Rental assistance in San Diego is a hot topic as of late. Many landlords and property managers have heard of Section 8, but don’t know all the ins and outs of the program. As of January 2020, all landlords and property managers are required to accept Section 8 housing vouchers as a form of income. What does this mean and how does it affect rental property owners?
At Good Life Property Management, we have spent time researching the Section 8 program and working with the San Diego Housing Commission to get a complete understanding of how Section 8 works and what we need to do to comply with these regulations.
What is Section 8?
Section 8 is a form of rental assistance. The goal of the program is to ensure people living with lower wages can find decent housing and a suitable living environment outside of public housing units.
How does Someone qualify for Section 8?
Each area of San Diego has its own program, so they will need to apply to the correct one. They should apply for the area they want to live in. They can still apply even if you don’t currently live in that area.
A person is eligible for Section 8 if you meet one of the following:
- People who live or work in the City of San Diego
- Individuals and families with annual income less than 80 percent of San Diego’s Area Median Income (AMI)
- Veterans and active-duty military
- Low-income seniors age 62 or older
- Individuals with disabilities
- Homeless families and individuals
Section 8 is designed for low income families. In general, the family's income may not exceed 80% of the median income for the county or area in which the family chooses to live. Additionally, at least one person in the household needs to have legal documentation. Backgrounds checks are provided and while they can still be approved with a felony on record, they will NOT be approved if they meet one of the following:
- They are on the lifelong sex offender list
- If they have been convicted of producing meth in federal housing
- If they have been evicted in the last 3 years due to drug-related crimes
Once approved, they will be added to a waiting list and be notified when the housing authority is able to place them in a property. Because of the lack of funds provided by the government, applicants can be waiting for up to 10 years.
How does this affect landlords and property managers?
As of January 2020, landlords and property managers cannot deny applicants simply because they are on Section 8. They cannot publish property ads that discriminate against Section 8 vouchers either. Section 8 applicants must be treated the same as any other applicant.
There are a number of benefits to approving Section 8 applicants. First, you’ll receive consistent and on-time rent payments. The government portion is always provided on the first of the month and Section 8 tenants are required to pay on time or they risk losing their voucher. Because of the long waiting list for the vouchers, Section 8 tenants are typically on top of their payments, as they do not want to lose the home and go back on the waiting list.
There’s also a listing service provided for Section 8 properties. Gosection8.com is available for applicants where landlords and property managers can post their properties. You might think that because of the set of regulations with these applicants that you have less freedom when it comes to approving them as tenants. However, you are still able to use your current rental criteria to screen applicants. The main difference is that the voucher has to be included in their income calculation. You can still screen for credit and run background checks.
You also get additional services provided with Section 8 tenants.This includes unit inspections every two years, electronic signature software for leasing documents, and self-certification of repairs for qualified landlords. A secure, online landlord portal provides account information around the clock.
How Does Section 8 Factor Into Income?
Section 8 vouchers must be accepted as a form of income when screening applicants. It functions just like a paystub or any other government assistance, i.e. welfare or child support. These vouchers will have an estimate of the maximum rent the applicant can afford. Final amounts will be calculated once the property is leased.
The biggest factors that go into the estimation are zip code and if the tenant pays utilities. For example, a La Jolla zip code may have a higher maximum rent than City Heights on the voucher. Other factors include household size, annual income, and voucher size (such as how many bedrooms are in the home).
Let’s say that you typically require 3x the monthly rent amount for your income requirement. You can apply the 3x rent-to-income ratio to the portion of the rent the tenant will be responsible to pay. Most of the time the applicant will always meet the qualification. If their voucher is more than what the property is listed as, the applicant will pay their portion of 30% of their annual income. This can be viewed on the voucher of their income.
For any requirements outside of income, you can screen them the same as any other applicant. This goes for credit, rental references, and accounts in good standing.
What happens after a Section 8 applicant is approved?
Congrats! You’ve approved a Section 8 applicant. You may typically have a set time frame that you give approved applicants for them to sign the lease and submit a deposit. Good Life usually holds the property for approved applicants for 24 hours.
However, you cannot require those strict time frames for section 8 applicants. They would not be able to meet those requirements due to government involvement and time needed for each step. Enforcing those requirements could be viewed as a way to not have to rent to Section 8 applicants, which violates state law. You’ll need to work with the housing authority and be flexible on the timelines.
What are the leasing steps for an approved Section 8 applicant?
