California implemented a new law at the beginning of 2020 that forbids property owners from rejecting applicants on the basis of their using Section 8 housing vouchers as an income source. The message was clear–rental property owners cannot discriminate against those using housing vouchers.
Equivalent laws previously existed in certain California cities, but it is now the law statewide.
This article explains what the law requires, how the Section 8 program works, and what landlords should know about screening and accepting voucher holders.
Section 8 housing choice voucher program helps low income families
The federal Section 8 housing program was designed to allow very low income families, the elderly, and the disabled to find rental properties within their financial means on the private market, and, in the Golden State, the program is administered by the California Public Housing Authority.
To address California's housing shortage, California implemented Senate Bill 329, authored by Los Angeles Democratic State Senator Holly Mitchell and signed into law by Governor Gavin Newsom, at the beginning of 2020 to require landlords and property management companies to accept Section 8 housing vouchers as an income source from applicants.
Mitchell said that the law was needed because many landlords rejected Section 8 applicants, citing a statistic that some 70 percent of vouchers expired before the intended recipients could find a landlord or property management company that would accept Section 8 vouchers.
Nationwide, some 2.1 million renters live in Section 8 housing, either the renter-based Housing Choice voucher program or project-based Section 8 housing, in which owners set aside all units for Section 8 residents in return for guaranteed payments from the federal government.
Generally, the applicant's income must be 50 percent or less of the median income of the city or county where the applicant seeks to live. By law, 75 percent of the vouchers must go to applicants who earn 30 percent of the area median income or less. Statewide, about 300,000 California households receive Section 8 vouchers.
The Housing Choice voucher program allows renters to find their own program-approved housing. They list the Section 8 voucher as income on their rental application and the subsidy goes into effect when the applicant is chosen as a renter by the property owner or property management company.
Because the renter is responsible for a certain portion of the rent, the property owner or property management company must verify they can pay their portion of the rent.
To qualify for Section 8, applicants must be U.S. citizens or otherwise in the country legally, and meet income requirements. Those caring for young children or the elderly are often given preference.
Section 8 for California landlords
Property owners or property management companies that are interested in accepting Section 8 can apply to be added to the Public Housing Authority's database. They should contact a local Housing Authority office to make this request.
The state will conduct a health and safety inspection as part of the Section 8 process. The state is party to the rental contract, and must approve of the total rent charged.
Homeowners who live in their condos, houses, or other single family homes and rent out only one room are exempt from the requirements of Senate Bill 329 as it relates to Section 8.
Property owners can still reject Section 8 applicants after giving their application due consideration, but they may face resulting litigation, especially if the Section 8 tenant was the only applicant.
Section 8 tenants must comply with all conditions of a lease agreement, which means that property owners can evict them for violations of the lease, as they can with other renters.
Housing and Urban Development (HUD) provides funds to the Authority, which then pays property owners directly on behalf of the resident. Qualifying tenants pay 30 percent of their income toward rent, and the federal government pays the remainder.
Investors who wish to sell their rental property have to notify the public housing agency, since the contract will terminate when the sale is executed. The housing agency will typically make efforts to transfer the Section 8 lease to a new owner. In the case of a foreclosure, the new owner must honor the Section 8 lease unless they plan to live in the property themselves.
Advertising must reflect the law
California's property managers, property owners and investors cannot discriminate against prospective tenants with a housing voucher. Printed marketing materials and online advertising must reflect compliance with the law.
Federal fair housing laws require property owners to treat all applicants equally, including voucher holders.
Section 8 is treated as income
California already had a law, the Fair Employment and Housing Act (FEHA), that bars housing discrimination based on race, color, national origin, disability, gender, gender identity, familial status, sexual orientation, and some forms of income.
Requiring specific kinds of income constitutes discrimination against some residents. Property owners must now view a housing voucher as part of an applicant's income.
Maintain fair and consistent screening criteria
The laws governing Section 8 do not impact any of the screening processes a property owner has in place. The same credit criteria and income verification steps can be utilized to screen Section 8 tenants, as are utilized to screen all other applicants.
The only change with the income criteria is that a property owner can only evaluate ability to pay against the portion of the rent that the resident will be paying, not the entire rent.
For example, if rental criteria says that a resident must earn three times the monthly rent, an owner has to set their income threshold for Section 8 applicants at three times the renter portion of the monthly rent, rather than 3 times the full asking rent.
Let's say you own a property with a monthly rent of $1,500. A Section 8 applicant is interested in your unit. After verification, the housing authority determines this tenant's required contribution is $450 (30% of their monthly income). The Section 8 voucher covers the remaining $1,050, which is paid directly to you.
When screening this applicant, you would only be allowed to evaluate their ability to pay their $450 portion. If your standard screening requires tenants to earn three times the rent, you would need to limit your verification to considering whether they can pay at least $1,350 monthly ($450 × 3), not $4,500 ($1,500 × 3).
Section 8 FAQ’s for CA Property Owners
Can I charge my normal market rent for Section 8 tenants?
The state must approve the total rent charged as part of the Section 8 process, so your proposed rent will be reviewed to ensure it’s comparable to similar units in the area.
How are Section 8 payments handled?
The Housing Authority receives federal funds from HUD and distributes vouchers directly to property owners on behalf of the resident.
What happens if a Section 8 tenant violates the lease?
Section 8 tenants must comply with all conditions of a lease agreement. You can evict them for violations of the lease, following the same processes as with other renters.
Do I need to change my screening criteria for Section 8 applicants?
No. You are expected to maintain your standard screening processes, but when evaluating income requirements, you must only consider the portion of rent the tenant will be paying, not the entire amount.
What happens if I sell my property with Section 8 tenants?
You must notify the public housing agency since the contract terminates when the sale is executed. The Housing Assistance Payments (HAP) contract typically terminates upon sale, but the housing agency may work to transfer the Section 8 lease to the new owner.
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