The Definitive Guide to Understanding Section 8
Created to help low-income, elderly, and disabled households afford decent, safe and sanitary private housing, the Housing Choice Voucher Program (HCVP), commonly known as Section 8, provides a federally-funded subsidy to eligible families, paying for all or a portion of their rent and utilities costs. The Program provides not only significant benefits to these families, but also an opportunity for those landlords who chose to participate to potentially make their property more profitable.
Unfortunately, the process of application, approval and compliance under the Program (for both landlord and tenant) is confusing and complicated, often causing people to look elsewhere for seemingly easier opportunities. This article will clarify the confusing, and simplify the complicated, discussing:
- What Section 8 does
- Its advantages and disadvantages for landlords
- What a property owner must do to participate
- What households are eligible for the Program
- The tenant application, screening and housing process, and
- Ongoing obligations for landlords, tenants and the housing agencies administering the Program
One quick note: Section 8 is most commonly thought of as helping low-income families pay their rent, but it also provides rent subsidies for elderly and disabled families, and can even assist eligible households with the purchase of a home. We’ll touch on the rules for elderly and disabled households, and also take brief look at HUD’s Homeownership Voucher Program (HVP), but will focus primarily on HCVP’s rental assistance for low-income families.
Now, let’s start with a little background.
The Creation and Rationale for HCVP
The Housing Choice Voucher Program, created as a part of the Housing Act of 1937, and administered by the U.S. Department of Housing and Urban Development (HUD) and local housing agencies, seeks to address the difficulty of low-income families finding and being able to afford decent housing.
As noted in our Complete Guide to the Low-Income Housing Tax Credits Program (LIHTC), according to the National Low Income Housing Coalition, “in 2013, for every 100 extremely low income renter households, there were just 31 affordable and available units.” The Coalition then noted, “in no state can an individual working a typical 40-hour workweek at the federal minimum wage afford a one- or two-bedroom apartment for his or her family” without paying more than 30% of their income in rent.
While the specific percentage is up for discussion, historically personal finance experts have suggested that a family should pay no more than 30% of their income toward their housing, and the failure to do this can cause dire, long-term financial consequences.
As explained in a 2016 NY Times article, Jessica Yager, executive director of the NYU Furman Center, explained, “Housing is one of many basic needs. The more you pay for housing, the less income you have left over for food, child care, health care and clothing.”
Additionally, as explained in The Motley Fool finance website, “it’s important to start saving money for things like retirement, emergencies….” If a family is forced to spend too much on housing, and ends up spending all, if not more of its income on basic necessities, then nothing can be set aside for savings, retirement or emergencies.
Again, 30% of gross income isn’t universally accepted. The Motley Fool article suggests that 30% of after tax net income is appropriate, and a 2015 FORTUNE magazine article argues that the standard is irrelevant because (1) it’s an arbitrary holdover from the New Deal era, (2) housing affordability should take other costs into account, and (3) looking at certain economic trends, one should expect housing to take up an increasingly large part of people’s incomes.
Nonetheless, the federal government decided it’s in the public interest, through the adoption and use of Section 8, to help families live in safe, decent and sanitary housing, without having to spend more than 30% of their income on their rent and utilities.
How does the HCVP do this? Let’s take a look at the Program’s mechanics.
How Does Section 8 Work?
The Program is administered by HUD and local public housing agencies (PHAs) under contract with HUD. According to the Affordable Housing Online website, there are currently 2,427 PHAs offering the Section 8 Program. HUD maintains a searchable directory of these PHAs for applicants and property owners wishing to participate in HCVP.
The Program issues vouchers, or subsidies, to qualified households to be used to pay all or a portion of the household’s housing costs, consisting of rent and utilities. The PHA pays the voucher amount directly to the rental property owner. If the total housing costs are more than the voucher amount, then the household must pay the difference.
