Occupancy Standards
Setting Occupancy Standards Without Discriminating.
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Persons per bedroom vs. persons per square foot of living space.
The question of what is a "reasonable" occupancy standard has been a troubling one for rental property owners for several years. The number of people willing to share a home is often economic but may also be cultural.
Federal Fair Housing law prohibits discrimination based on: race, religion, ethnic background or national origin, sex, age, children (except in certain designated senior housing) and mental or physical disability.
Property owners and managers must always be sure they are not using occupancy standards to discriminate against a protected class. However, they must be concerned with occupancy for a number of good business reasons. They include: wear and tear, parking, utilities, demands on services and common areas.
Depends on what the meaning of reasonable is!
The continuing controversy between HUD and rental housing interests about the definition of the word "reasonable" has centered around the number of persons per bedroom vs. the number that local building codes allow per square foot of living space.
The federal budget act passed by Congress and signed by President Clinton in April 1996, stated that it's okay, with certain exceptions, to limit occupancy to two persons per bedroom -- at least until the Department of Housing and Urban Development (HUD) issues a new rule. However, guard against making any standard a blanket policy because the two-per-bedroom criteria won't work in all cases.
Past Occupancy Guidelines
Property owners need occupancy standards to keep housing from becoming overcrowded and to protect their investment. But in some cases these standards have been used to exclude families with children, something the federal fair housing act forbids.
According to HUD, owners can set their own "reasonable" occupancy standards, but the agency has issued no definition of "reasonable." Instead, when residents bring occupancy complaints before HUD, the agency decides the issue on a case-by-case basis.
The famous Keating Memo
In 1991, HUD released an internal memo known as "the Keating memo" offering some guidance. The memo said that owners, with certain exceptions, could limit occupancy to two persons per bedroom without discriminating against families with children. The memo also described some of the exceptions
Then came the Diaz Memo
In July 1995, HUD issued a new memo (the "Diaz memo"), reversing its policy and saying that owners now had to refer to the rental unit's occupant capacity by square footage, to comply with a code issued by an organization called the Building Officials and Code Administrators (BOCA).
The Diaz memo created an outcry from property owner interests. Most owners and managers felt that the BOCA code was unrealistic because it allowed too many people to occupy a rental unit.
For example, under the square footage code owners might have to allow as many as nine people to share a two-bedroom apartment.
The 1996 Law
The federal budget law essentially cancels the Diaz memo and restores the standard of the Keating memo. This law will be in force until HUD issues a final rule on occupancy standards at some point in the future.
What 1996 Budget Law Means
Be careful. Even though the budget law is a lot clearer than the Diaz memo, the Keating memo doesn't say that two per bedroom works in all cases. What it does say is that two per bedroom is presumed an acceptable occupancy standard unless the size of the bedrooms or other "special circumstances" indicate that the policy is unreasonable.
HUD will still decide the question case by case. You need to look at both the size of the bedrooms and any other "special circumstances" that could undermine the legality of your policy. Here are some things you need to think about pertaining to "reasonableness" when setting or evaluating your occupancy standards.
Congress, not HUD, enacted the new law. HUD is probably not completely happy with the law and may be eager to find "special circumstances" where they can crack down on owners who set two-per-bedroom standards "unreasonably".
Some criteria to consider.
Are the bedrooms and/or living area unusually large and spacious. If so, you may have to let more than two persons per bedroom occupy the unit. For example, you might have to let a family of five rent a two-bedroom apartment with large bedrooms and a spacious living area.
The memo also says that if bedrooms and/or living area are "extremely small," it might be reasonable to limit occupancy to fewer than two per bedroom. Consequently, you might be able to reject a family of four applying for a small two-bedroom mobile home without much living space.
The Keating memo does not define either "unusually large and spacious" or "extremely small".
Simply counting the number of bedrooms won't help you much in setting or testing your standard if your rental property has special features or layouts. For example, a one bedroom with a spacious den could house more than two persons comfortably. HUD might consider a den, study or even a utility room to be a bedroom, even if you don't call it one. So, if a family of five wants to rent a two-bedroom with an extra room, the memo says it would probably be unreasonable to deny them the housing. But if the same family applies for a two-bedroom with only a living-room, kitchen and bath, it would probably be reasonable to say no.
Let infants share bedrooms with parents.
The Keating memo indicates that it's probably unreasonable to prohibit "infants" (HUD doesn't define the term) from sharing bedrooms with adults, even if it results in occupancy by more than two persons per bedroom.
You may not be able to use a two-per-bedroom standard to exclude a couple with an infant, or a couple expecting a child, from a one-bedroom apartment.
Some owners specifically address this situation in their written occupancy policies. Your written policy might state that a newborn child up to the age of 6 months will not be included in the count for occupancy limits.
Avoid discriminatory comments and rules.
The memo also says HUD will consider other "relevant factors," including discriminatory remarks and rules, to evaluate an occupancy standard. So, even if two per bedroom is appropriate, given the size, layout, etc. of the rental unit, it may not pass muster if HUD learns that there is a rule banning children from any part of a rental housing community, such as the clubhouse. Or that an employee or leasing agent has made a remark like "the owner doesn't like kids or certain groups."
Enforce the standard consistently.
A "relevant factor" that can undermine an otherwise appropriate two-person- per-bedroom standard is the discovery of any evidence that the owner enforces the standard only against families with children or certain ethnic groups. Rejecting a family of five from a two-bedroom unit will be discriminatory if the owner has rented the same or a similar unit to any other group of five or more.
Consider capacity of utilities and mechanical systems.
The Keating memo notes that owners can consider "limiting factors" in setting their occupancy policies, such as the capacity of the septic, sewer, or other building systems.
Using "limiting factors" to restrict occupancy to fewer than two per bedroom may be riskier than it used to be, however, given the political climate at HUD. If you want to limit occupancy to one, make sure you can prove that your building systems can't handle two persons per bedroom, and that the burden on the systems would be potentially debilitating.
Consider state and local laws.
Ask your lawyer or local rental housing association whether your state or local governments have their own occupancy rules.
If the state or local rule is stricter than HUD's, you must follow it. For example, the Texas guideline is two persons per bedroom plus an infant less than 6 months old who sleeps in the same bedroom.
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