Every now and then, a homeowners association that allows rentals will run into Section 8 tenants. Associations should tread carefully when dealing with such tenants, as the complexities of the law can put the HOA in legal trouble in certain situations.
What Are Section 8 Tenants?
In 1974, the federal government established the Housing Choice Voucher Program, which aimed to assist low-income tenants by subsidizing a portion of their rent and utilities. The Act was an amendment to Section 8 of the Housing Act of 1937. Hence, Section 8 tenants simply refer to tenants who fall under the income margins under the Act.
The Department of Housing and Urban Development oversees Section 8 housing, and there are public housing agencies that manage the program at the state level. Generally, a tenant or family must fall below the 50% median income in their area to become eligible for Section 8 housing.
The Benefits of Renting to Section 8 Tenants
For landlords, there are several advantages when they choose to rent to Section 8 tenants. They receive rent payments on time and have a fairly large pool of potential tenants. Plus, tenants are pre-screened by public housing agencies.
1. On-Time Rent
Because the government subsidizes part of their rent, Section 8 renters are less likely to miss a payment. The public housing agency pays the landlord directly every month. In some cases, the tenant is still responsible for a small portion of the rent. But, there is a smaller chance of delinquency because tenants know they will lose their Section 8 status (and housing vouchers) if they violate the lease agreement.
2. Large Pool of Tenants
There is no shortage of tenants who fall under Section 8 housing. In fact, the demand for this program is so high that some renters stay on the waiting list for years before acceptance.
3. Pre-Screened Tenants
Public housing agencies usually screen tenants according to their income, but these agencies also look into other things such as criminal history. Section 8 applicants who have been evicted due to drug-related activities within the last 3 years will not be accepted. That said, it is still a good idea for landlords to adopt a more thorough screening process even with Section 8 tenants.
The Disadvantages of Renting to Section 8 Tenants
As with anything, leasing to section 8 renters also comes with its fair share of downsides.
1. PHA Determines Rent
The first disadvantage of renting to Section 8 tenants is that the rent is capped. The local public housing agency sets the rental rate for the unit based on the rental market in the area. Rent also can’t go beyond 40% of a tenant’s income. As such, landlords tend to charge less to rent to Section 8 tenants than they would for normal renters.
2. Annual Inspections
Not all units can accept Section 8 renters. Properties that wish to qualify as Section 8 housing must pass an extensive inspection first. If HUD requires any changes, landlords will have to make them within 30 days and then undergo inspection again. Following the initial inspection, Section 8 housing must go through annual inspections to make sure they are compliant with HUD guidelines.
3. Negative Connotations
One unfortunate drawback of renting to Section 8 individuals is the negative connotations that it generally brings. Section 8 tenants have been stereotyped as noisy or unkempt, and some non-Section 8 tenants may not want to live in the same community as a result.
Are HOAs Required to Accept Section 8 Renters?
Currently, no federal law requires homeowners associations to accept Section 8 tenants. The law also does not require HOAs to notify other residents of the existence of Section 8 housing in the community.
It is generally not a good idea to disclose such information to members as well. Due to the negative connotations associated with Section 8 housing, residents may discriminate against Section 8 renters. They might treat them poorly and ostracize them. This will create discord within the community, which will not bode well for the association.
State and Local Laws May Differ
While federal law does not require HOAs to accept Section 8 renters, associations must act with care. There are some state and local laws that prohibit landlords from rejecting applicants due to their Section 8 status. One example is Santa Monica (CA), which recently barred landlords from discriminating against Section 8 renters. Similar laws exist in Florida, specifically in the counties of Miami-Dade and Broward. Some other states and local areas may also have broader laws that prohibit discrimination based on a prospective tenant’s source of income.
Crafting a Rental Policy for Your HOA Community
If a homeowners association wishes to screen tenants allowed into the community, it must create a rental policy that accomplishes that without an intent to discriminate. Associations can consider prohibiting rentals altogether to eliminate potential claims of discrimination. Though, this may face some pushback from residents who wish to make extra money or are only maintaining their property as a second home.
On the other hand, associations may allow rentals but impose reasonable restrictions. For instance, an HOA can require homeowners to go through an approval process, similar to an architectural review process, before renting their home. Many associations also allow long-term rentals but prohibit short-term rentals. This is due to the security issues associated with short-term rentals as well as the impact they have on property values.
Even if an owner argues that rental restrictions did not exist when they first bought the home, an HOA has a solid defense. Homeowners know that an association’s covenants and rules can be amended over time. They must know the obligations they signed up for.
Seeking Professional Counsel
Dealing with Section 8 tenants can be a complicated issue. There are certain legal repercussions that homeowners associations can face if they make a wrong move. As such, it is always best for HOA boards to consult an attorney when crafting their rental policies. Alternatively, an HOA management company can also provide similar services.
Clark Simson Miller aims to make the jobs of HOA board members easier with our wide array of management solutions. Call us today at 865.315.7505 or contact us online to request a free proposal.
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