Imagine, if you will. You have a rental property that has been in the family for years. It’s nothing too fancy but you are always able to find tenants. You ended up having to evict the last tenant, so you are trying to be extra careful this next time. Now your manager brings you an application where the tenant wants to use a Section 8 voucher. You have never rented to Section 8 tenants and don’t plan to start now. You have been advised by other landlords over the years that Section 8 is a boreoarctic headache. You understand there is way too much paperwork and government inspections. You also have concerns about who the Section 8 tenants will be and if they are a problem, you won’t be able to get rid of them. You tell your manager that you do not accept Section 8 and would like to state that upfront. Is there anything wrong with that? We'll explain.
What’s Section 8 and Why Are Landlords Concerned?
Section 8 is a federal rental assistance program where the U.S. Department of Housing and Urban Development (HUD) offers low-income households vouchers to pay rent to private landlords. Many landlords are reluctant to accept Section 8 tenants. They don’t want to deal with the extra bureaucracy including the additional paperwork, inspections, and delays. Many landlords worry about terminating a Section 8 lease if the tenant becomes a problem. While others are worried about the general quality of tenants associated with government assistance programs like Section 8.
Do California Landlords Have To Accept Section 8?
Yes, California landlords now must accept Section 8. This started with the passing of SB 329 which went into effect January 1, 2020. SB 329 amended California’s Fair Employment and Housing Act (FEHA), to include people using housing subsidies as a protected class under source of income.
Therefore, it is against the law for a landlord to not accept tenants because they are using Section 8 vouchers. It is legally equivalent to turning down someone because of their race. Of course, it is also against the law to advertise or state in any way that you do not accept Section 8 even if no applications have been made.
Can You Turn Down Someone on Section 8 Because of a Lack of Income?
You can only consider the tenant’s portion of the rent when looking at the tenant’s income since the housing authority is paying the rest.
For example, let’s say like many landlords, you require tenants to show income at least three times the rent amount. So, if the rent is $2,000 per month and the housing authority agrees to pay $1,400. The tenant would need to pay $600 per month. In this case, they would need to show a household income of $1,800 per month. Not the $6,000 per month that would be needed by someone without a voucher.
Don’t forget, that the housing authority uses a formula that takes into consideration the tenant’s income when determining the tenant’s portion of the rent. Therefore, the tenant’s income should be enough to qualify and is not going to be a reason to decline.
Can You Turn Down Someone on Section 8 for a Poor Credit Score?
No, not since SB 267 amended California’s Fair Employment and Housing Act (FEHA). California landlords can no longer turn down applicants using Section 8 vouchers due to low credit scores
Effective January 1, 2024, landlords are prohibited from using “a person’s credit history as part of the application process for a rental housing accommodation without offering the applicant the option of providing lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay the portion of the rent to be paid by the tenant”.
Landlords can still run credit reports for people using housing subsidies if it is part of their normal screening process. They can still see if the applicant has a history of not paying their portion of rent to former landlords or has a criminal record that goes against the rental property owner’s selection criteria. We are not attorneys but those sound like valid reasons to deny an application.
What Happens if You Refuse To Take Section 8 Vouchers?
Landlords who don’t accept Section 8 vouchers are breaking the law and are taking a significant risk. You could be sued civilly, charged criminally, or both. There are fines and you are subject to punitive damages. Such allegations are expensive to defend and are emotionally draining to those who are accused so you need to take it seriously.
You could get turned in by disgruntled tenants or trapped by hungry attorneys looking for landlords who are breaking the law. There are even government agencies running sting operations. The City of Long Beach has started to criminally prosecute landlords for breaking this law. You can be certain they are not the only ones.
Is There Any Way to Legally Avoid Taking Section 8 Tenants?
Yes, don’t own any rental properties that would attract people who make less than 50% of the local Area Median Income (AMI). Section 8 and other rental assistance programs have price limits.
Therefore, if you rent out a luxury condominium, an oceanfront home, or a house at the country club you are not going to have Section 8 tenants. If you have an apartment, condo or house that is on the more affordable end of the market then there is a good chance you will have a Section 8 applicant.
What Should California Landlords Do When Someone Applies Using Section 8?
You need to follow the law and process the application understanding that you are not allowed to turn someone down just because the applicant has a housing subsidy. The applicant needs only show income to cover their portion of the rent and credit history is looked at differently.
Landlords need to get out of the mindset of how they can get out of renting to someone on Section 8. After all, there are several benefits to landlords taking housing vouchers like Section 8. We will address those another time. In fact, we are seeing more landlords lean into Section 8 with a positive approach.
Section 8 does have some advantages but there are various pros and cons. The process can become overwhelming and confusing for landlords, especially for those not familiar with the system.
This is another reason why many landlords are retaining the services of a professional property management company, especially ones who know how to handle Section 8.
Bottom Line
Section 8 is a rental assistance program where the housing authority pays a portion of low-income households' rent to private landlords. Many landlords don’t want to deal with Section 8 due to the extra bureaucracy involved. However, since the passing of AB 329, it is against the law to decline a tenant because they have a government subsidy. The housing authority pays a portion of the rent, and the tenant only needs to show enough income to pay their portion of the rent. SB 267 makes it against the law to turn down a Section 8 tenant due to poor credit without “offering the applicant the option of providing lawful, verifiable alternative evidence of the applicant’s reasonable ability to pay”.
Landlords who do not follow the law may be fined, incur punitive damages, sued civilly, and even charged criminally. The only way to ensure that you will not have Section 8 tenants is to have rental properties at more affordable price points. However, many landlords are learning the benefits of Section 8, and many are choosing to use professional property management companies to help with the process.
Thank You
Thank you and we hope that you found this helpful and informative. If so, please like, share, and subscribe. Remember we are not attorneys, so we don’t give legal advice. Laws are always changing and vary depending on the specific municipality in which the property is located. For legal advice please consult a real estate attorney familiar with the laws in your area.
For Real Estate Advice
If you are looking for a reliable property management company to help you handle a rental property or a real estate broker to guide you through the sales process in Long Beach, Los Angeles, or Orange County, California; or you are just considering it and have a few questions about real estate contact the Mike Dunfee Group today! We are happy to help.
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