Once you have an approved applicant, there are a few different steps required for a section 8 tenant. First, you will request the Tenancy Approval Packet. This packet has the information
and forms required to start the move-in process. You or the tenant can return the completed and signed RFTA and forms along with a copy of an unexecuted lease agreement to SDHC. You can also choose to use an SDHC-approved lease agreement.
The second step is the SDHC review. SDHC will review both the RFTA packet and the lease agreement to ensure both meet the following criteria:
- The rent does not exceed what the family can afford to pay.
- There are no conflicts with program rules.
- There is compliance with state and local laws.
- The initial lease term is at least six months.
- The lease agreement outlines which utilities and appliances will be provided and by whom (landlord pays water, tenant provides refrigerator, etc.)
The third step is the unit inspection. When SDHC determines that the RFTA packet and lease agreement meet the required criteria, the unit will be scheduled for an inspection. SDHC staff will contact you to schedule an appointment within one business day. SDHC is required to ensure that all housing units occupied by Section 8 Housing Choice Voucher rental assistance participants meet certain health and safety standards. These housing quality standards are set by the U.S. Department of Housing & Urban Development (HUD).
Do note that the tenants should not sign the lease before inspection. Due to the COVID-19 pandemic, all inspections are self-inspections. The SDHC will send a self-certification inspection form that must be signed by both owner/agent and participant.
The fourth step is the actual move-in. When the unit passes inspection and the rent amount is approved, the tenant can move in at the end of their 30-day notice. SDHC staff will prepare and mail the final documents. The Housing Assistance Payments Contract/Lease Addendum will need to be signed by you and returned before payments begin.
The fifth and final step is the payment process. Once the contract and lease are signed and returned, SDHC will process and issue the initial payment. The payment will be directly deposited into your bank account each month on the first. SDHC will continue to issue payments as long as the unit meets the aforementioned housing quality standards and the assisted family meets eligibility requirements and complies with program rules and regulations. At the end of the calendar year, SDHC will send you an Internal Revenue Service Form 1099-MISC (Miscellaneous Income Form) for your tax records.
Raising the Rent
Many landlords worry that they won’t be able to rent the home for the rate they want to with Section 8 applicants. However, they can still submit their requested rate to the SDHC. The SDHC will then compare that rate with units in the area that have similar features and amenities. They also factor in location, unit type, quality, and utilities provided. Once the SDHC has completed this review, they will make their recommendation to the landlord. If the landlord disagrees, they can submit information for three comparable units within a two-mile radius from the unit. The SDHC will review again and notify the landlord of a final rent decision.
Landlords are still able to raise the rent on the unit. They need to provide the tenant and SDHC with a 60-day written notice of the proposed rent increase. If it is approved, the rent increase will be effective on the date specified by the landlord or on the first of the month following a full 60-day notice to the tenant and SDHC, whichever is later. Rents for existing Section 8 tenants The landlord will need to submit a Rent Increase Application along with a copy of the written notice provided to the tenant to start the process.
Do the tenants need to sign the lease before we can get the RFTA packet?
No, the lease will not be signed until later in the process.
Does a licensed agent need to sign the documents as we represent the owner?
In order for an owner or property management agency to conduct business with SDHC, they need to establish a vendor code. The vendor code is created with the new vendor documents provided with the RFTA packet. After we receive a copy of the property management agreement or any other document establishing the link between the property owner and property management, an agent can complete all forms on behalf of the owner.
Does the RFTA packet require a signed lease or just a blank template?
A blank template is sufficient. The effective date of subsidy (i.e. date the landlord is paid) is established by the leasing worker. Sometimes the effective date of subsidy and the move in date on the lease will not be the same. In these cases, the participant will be fully responsible to pay all rent up to SDHC effective date with no reimbursement.
Should tenants sign the lease before the inspection?
No, they will sign the lease after the unit inspection is complete and approved.
Is there a minimum lease term requirement?
Yes, the minimum lease term is 6 months.
How long between submitting the RFTA packet will the HAP be sent?
It varies. We recommend keeping in contact with the leasing worker assigned to the RFTA in order to get an accurate effective date.
When can we expect the initial rental payment? We typically do not provide possession of the home until the deposit and first month's rent is paid.
The subsidy is not paid up front. It is paid after the RFTA is approved, the inspection passes, the move out date from the old unit is established and subsidy is terminated (if applicable), SDHC contracts are signed, and the participant has taken possession of the unit.
For all the latest law updates and San Diego real estate news, subscribe to our newsletter!