While the concept is fairly straightforward, the complexities arise in determining if a household is eligible for the Program, how it applies for the vouchers, what is a reasonable rent in the PHA’s area, how much of that rent should be paid by the subsidy and how much by the household, and on and on. Let’s start at the beginning: Who makes the rules, and where can you find them.
HUD Regulations and Policies and PHA Plans
Section 8 rules are specific requirements that every PHA must follow, including for example, vouchers are available only to US citizens or non-citizens who have eligible immigration status. The PHA can’t modify this requirement.
Polices on the other hand give direction to PHAs, but allow the local agency flexibility in crafting the specific rules it will implement. This is done so PHAs can address the unique qualities and needs of its area. One example is how a PHA chooses to prioritize the award of vouchers among applicants. HUD doesn’t require any prioritization, but allows PHAs to create their own. Some might want to give preference to residents of the PHA’s area over non-residents, while others might want to give priority to households with a certain composition. The effect of giving PHAs this flexibility is that the “rules” are different for virtually every PHA.
So where can an applicant or a property owner figure out these differences? In the PHA’s Administrative Plan.
Each PHA is required to create two written, HUD-approved plans: (1) a PHA Plan, and (2) an Administrative Plan. The PHA Plan describes the PHA’s mission, and its strategy for pursuing this mission. The Administrative Plan is where the nuts and bolts of the PHA’s policies and procedures are found. To see an example, you can look at the Massachusetts Department of Housing and Community Development’s Administrative Plan.
From a household’s perspective, the first item they’ll need to understand in the Administrative Plan is the PHA’s application process.
The Household’s Application
If a household wants to receive HCVs, it must submit an application to its local PHA. Because the amount of households seeking vouchers far outnumber the funds available for vouchers, PHAs use a waiting list. These lists are often so large that the PHA will “close” the list, meaning the PHA simply won’t accept any new applications. Due to this, households often look to multiple PHAs for an “open” waiting list, and apply to each. The Program allows this, so long as households submit separate applications for each PHA.
However, even if a household is able to get on a waiting list, depending on the demand for HCVs in their area, they may still have wait months or even years before being approved for and issued vouchers.
Once a household finds an open waiting list it submits its application. Some PHAs require only an abbreviated pre-application at this stage, leaving the full application until the household is at the top of the list. Other PHAs require the full application before it will place an applicant on the waiting list.
While there is no HUD-approved application form, applications typically ask for:
- Household income and sources
- Household composition and size
- Citizenship status, and
- Any other items requires under the PHA’s Administrative Plan.
To see a sample application, you can check out this one at HomeForward.org.
If the application is denied, they can appeal the denial by following the process outlined in the Administrative Plan. As with so many of the Section 8 “rules,” the appeal process can vary from PHA to PHA.
If the application is approved, the household waits until the PHA tells them they have reached the top of the list, so they can take the next step. Notably, because there may have been a long time between being placed on the waiting list and reaching the top of the list, often that next step is re-certifying all of the information in the original application to the PHA.
Included in all applications is the information necessary to determine if a household is eligible for HCPV assistance. To be eligible, households are required to:
- Have a household income of 50% or less of the area median income. HUD calculates these medians annually, and publishes them on their website.
- Be U.S. citizens or non-citizens who have eligible immigration status.
- Be in good standing with federal housing Programs (e.g., no evictions from public housing or fraud in connection with a federal housing Program), and
- Satisfy all other criteria a PHA has included in its Administrative Plan.
While a PHA doesn’t have to perform special screenings of applicants (e.g., rental history, credit history, criminal background), some PHAs require that all applicants pass such screenings. Others leave the screening process to landlords.
Elderly and Disabled Households
In addition to providing assistance to low-income families, Section 8 also serves elderly disabled households. Elderly households are those with one or more persons who are at least 62 years old as of the date their tenancy begins.
