Feature
by Chris M. Kelly
The percentage of rented properties in the city has dwindled greatly since the dot-com boom of 1998 and 1999, much like an ebb tide of the massive bay that surrounds San Francisco. As a result, some landlords are paying renewed attention to the addition of Section 8 tenants. Before pursuing Section 8 tenancies, however, you should learn the basic facts as well as gauge the perspectives of local landlords, property professionals and public housing officials who have had extensive experience with this federally funded housing program.
The federal government created the program and its funds originally for unemployed or low-income individuals or heads of households. Because of their employment status, these people are unable to pay market-rate rents. The Department of Housing and Urban Development administers the program on the federal level. They transfer funds to a local Housing Authority, which then pays landlords who accept Section 8-qualified tenants. Subsequently, these tenants are required to pay a small percentage of the rent. The maximum amount the San Francisco Housing Authority currently issues to a tenant for a one-bedroom apartment is approximately$1,600.An additional amount is granted for utilities. In San Francisco and other Bay Area cities, the respective housing authority staff in each community annually inspects Section 8 rental properties in order to ensure they are safe, clean and otherwise worthy of being rented. In addition to a lease with the tenant, the landlord must also provide proof of ownership and sign a contract with the local housing authority.
John Strong owns rental properties in San Francisco, Berkeley and Oakland. He has added between 20 and 30 Section 8 renters during the past six years. He has generally had a good experience with both Section 8 renters and the administrators who help place them. He notes “most of the people who need this program are using it.” For the most part, he finds that the system works but he does, however, add a few caveats. “A landlord,” according to Strong, “will probably have to go over more applications to find a “good fit” from a pool of Section 8 applicants.” Strong also observes that Section 8 renters will tend to stay longer than other, non-Section 8 renters. One interesting facet of Section 8 is that eligibility is transferable to family members. Strong describes a mother who has secured a Section 8 housing unit and lives there with her 12-year-old son. “She can pass her eligibility on to her son once he turns 18, as long as he qualifies for the program independently,” Strong explains. Thus Section 8 eligibility “could be carried on in perpetuity.” In Berkeley and Oakland, Strong observes, this is not necessarily bad economic news. These communities are willing to work with landlords so that Section 8 rents will be comparable to market rates for their respective areas, with allowable increases each time a Section 8 contract is renegotiated, which is usually once a year.
In most Bay Area cities, a landlord has the option of getting out of a Section 8 tenancy as long as he/she gives sufficient notice well before the lease expires (usually a few months) to the local housing authority, any local rent board and the tenant. A landlord may cite economic hardship and must provide proof to officials before it is granted. In San Francisco, this is more difficult to do than in other cities. Ed Ilumin of the San Francisco Human Rights Commission has seen this situation play out, fortunately with a happy ending. “During the dot-com boom, there was a real incentive to evict people and get higher rents,” he explains. For example, there was a building at Hyde and Ellis Streets a few years ago with a lot of Section 8 tenants and the owners wanted to get more rent. Ilumin observes how “the owners declared financial hardship, worked with the various agencies, and the tenants were relocated successfully.”
The rest of Ilumin’s story provides some needed history to explain San Francisco’s unique situation. In the wake of the Hyde/Ellis move-out, he describes how city housing officials studied the cause for displacements like these. They concluded that the amount for market-rate rents that the Housing Authority had granted were based on a Bay Area average, not a San Francisco average. The San Francisco average, he says, was much higher. The officials then worked with the Board of Supervisors to move Section 8 tenancies under the San Francisco Rent Ordinance in the summer of 1998. A year later, the federal Department of Housing and Urban Development decided to increase the voucher amount it would pay to the San Francisco Housing Authority.
The issue of limiting rent increases to a few percentage points a year is not as gloomy as some landlords might think. According to Saul Ferster, an attorney for San Francisco landlords for over a decade, “The Rent Ordinance limits only what you charge the renter,” states Ferster. “It cannot limit what you can charge the government.” For example, since most contracts and leases need to be renewed yearly, rental increases can be negotiated as part of each renewal. He explains further that one of the advantages of a Section 8 tenancy is that during an eviction process, which can take months, a landlord usually will still be able to collect rent from the local housing authority.
The action the Board of Supervisors took in 1998 did not end with bringing Section 8 tenants under the Rent Ordinance. They also banned evictions based on the source of the tenants’ income. In other words, landlords cannot evict tenants solely because they are in a Section 8 program. In addition, landlords cannot turn down an applicant merely because the applicant will use government dollars to pay for most of the rent. If a tenant finds a higher-paying job or otherwise leaves the Section 8 program, the landlord must keep that tenant as long as the tenant is able to pay the rent and follows the Rent Ordinance guidelines in good faith.
Though it has now been four years since the Board’s actions, landlords are still coming up to speed on the facts, according to Delene Wolf of the San Francisco Rent Board. She notes “Section 8 landlords are still surprised when they find out they can’t just say ‘I don’t want to be in the Section 8 program anymore’ and try to evict (the tenants) on that basis.” She argues that they don’t realize there must be a “just cause” reason to evict.
Clifford Fried, an attorney who has represented property owners since 1985, has handled between 40 and 50 Section 8-related cases during this time. He provides a wider perspective about the economic discrimination issue. Both New Jersey and Massachusetts, Fried explains, have approved legislation that specifically bans landlords from passing over rental applicants strictly because of their sources of income. He comments that although California has such a law on its books, state courts have yet to interpret Section 8 tenants into the law. At this point, there is no federal protection against discrimination based on income source. Someday, perhaps soon, this part of federal law will be debated and action taken, and the Board of Supervisor’s decision and resulting policy will be upheld or invalidated.
Fried also provides another viewpoint pertaining to Section 8 tenancies. He believes that a Section 8 tenancy is a benefit or a disadvantage, depending on the perspective of the landlord. He defines one group of landlords who “sees a federally guaranteed source of rental income for as long as they have their Section 8 tenants, and factor that into their business plans.” He views another group of landlords who “views Section 8 as a time-consuming, bureaucratic process to find tenants with limited employment prospects.”
The Section 8 program in San Francisco for the most part is successful, Ed Ilumin points out, recounting the many tenancies in the Park Merced, Fillmore Center and Fox Plaza properties during the last few years. Perhaps the next flood tide of potential renters, driven by a wave of positive economic forces, will help to foment legislative challenges that will change the current status of the Section 8 program. For now, landlords must fish the local rental waters carefully.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Chris M. Kelly is a freelance writer living in San Francisco. © Copyright 2002.