New Jersey-2014-A4791-Introduced

An Act establishing creditworthiness guidelines for affordable housing and supplementing Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that:

a. The current shortage of affordable housing in this State has forced many low- and moderate-income New Jersey residents to live in market rate housing they cannot afford but must occupy rather than face homelessness.

b. After paying the rent, these struggling families and individuals are frequently left with less money than needed to meet other basic household obligations. Late or partial payments, as well as missed payments made up in subsequent months, are often the result.

c. These undesirable but unavoidable decisions negatively affect the households' credit reports and inevitably lead to lower-credit scores.

d. Access to housing with affordable rents would remedy a major cause of the financial difficulties experienced by lower-income persons, leave them with more income to meet their basic expenses, and help them to restore their credit standing.

e. Households fortunate enough to obtain tenant-based housing subsidies, or access to cost-controlled housing units, generally after years spent on waiting lists, are often rejected by prospective landlords based upon inadequate credit assessments.

f. These assessments fail to take into account the totality of the circumstances that confronted the particular family or individual in question, fail to recognize that the credit issues are generated by the very problem that affordable housing would resolve, disregard the limited choices available to affected households, and discount their best efforts to deal with them.

g. It is in the interest of the public to ensure that low- and moderate-income persons are not unfairly denied the opportunity to obtain housing they can afford and desperately need.

h. It is also in the public interest to establish, in relation to housing subsidy and affordable housing programs, fair and just standards and guidelines for credit evaluation and the use of credit scores, credit reports, and related assessments of creditworthiness or fitness to be a tenant.

2. For the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), "credit or other risk score or assessment" means a number or other form of rating that is derived from an algorithm, computer application, model, or other process that is based in whole or in part on credit information, court records or similar data, and which purports to characterize or categorize a person's creditworthiness, fitness to be a tenant, or other position or status. The term includes but is not limited to FICO or other credit scores, tenant scores, insurance scores or other enumerations. The term also includes the use of generic events or occurrences, such as a filing or discharge in bankruptcy, or being a named party in a court proceeding, as justification for denying a person credit or admission to an apartment or other rental dwelling.

3. On or after the effective date of P.L. , c. ( ) (pending before the Legislature as this bill), credit or other risk scores or assessments calculated or disseminated by any entity shall not be used in any manner to evaluate the creditworthiness of:

a. the holder of a State or federal tenant-based housing subsidy; or

b. an applicant seeking to rent a dwelling unit restricted to occupancy by low or moderate income households.

4. The right to occupy a rental dwelling unit by a tenant possessing a federal or State housing voucher or other tenant-based government subsidy shall not be denied based on an assertion of lack of creditworthiness, unless the following condition is affirmatively met:

a. The tenant has, within the previous three years and while in receipt of a rental subsidy, failed on two or more occasions to pay the unsubsidized tenant share of the monthly rent in accordance with the rental agreement. Rent discharged in a bankruptcy proceeding shall not be considered unpaid for the purposes of this section.

b. Notwithstanding the provisions of subsection a. of this section, the specific facts and circumstances surrounding the failures to pay rent shall be reviewed and evaluated, including, but not limited to, disputes as to the amounts of rent due, the accuracy of the calculations determining the tenant's share of the rent, and other relevant factors as they may be present. If a tenant had a bona fide reason for the failures to pay and subsequently paid all outstanding amounts owed as the tenant's share, then a positive determination of creditworthiness shall be made in such a case.

5. The following standards shall govern any evaluation of the creditworthiness of an applicant for the rental of any dwelling unit intended to be affordable to low or moderate income households pursuant to any federal or State affordable housing or subsidy program, including the "Fair Housing Act," P.L.1985, c.222 (C.52:27D-301 et al.), unless standards more favorable to the applicant are mandated by other federal or State laws or regulations:

a. If the applicant is a holder of a federal or State tenant-based housing voucher, a credit or other risk score or assessment calculated or disseminated by any entity concerning the applicant shall not be considered.

b. If the dwelling unit involved is one for which the rent will be limited to a percentage of the tenant's income, and adjusted to maintain that percentage should the tenant's income change, then the applicant shall not be denied admission based upon a lack of creditworthiness unless the applicant has, within the previous three years and while in receipt of a rental subsidy, failed on two or more occasions to pay the unsubsidized tenant share of the monthly rent in accordance with the rental agreement. Rent discharged in a bankruptcy proceeding shall not be considered unpaid for the purposes of this section.

c. Notwithstanding the provisions of subsection b. of this section, the specific facts and circumstances surrounding the failures to pay rent shall be reviewed and evaluated, including, but not limited to, disputes as to the amounts of rent due, the accuracy of the calculations determining the tenant's share of the rent, and other relevant factors as they may be present. If a tenant had a bona fide reason for the failures to pay and subsequently paid all outstanding amounts owed as the tenant's share, then a positive determination of creditworthiness shall be made in such a case.

6. In determining a prospective tenant's ability to pay the rent concerning all other housing which is intended for low or moderate income households:

a. The initial and most important consideration shall be an applicant's current employment status and ability to pay the rent. If the amount of rental payments is less than or equal to 38% of the applicant's income, the applicant shall be considered eligible. An even higher percentage of income may be permitted at the option of the landlord, and shall be required in order to provide a reasonable accommodation to a disabled applicant.

b. If an applicant is eligible pursuant to the provisions of subsection a. of this section, the applicant's credit history shall be evaluated with regard to the following factors: employment history and wage history, especially the amount of household income in relation to the cost of living in the region; rent or mortgage payment history; and the extent to which the household attempted and was able to develop a budget or payment plan that enabled it to meet most of its expenses most of the time, keeping payments of expenses as close to current as was reasonably possible, the occurrence of unanticipated problems, and emergencies or other factors that significantly affected the household's ability to adhere to any such budget.

c. For the purposes of renting a low or moderate income dwelling unit for which an applicant household is otherwise eligible, there shall be a rebuttable presumption that an applicant household is creditworthy if a member or members of the household has a history of regular employment and, despite a household income that in the past was below the self-sufficiency level as that term is defined under section 3 of P.L.1992, c.43 (C.34:15D-3) and inadequate to meet its basic needs, the household made a good faith effort to meet its regular rent or mortgage obligations and other household expenses, and was able to do so most of the time.

7. This act shall take effect immediately.

STATEMENT

This bill establishes guidelines for determining creditworthiness of applicants seeking to rent affordable housing units. The critical shortage of affordable housing in New Jersey has forced many low- and moderate-income households to reside in market-rate housing they cannot afford but must occupy to avoid homelessness. As a result, individuals in this State are coping with damaged credit.

The bill requires that credit scores and other risk scores or assessments issued by entities that provide such products not be taken into account when determining the creditworthiness of an applicant who is the holder of a State or federal tenant-based housing subsidy or who is seeking to rent a dwelling unit restricted to occupancy by low or moderate income households.

The bill further provides that negative credit history for such applicants will only be permitted to be used against such applicants if the following conditions are present: the tenant has, within the previous three years and while in receipt of a rental subsidy, failed on two or more occasions to pay the unsubsidized tenant share of the monthly rent in accordance with a rental agreement. After a review of the circumstances, a tenant having a bona fide reason for late rental payments may still be deemed creditworthy under the bill. In determining the ability to pay of prospective tenants, the bill provides guidelines that emphasize that the most important consideration is an applicant's current employment status and ability to pay the rent. If the amount of these payments is less than or equal to 38% of the applicant's income, the applicant shall be presumed eligible. An even higher percentage of income may be permitted at the option of the seller or the landlord, and shall be required in order to provide a reasonable accommodation to a disabled applicant.