Suspension of Rent Vouchers Frustrates Landlords

With all the conviction of an army recruiter, housing officials in Los Angeles have spent years searching out property owners and persuading them to enlist in a program that subsidizes low-income tenants.

Now, some of those owners may find themselves rethinking their decision.

Last month, for the first time in its history, the Housing Authority of the city of Los Angeles suspended 1,500 rental vouchers, citing a lack of funds. Would-be tenants, who were on the verge of moving into apartments, discovered that their vouchers, once viewed as a guarantee of assistance, were useless.

But the suspension has affected property owners as well. In Los Angeles 17,000 owners participate in the so-called Section 8 program, renting their apartments and houses to low-income tenants in exchange for monthly checks from the federal government.

Some who had chosen to rent to voucher holders must now find new, unsubsidized tenants. Others are searching for ways to assist the Section 8 tenants, in the hopes that money to fund the vouchers will be found.

Although the suspension does not affect the majority of owners, it may serve to undo the goodwill the Housing Authority has worked hard to create.

“Mainly, it’s frustrating,” said Germaine Hill, who recently decided to list her property with Section 8. “I feel they should have notified us in advance that this was a possibility, and I probably could have signed this lease sooner. Now they’re telling us it’s too late. I think that’s unfair.”

Under Section 8, tenants pay about a third of their income to rent each month; the federal government pays the rest.

Last year Section 8 pumped about $370 million into the city’s economy through rent payments to property owners. Program officials estimate that figure will reach $393 million in 2004.

Owners play a crucial role in the program, particularly in cities with tight housing markets like Los Angeles.

In 2001 the program’s success rate -- the percentage of participants who were able to find an owner willing to rent to them by a specified deadline -- was only 50%, said Steve Renahan, director of the Section 8 program for the L.A. Housing Authority. Those who missed the deadline lost the housing subsidy.

Some owners have been unwilling to participate because they could reap higher rent on the open market. Others complained that the program’s procedures created added layers of bureaucracy and delays.

In response, the city dedicated more staff and funds to reaching landlords. At trade shows and apartment owner meetings, staffers touted the merits of the program: rents paid by the government, listings through the Housing Authority, an added level of tenant screening.

“The 50% success rate told us, more than anything else, that we needed to do more of this” outreach work, Renahan said. “It’s a tragedy for a family to be on the Section 8 waiting list for many years, get a voucher and not be able to use it.”

The success rate of voucher holders is now about 80%, Renahan said. The number of landlords participating in the program increased from about 16,000 in 2001 to about 17,000.

Officials are aware that the voucher suspensions may chip away at some of that success. In particular, owners who had planned to rent to a tenant with a now-suspended voucher “may be disinclined to participate again,” Renahan said.

Even with the difficulties the suspensions have caused, no one speculates that units will go unrented or that owners will flee the program en masse.

Still, for owners like Hill, the suspension of the 1,500 vouchers has complicated the already difficult task of finding a tenant.

“This is my first time going through the process,” she said. “So far, I’m not happy.”

Renting out her house through Section 8 sounded like a good idea, better than having applicants walk in off the street.

“Plus, Section 8 guarantees a certain portion of the rent,” she said. “I thought that would be better than having to hassle to get the rent payment from someone else.”

Hill listed her property with Section 8, fielded phone calls from potential tenants and sent out 20 applications. She settled on Diana Machado, a mother of three daughters, who is disabled and living in a homeless shelter while attending college.

Then Hill learned from Machado that the voucher that would have allowed her to pay about $1,600 in rent had been suspended. Eventually the owner received a letter from the Housing Authority stating that the vouchers might be reactivated in 2005.

She can’t wait until then, but she doesn’t want to rent to anyone else just yet.

“I’m going to have to go through the [tenant selection] process all over,” said Hill, who works a full-time job in addition to managing rental property. “That’s why I really want to wait and find out what’s going on. I really want Diana to move into my property. She’s so nice, and her children are so adorable.”

Hill even offered to lower the rent, but Machado still could not afford it.

In some cases, the tenants themselves are the recruiters for the program.

Deborah McFarland needed a home that was big enough for the three foster children she is raising and found a vacant five-bedroom house in Los Angeles.

The owner, who asked that his name not be used, had never rented to a Section 8 tenant before, but agreed and even allowed the family to move in before the inspection and the signing of the contract, so they could spend Christmas 2003 in their new home.

“I just wanted to help her out,” he said.

But the house did not pass the first inspection by a Section 8 official. The inspector left the owner with a list of repairs and changes that cost about $7,000.

“After I did it, I called them for inspection,” the owner said. “They said the voucher is suspended. That’s money I would have saved.”

For now the owner has few options: He can continue paying the mortgage (about $1,500) without the help he expected from the federal government, accept a reduced rent or evict McFarland.

The voucher, which would have allowed McFarland to pay about $1,600 a month, was suspended before her share of the rent had been determined. So far she has not paid any portion of the rent and has no means to do so.

She also worries about the owner, whose kindness is costing him.

“He had faith in the system,” McFarland said. “He’s put so much money into the house to fix it for me. I’m so outdone and embarrassed.”

The voucher suspensions may also have given credence to owners who advise against participating in the program.

Although the most recent issue of the Apartment Owners Assn. of Southern California’s magazine includes an article on the benefits of Section 8, “we don’t recommend that our members use Section 8 anyway,” said Dan Faller, who heads the association. “With all the government regulations and restrictions and things like this that come along, we recommend, if possible, that they build their clientele outside of Section 8.”

Ruth Hayles, executive director of the Minority Apartment Owners Assn. in Los Angeles, said the suspension of vouchers had caused hardship for tenants and was “devastating for landlords as well.” But she does not dissuade owners from participating -- nor does she believe that the current problems will push owners away.

Positive changes in the program, allowing owners to receive rents close to or at market rate, have made it more appealing, she said. The current problems she attributed to financial troubles afflicting city, state and federal governments.

“We know what funding is like,” Hayles said. “It’s tight all over.”