Indiana has led the way on preempting local governments from making bad housing policies. Will other ... [+] state's follow?

It is a thing of beauty, and so much so, that I am just going to quote it in full, right up front, Indiana Code 32-31-1-20 Local units prohibited from regulating rental rates and landlord-tenant relationship.

Sec. 20. (a) Subject to IC 36-1-3-8.5, this section does not apply to privately owned real property for which government funds or benefits have been allocated from the United States government, the state, or a political subdivision for the express purpose of providing reduced rents to low or moderate income tenants.

(b) A unit . . . may not regulate rental rates for privately owned real property, through a zoning ordinance or otherwise, unless the regulation is authorized by an act of the general assembly.

(1) The screening process used by a landlord in approving tenants to lease privately owned real property.

(2) Security deposits.

(3) Lease applications.

(4) Leasing terms and conditions.

involved in a landlord-tenant relationship.

(6) The rights of the parties to a lease.

(7) Any fees charged by a landlord.

Any ordinance or regulation that violates this subsection is void and unenforceable.

What’s happening here is that Indiana’s legislature has taken tenant landlord law away from local governments. Over the last decade, something called the Eviction Lab based at Princeton University has been charging huge fees to have its director, Matthew Desmond, deliver speeches about the “eviction crisis” in the United States. What happens is that Desmond blows into town, declares the local jurisdiction to be among one of the cities with one of the highest eviction rates in the United States. Anecdotes follow. Then local City Councils and Mayors set about to “fix” the problem with really bad policies affecting the contracts between tenants and landlords. If you want to dig into that story, you can read an older post on this here .

The policies include bans on background checks, limits on deposits, sealing of eviction records, and disallowing the use of credit scores to determine eligibility for tenancy. Over time, there are an accretion of these measures, all of which serve only to raise the risk of renting to people with less money struggling to find an apartment. I took a closer look at the failed logic behind banning credit checks. This is from a post back in December 2020. I quote a Washington Post article that argues credit scores are supposed to be race neutral but aren’t because most people of color have poor credit scores.

The logical failure here should be obvious. Population X has low credit scores. Population Y has average or above average credit scores. Credit checks reveal this, meaning members of population X often can’t find a place to rent when credit scores are used. Therefore, we should ban credit scores.

If it is true that people of color have lower credit scores than whites, the question is, “Why?” and how can we address that through policy or other measures. Credit scores, reporting, and use to evaluate risk are not the problem, it’s the underlying problems in the economy that result in a disproportionate number of people of color having poor credit scores. The argument is that, essentially, since the results favor whites, the credit score is racist and should be banned. The implication is, too, that anyone who uses a credit score to measure the risk of renting to someone is racist as well. This is logically absurd but understandable. Banning credit checks or other data to evaluate tenants is the equivalent of turning up your radio when your car starts making a terrible noise.

Yet politicians, especially local city elected officials grasping for the golden ring of higher office, absolutely love policies that bash landlords, seem to favor tenants, and cost no money and come with zero evaluation; do these measures even work? Of course, they don’t. Take efforts to ban “source of income discrimination,” an effort to force housing providers to take vouchers. The truth is most housing providers would be happy to take vouchers if they weren’t so hard to use , requiring too much red tape and inspections that are often arbitrary. If you look at any jurisdiction that has source of income rules, you’ll find a jurisdiction with hundreds if not thousands of unused vouchers. These measures don’t help the real problems but make things worse by making rental housing riskier; the only way to offset risk with no tools to measure it is to raise rents.

Enter Lynne Petersen , President of the Indiana Apartment Association and Brian Spaulding incoming President of the association. Back in 2020, they worked on a proposal to preempt cities like Indianapolis from setting the terms of tenant landlord contracts like leases and deposits. Spaulding explained that “our language originally passed the House . . . and was then vetoed by the Governor. In 2021, SEA 148 (passed the House and Senate in 2020) was considered again to override the Governor’s veto. It was successful.”

Some readers might remember back to a series I wrote on preemption, one that a friendly critic found to be too long even for policy wonks (you can read them here, in order, Preemption And Housing: Cooley’s Rule And Rights Of Local Governments , Preemption And Housing: Local Governments Have An Important Role , Preemption And Housing: The Deep Roots Of The Dillon Rule , Preemption And Housing: Towards A Vertical Balance Of Power ).

In that series I did an exhaustive review of why preemption is not like the Tenth Amendment of the United States Constitution and how it could be wielded by legislatures to reign in local governments and politicians eager to score political points rather than address the single most important problems in rental housing, lack of supply and lack of fast cash subsidies to pay for rent when there is trouble. I did this because many legislatures think that the Tenth Amendment’s prohibition of the federal government exercising anything but its enumerated powers is a bulwark for local control; this is a conceptual problem Petersen, Spaulding, and a veto proof majority of the Indiana State Legislature didn’t have. And the Dillon rule means it isn’t true. So, they did it! I only wish I could claim credit from them having read my boring preemption posts. Spaulding charitably said of my posts, “Thanks Roger! This was a great read. We wish we had a few of your arguments when we were working on our testimony!” They didn’t need them. One down, 49 to go. Next up, preempting local eviction laws.