Why do landlords reject vouchers, and what can be done?

For low-income households struggling to pay the rent, receiving a Section 8 Housing Choice Voucher can be like winning the lottery. There are not enough vouchers available for all the families that need them, and many families spend years on a waiting list before they receive assistance. Finding an apartment where that voucher can be used, however, may be even harder. Many landlords around the country will not accept tenants with Housing Choice Vouchers, especially in low-poverty neighborhoods. The Section 8 Housing Choice Voucher (HCV) program is the largest federal rental subsidy program. It serves over 2.1 million low-income households. The program depends on private landlord participation, since voucher holders use their Section 8 rental assistance to lease apartments on the private market. Tenants pay 30% of their income for rent, with the local housing authority using HUD funds to pay the balance. Units must rent below the area Fair Market Rent, updated each year by HUD. They must also pass an annual inspection and meet HUD’s Housing Quality Standards (HQS). Voucher holders have 60 days to find an apartment that meets the program guidelines, although it is possible to get short extensions. Large numbers of landlords around the country refuse to accept tenants with Section 8 vouchers. A 2018 study ,prepared for HUD by the Urban Institute, investigated discrimination against voucher holders in five major metropolitan areas: Fort Worth, TX; Los Angeles, CA; Philadelphia, PA; Newark, NJ, and; Washington, DC. Between ⅔ and ¾ of landlords rejected voucher applicants in Fort Worth, Los Angeles and Philadelphia. In Newark, 31% of landlords refused to accept vouchers, and in DC, 11% of landlords would not take vouchers. The study also found that landlords were more likely to reject vouchers in low-poverty neighborhoods compared with high-poverty areas. In each of the cities except DC, the denial rates were substantially higher in low-poverty neighborhoods. In addition, landlords were more likely to miss appointments with voucher holders than the control testers without vouchers. There was also a slight bias towards the control testers with no vouchers. Landlords were more likely to tell them about, and invite them to visit, more units. These patterns of voucher rejection contribute to ongoing segregation of poor people, especially minorities. Even when there were many available apartments in low-poverty areas that met HCV guidelines, there were few vouchers used there. Instead, most vouchers in the five test cities were being used in high-poverty, minority-majority neighborhoods. It is ironic that Section 8 vouchers were designed to help people move to areas of opportunity. Instead, landlord rejection of this rental assistance has contributed to greater racial segregation and concentration of poverty. Section 8 vouchers offer landlords a number of benefits. Because the federal government pays 70% of the rent, landlords can count on timely payments. Because the tenant contribution is tied to their income, they are more likely to make their payments on time as well. Voucher applicants are also pre-screened by the public housing authority. Tenants go through background checks and income certifications. This saves landlords time and expense when they are trying to fill their apartments. [caption id="attachment_2728" align="mx-auto" width="300"] HACSC is one public housing authority providing incentives for landlords to accept vouchers.[/caption] So why do so many landlords reject tenants with Section 8 vouchers? Especially in hot real estate markets, landlords may feel they can charge higher rents than they can get through the Section 8 program. Some landlords may find it more work to accept two rent payments for an apartment. Others may worry the government or tenant may not be timely with their payments. This could be a concern during government shutdowns, for example. Landlords may also worry about how responsive public housing authorities may be to complaints about tenants. These problems could be damage to apartments or illegal sub-letters cramming into apartments At its heart, these concerns reflect landlords reacting to a perception that Section 8 voucher holders, because they have low incomes, are likely to be “problem tenants.” However, Section 8 voucher holders are “incentivized” to follow the terms of their leases. If they violate the terms of their lease, not only can they be evicted, but they could also lose their voucher. One of the most common landlord issues is annual inspections. On the positive side, annual inspections make sure that apartments supported by taxpayer dollars meet basic health and safety standards. Doing the inspections each year means that landlords need to keep their units up over time. But many landlords complain that the inspection process is slow and costs them money. It can take many weeks to get an inspection scheduled, and the unit may not be occupied for several more weeks after that if it fails the first inspection. Vacant units cost landlords money in lost rent. Landlords also complain that the inspection process is arbitrary. An apartment may receive a passing grade one year, and then fail the next with a different inspector. One landlord representative said that while units occupied by voucher tenants have higher maintenance costs, it is mostly because of the need to keep up with inspections rather than damage by residents. There are two approaches to convincing more landlords to accept tenants with Section 8 vouchers. On the one hand, some public housing authorities have worked with landlords to provide incentives for participation. On the other hand, many state and local governments have enacted laws that outlaw housing discrimination on the basis of someone’s source of income (SOI). In a jurisdiction that bars discrimination based on SOI an applicant cannot be turned away because they receive government assistance. This includes rental assistance through a Section 8 Housing Choice Voucher. The Housing Authority of the County of Santa Cruz (HACSC) and the District of Columbia Housing Authority (DCHA) have had success using new incentives to recruit landlords. Both public housing authorities reached out to landlords to identify concerns with the program. HACSC improved service to landlords by dedicating a single staff contact for landlord questions. HACSC expanded outreach to more landlords and developed a new brochure that outlines the benefits of having tenants with Section 8 vouchers. HACSC also provides landlords who accept vouchers with some financial security. Landlords can be reimbursed up to $2,500 to cover unit damage, unpaid rent and legal fees if a tenant leaves the apartment in the first year. [caption id="attachment_2729" align="mx-auto" width="200"] DCHA has a landlord advisory committee and raised eligible rents.[/caption] In Washington, DC, DCHA heard from landlords that they wanted to see a smooth process for certifying families as eligible for the program, and that recertifications were done without delay. They also wanted housing inspections to be done more quickly. DCHA added more staff to work with landlords and established a landlord advisory committee. They developed an online tool for landlords to look up the information they needed to set rents. DCHA also established a custom payment standard and raised the amount eligible for rental assistance to 175% of the Fair Market Rent (FMR). This allowed voucher holders to live in parts of the city where rents were higher, mostly in low-poverty, high-opportunity neighborhoods. If incentives for landlords are a carrot, then SOI laws barring discrimination against voucher holders are a stick. The Urban Institute study found that vouchers were rejected at lower rates in cities that had SOI protections. But even in cities with SOI anti-discrimination laws on the books, some landlords still refuse to accept tenants with vouchers. It is often hard to enforce SOI laws, since landlords can often cite other reasons besides source of income to reject applicants. Washington, DC has SOI laws, and landlords there are required by law to accept vouchers. However, DCHA cited lack of enforcement as one reason why incentives were needed to bring more landlords on board. More about SOI discrimination in housing and places that have SOI laws can be read here. What else can be done to convince more landlords to accept Section 8 Housing Choice Vouchers? The approach will probably involve both carrots and sticks. Stronger enforcement of SOI protections would push more landlords to accept tenants with vouchers. Extending search time to find an apartment would be helpful, especially in cities with tight and expensive rental markets. Continuing more outreach to landlords is important. Making the inspection process quicker and more consistent would also probably bring more landlords into the program.