A disabled household is one where the head, co-head, spouse or sole member is an adult with a disability. A person with a disability is someone who (i) is disabled under Section 223 of the Social Security Act; (ii) has a physical, mental, or emotional impairment that is expected to be of long-continued and indefinite duration, and, substantially impedes their ability to live independently, and, is of such a nature that such ability could be improved by more suitable housing conditions, or (iii) has a developmental disability as defined in Section 102 of the Developmental Disabilities Assistance and Bill of Rights Act.
Notably, these definitions mean that a household whose only disabled person is a minor child doesn’t qualify as a disabled family for Section 8 purposes.
Calculating the Voucher Amount
The information requested in the application isn’t only so the PHA can determine if the applicant is eligible for assistance, but also so it can determine the voucher amount needed for that household. Calculation of the amount requires a determination of (i) what’s a reasonable rent and utility cost for the type of housing sought by the applicant, and (ii) how much can the household contribute to the payment of those costs.
Section 8 requires that housing costs (rent plus utilities) must be within the fair market value (FMV) and Fair Market Rents (FMR). FMRs are determined by HUD (see their site for a current list of FMRs), and represent the costs for medium-quality apartments in a PHA’s area. FMRs are determined for different sizes of units.
Using the FMRs calculated by HUD, each PHA establishes its own “payment standards” for the total housing costs it will approve. Payment standards must be between 110% and 90% of the FMRs.
To determine how much a household can contribute to these costs (called the “total tenant payment”) the PHA looks at the applicant’s income. The PHA first calculates an applicant’s “annual income” and then its “adjusted income.” These calculations are very complicated, taking into account such things as the income of “Temporarily Absent Family Members,” educational scholarships, income from a business, and childcare and medical expenses.
For exactly what is considered “income,” and what items can be excluded or deducted from this amount to determine the “adjusted income,” take a look at Chapter 5 of the Program.
Once the PHA determines adjusted income, the general rule is that the total tenant payment is 30% of the adjusted income. Households can chose to contribute a higher percentage, but no higher than 40%.
The actual percentage for a specific household isn’t actually made until they find the unit they wish to rent. If that unit is more expensive than others of similar size, but they are willing and able to pay up to the 40% maximum, they can elect the higher percentage (as opposed to making the smaller 30% contribution) so that they can rent the unit they prefer.
For the purpose of determining the maximum subsidy, the PHA will start by using 30% of adjusted income, and then modify it if necessary. They subtract that amount (the minimum possible tenant payment) from the PHA’s payment standard to find the maximum voucher amount.
As an example, if the payment standard for a 3-bedroom unit was $1,000, and the PHA determined that an applicant’s minimum tenant payment was $400, then the maximum subsidy amount would be $600.
Of course, the actual subsidy amount can’t be determined until the applicant tells the PHA where it wants to live. If the rent and utilities of that unit is lower than the payment standard, then the voucher calculation requires that the subsidy be lower too. If the applicant wants to live in a unit with housing costs greater than the payment standard, it has to increase its contribution to make up the difference.
In all cases, as noted above, the PHA won’t subsidize housing costs where the applicant will have to contribute more than 40% of their adjusted income.
As a side note, Section 8 will not subsidize any security deposits required by landlords. This cost must be paid entirely by the household.
Once the applicant is issued, it has a “briefing session” with the PHA. Agencies can vary how these are done, and what information is given, but at a minimum they must explain:
- The Section 8 Program
- Discrimination and fair housing issues
- Household responsibilities
- The PHA’s payment standard and utility allowance policies, and
- How to find housing where they can use their vouchers.
Following the session, the tenant begins their search for a suitable property. They must find one within the time frame established by the PHA, though HUD requires that they have at least 60 days to find a unit. If they don’t get this done within the time period, they can ask for an extension, but, if an extension isn’t granted they’ll lose their vouchers.
Finding a Home and the Landlord’s Application
Section 8 vouchers can be used to rent single family homes, apartments, duplex/townhouses and mobile homes, provided they meet the “decent, safe and sanitary” standard defined by HUD in its Housing Quality Standards (HQS).
