, vouchers and unearned incomes are often more reliable than hourly wage-based income because they do not fluctuate from week to week.

SOID makes it harder for low-income tenants to secure stable housing in safe, well-resourced neighborhoods. When landlords refuse to accept housing vouchers, tenants are often left with few options—sometimes forcing them to pay higher rents or settle in areas with fewer opportunities. This practice has a disproportionate impact on people of color: in North Carolina, 74% of voucher recipients are Black households.

SOID is a modern form of segregation, echoing the effects of historic redlining. Due to SOID, lower-income families are forced into high-poverty neighborhoods, where there are fewer job opportunities, fewer parks and green spaces, and less access to fresh food. It can also lead to de facto school segregation as well, since children often go to school near their home. SOID is legal under federal law, so victims have no legal recourse.

WHAT ARE EXAMPLES OF POLICY SOLUTIONS TO SOID?

The federal government offers no protection for renters against SOID. In North Carolina, the General Assembly has gone a step further and made it illegal for municipalities to enact local SOID protections. These factors limit policy solutions. However, there are still some ways for municipal governments to address this issue.

For example, both Mecklenburg County and the City of Charlotte require developers who receive financial assistance or subsidies to refrain from  source of income discrimination. This policy is enforced by fining developers who accept city incentives yet continue to engage in SOID. After three violations, the developer may lose its city or county funding entirely. In 2019, Durham passed a similar policy applying to all housing agencies that accept city or county funds. In Wake County, the Housing Provider Partners Incentive Program offers cash incentives to landlords that will offer affordably priced rentals. If a landlord participates in this program and accepts vouchers for rent payments, they receive a $250 bonus from the county.

In general, North Carolina cities are allowed to use financial incentives to encourage landlords to accept all lawful sources of income, including Section 8 vouchers, unearned income, and child support, but they cannot mandate it.