The vouchers can’t be used for public housing, nursing homes, or properties in which the owner also resides.
PHAs often keep a list of properties accepting HCVs, but an applicant is not restricted to these units. If they find a property they like, they can ask the landlord if it accepts Section 8 vouchers, and if not, if they’ll apply to participate in the Program. To participate is simple: (1) the property owner notifies the PHA that it will accept Section 8 vouchers.
While that’s all that is necessary to attract possible Section 8 tenants (landlords may of course also use traditional marketing to attract these tenants, but adding that it “Accepts Section 8 Vouchers”), before it can actually receive the vouchers, a landlord will need to take a few more steps:
- Submit the landlord documents required under the Administrative Plan
- Pass an initial inspection
- Sign a lease with the tenant that includes all PHA-required addenda, and
- Sign a Housing Authority Payment (HAP) contract with the PHA
We’ll look at each of these steps below.
Additionally, there are some cases where a household is living without assistance in private rental housing, but then applies for, and is issued, vouchers. In these cases, they may be able to stay in the same housing (this situation is sometimes referred to as “lease in place”) if:
- The unit passes the PHA’s initial inspection
- The unit meets Section 8 payment standard requirements
- The owner is willing to accept Section 8 vouchers and participate in the Program, and
- The landlord and tenant sign a new lease with all required PHA addenda.
This situation may be attractive where the parties have an established rental relationship, and the landlord would prefer to keep the tenants in the unit.
Once a tenant finds a property that accepts vouchers, the landlord typically sends the PHA a Request for Tenancy Approval (RTA) form, a W-9, proof of property ownership, and a direct deposit form so the PHA can make voucher payments to the owner’s bank account. The PHA reviews this information and determines if the rent requested is reasonable. If the rent amount is approved, the PHA will schedule an initial inspection.
Property Inspections: Initial, Annual and Special
HUD requires that all properties accepting HCVs pass three different types of inspections: initial, annual, and special inspections (e.g., complaint inspections, quality control inspections). The inspections determine (1) whether the housing meets HUD’s Housing Quality Standards (HQS) requirements, and (2) the reasonableness of the rent.
The HQS requirements consider (13) performance areas:
- Sanitary facilities
- Good preparation and refuse disposal
- Space and security
- Thermal environment
- Illumination and electricity
- Structure and materials
- Interior air quality
- Water supply
- Lead-based paint
- Site and neighborhood
- Sanitary condition, and
- Smoke Detectors.
The initial inspection has to be done before the lease is signed. If the property fails the initial inspection, it’s given a certain number of days to correct the deficiencies, and then the PHA re-inspects the unit. If the property still doesn’t meet HQS requirements, the PHA can cancel the tenancy approval, and tell the tenants to look for other housing.
While the other types of Section 8 inspections occur later in the process, let’s take a quick look at them.
HUD requires that all properties accepting Section 8 vouchers pass an HQS inspection no less than annually. Like the initial inspection, if a unit fails the annual inspection, the property owner is given a reasonable period of time to correct the deficiencies before reinspection.
However, under two deficiency circumstances the PHA must stop voucher payments: (1) if a life-threatening violation isn’t fixed within 24 hours of inspection and the PHA didn’t give an extension; and (2) a routine violation isn’t corrected within 30 days of the inspection and the PHA didn’t grant an extension. If the repairs are made, the PHA can restart the voucher payments, but if they aren’t, the PHA can terminate the Housing Assistance Payment (HAP) contract.
Special Inspection No. 1: Complaint Inspections
If a landlord, tenant or the general public files a compliant about the state of an HCV property, the PHA will conduct a complaint inspection according to its Administrative Plan (a sample complaint procedure can be seen here). Just like initial inspections, complaint inspections examine if HQS requirements are met, and give landlords a specific period of time to correct any deficiencies before re-inspection.
Special Inspection No. 2: Quality Control Inspections
These are done to determine to determine if a PHA’s initial, annual and complaint inspections are being done in compliance with HUD’s rules and the PHA’s Administrative Plan. To ensure impartiality, independent parties perform quality control inspections.
Housing Assistance Payment (HAP) Contract and Tenant Lease
If the housing passes the initial inspection, the PHA sends the owner: (1) a notice of approval, (2) any PHA addenda the owner has to attach to the lease, and (3) a Housing Assistance Payment (HAP) contract. The HAP contract details the amount and terms of voucher payments.
Before signing a lease, the landlord may, but is not required to perform any screening it wishes, such as rental history and credit check. It should be noted that whether a landlord accepts a tenant is entirely up to the landlord.
Following signing of the lease, the owner sends a copy to the PHA, and rent payments begin soon after. While the PHA’s payments are automatically sent to the owner, the owner has to collect the portion of the rent covered by the tenant just as they would with any other tenant.
Landlord-Tenant Issues, Termination of Leases, and Rent Increases
Generally PHAs are not involved with landlord-tenant issues, but some will act as a mediator. In any case, most PHAs require that they be copied on any lease notices given to the tenant.
If a landlord wants to terminate a lease because its tenant isn’t meeting its lease obligations, typically they have to contact to the PHA for specific guidance. If they end up having to evict the tenant, Section 8 requires landlord to use a court-ordered eviction procedure. This is required even if state law provides for non-judicial evictions.
If a landlord decides it doesn’t want to renew the tenant’s lease, it just has to follow the notice provisions in the lease and notify the PHA.
If a tenant loses their HCV eligibility, the HAP contract’s terms determine what happens next. Typically the PHA sends a 30-day notice to the owner detailing when the HAP contract will terminate and when the HAP payments will end. When the HAP contract terminates, so does the lease. Accordingly, if the landlord wants the tenant to stay, it has to enter into a new lease, and then collect the full rent from the tenant.
Once a year a property owner can ask the PHA to approve a rent increase. Generally these requests are accepted if the higher rent is found to be reasonable. In those cases where the rent increase would require the tenant to spend more than the 40% of income maximum toward their housing costs, the rent increase can still be approved if the tenant agrees to increase its contribution above the 40% maximum. This situation is an exception to the 40% maximum rule.
Transferring Vouchers: “Porting”
Situations arise where a tenant needs to move to another unit outside the PHA’s area, but wants to keep and use its vouchers for the new property. Transferring the vouchers from one property to another is referred to as “porting,” and generally is allowed only if (i) the tenant has lived in the initial unit for at least one year, (ii) the PHA approves of the transfer, and (iii) the tenant complies with any lease requirements relating to the move. Of course, the tenant can only use the vouchers at another property if it still meets all the Section 8 eligibility requirements.
Exception to Porting: Project-Based Voucher Programs
In addition to the tenant-based voucher program we’ve been discussing, Section 8 also utilizes a “project-based” rental assistance program. Under these programs the voucher can only be used for a specific property. Accordingly, porting isn’t typically permitted for such vouchers. However, a family can move from a project-based property after one year, and switch to a tenant-based voucher when the PHA has new vouchers available.
Section 8 doesn’t allow a multi-family project to use these project-based vouchers for more than 25% of its units, thought this limitation doesn’t apply to units for elderly or disabled households. When a PHA and owner agree to a project-based program, they enter into an HAP contract, generally with a 15-year term and extensions.
Ongoing Landlord and Tenant Responsibilities
Section 8 households must meet certain obligations while using their vouchers. In addition to any obligations required under a PHA’s Administrative Plan, they must:
- Recertify every year their income and household makeup (changes in either can result in changes to the subsidy amount)
- Notify the PHA if there have been any changes to income or household
- Cooperate with annual inspections of the property, and
- Meet all their lease obligations (e.g., pay their rent on time, maintain the property, etc.).
If they fail to meet these obligations, they may be terminated from the Program.
Similarly, landlords must (i) cooperative with, and pass initial, annual and complaint inspections, and (ii) comply with any landlord obligations under a PHA’s Administrative Plan.
Advantages of Section 8 to Landlords
Because the PHA is paying for all or a portion of the rent, rent payments are more consistent and timely. This reduces costs associated with collecting late rents, and reducing the likelihood that an eviction for non-payment will be necessary.
Additionally, HCVP tenants have a lower turnover rate than non-Section 8 renters. Low turnover saves landlords the costs associated with bringing in new tenants, including marketing, prepping a unit for new tenants, screening for new tenants, etc. Further, Section 8 units generally have shorter vacancy periods, meaning the time a unit isn’t producing rental income is shorter than if it were only rented to non-HCVP tenants. This is so because there is almost always a high demand for properties accepting HCVs. Accordingly, if a landlord loses a Section 8 tenant, it can quickly find a new tenant.
Disadvantages of Section 8 to Landlords
Because the rent has to be within the FMV and FMR, and any rent increases have to be approved by the PHA, a landlord gives up the ability to charge whatever rent it wishes.
Further, property owners will have to pass, at a minimum, one inspection every year. While HQS standards are intended to be no stricter than local building code standards, any repairs that have to be made because of a Section 8 annual inspection may be considered a disadvantage to the owner. This is because many jurisdictions rarely enforce local building codes (absent a complaint), and these repairs might not have been necessary if the annual inspection hadn’t happened.
That being said, some landlords view these inspections as an advantage because (i) they are paid for by the PHA, and (ii) alert the property owners of potential problems.
Another disadvantage is one mentioned earlier: Section 8 tenants can only be evicted through a court approved process. In those states that allow for non-judicial evictions, this means that a landlord will incur greater costs (legal fees, court costs, notices, etc.) to evict a Section 8 tenant than it would have evicting a non-Section 8 tenant.
One more disadvantage is that the cost of repairing damage to a property by HCV participants isn’t recoverable from HUD. While landlords face the risk that a tenant’s security deposit, whether the tenant uses HCVs or not, will be less than the cost of repairs, because Section 8 tenants are by definition low-income, the chance of recovering funds by suit against Section 8 tenants is generally less than against non-Section 8 tenants.
Homeownership Voucher Program
As mentioned earlier, Section 8 can also assist families with the purchase of a home. Where a PHA participates in HUD’s Homeownership Voucher Program (and not all do), a participant can use a Section 8 voucher to help with its mortgage payments and home-ownership costs.
Where a party has been approved for, and is using HCV vouchers to rent housing, subject to meeting income and eligibility requirements, it can use these vouchers toward buying a home. As with rental units, any home must first pass an HQS initial inspection.
There are many requirements an applicant must meet to qualify for a Homeownership Voucher, including that:
- They be a first-time homeowner
- They meet certain minimum income requirement (except for elderly and disabled households)
- One or more adults in the household has full-time employment and has been continuously employed full-time for at least one year before it receives HV assistance (except for elderly and disabled households), and others.
Under the HV program the PHA subsidy is either (i) the PHA’s payment standard minus the total tenant payment, or (ii) the monthly homeownership costs minus the total tenant payment, whichever is less. Homeownership costs can include such things as mortgage and property insurance, real estate taxes, maintenance, repairs and utilities.
How long a PHA will make homeownership payments depends on the family type and the mortgage term. If the term is more 20 years or more, PHA assistance can’t exceed 15 years. If the term is shorter than 20 years, PHA payments can’t exceed 10 years. However, if the participant is an elderly household or a disabled family, there are no term limitations.
Hopefully its clear that while the HCV Program has the potential to benefit both residents and property owners, those benefits only are possible if the maze of HUD regulations and PHA policies and procedures are understood and followed. Further complicating the use of the Program, HCVP rules are amended from time to time. Accordingly, if you have any specific Section 8 issues, you should talk with your local PHA or a lawyer who regularly works with the Program.
If you have any comments, questions or experiences with Section 8, feel free to share them in the comments section below.