by Tony Ucciferri
Editor's note: Over the past few years, numerous legal and legislative changes have had an impact on the Section 8 Program locally. Consequently, important questions have been raised regarding the functions and administration of this program. The following questions and answers should provide some insights into the current Section 8 Program. Part I of this article appeared in our last issue (San Francisco Apartment Magazine, May 2003).
Q. Explain the contractual relationship between the San Francisco Housing Authority (SFHA) and the rental property owner. Can an owner choose to leave the Section 8 program? How does she/he do this?
A. The Housing Assistance Payment (HAP) Contract is the legally binding document that permits the SFHA to pay a subsidy on behalf of the tenant. The SFHA enters into a HAP Contract with the owner once an owner has agreed to rent a unit to a tenant, and the unit has passed a Housing Quality Standards (HQS) inspection. The HAP Contract delineates both the owner's responsibilities under the Section 8 Program and the terms of the SFHA’s obligations to the owner. As long as the tenant continues to receive a subsidy and lives in the unit, the contractual relationship continues.
Each month, by cashing the HAP check, the owner certifies that the unit meets the HQS inspection and the tenant may continue to reside in the unit. Should the owner fail the HQS inspection, he/she is entitled to a period of time to correct any deficiencies. Failure to respond will result in the abatement of the subsidy. If the subsidy ends and the HAP Contract is terminated, the tenant vacates the unit. Payment on the HAP Contract will only be made while a tenant resides in the unit. Should abatement continue for six months, the HAP Contract will be terminated.
Only the SFHA may terminate a HAP Contract. If an owner wishes to terminate a relationship with SFHA, he/she may do so only by terminating the lease agreement for cause as outlined by the San Francisco Rent Ordinance. Once the lease ends, the HAP Contract automatically terminates. However, if the HAP Contract is terminated, the lease is not automatically terminated. Except for voluntary termination by the tenant, an owner can only terminate the lease for just cause.
You should understand that the SFHA relationship with the owner exists solely as a means of providing the subsidy to the tenant. An owner's decision to terminate the SFHA relationship but not the tenant relationship is tantamount to terminating the tenancy, since the tenant will not be able to afford the full rent without the subsidy. In the private market, terminating the relationship with the SFHA would be the equivalent of terminating the actual tenancy. This is why you cannot terminate a HAP Contract, but must terminate the lease agreement in order for the SFHA relationship to end.
Q. What is the lease arrangement between the rental property owner and the tenant? May the owner use his/her own lease or does the owner need to use the SFHA lease?
A. The lease agreement between the owner and the tenant is the legal document that binds each party to a pre-determined set of rules and obligations. The SFHA historically provided a model lease as a service to an owner who did not have a clear understanding of what regulatory language belonged in his/her lease for an assisted tenancy.
In 1996, the Department of Housing and Urban Development (which is a funding source for SFHA) issued a Lease Addendum, which cleared the way for owners to begin using their own leases instead of the HUD model lease. Owners who choose to use their own leases must sign the HUD Lease Addendum in order for the HAP Contract to be executed. Refusal to sign the Lease Addendum is equal to refusing to rent the unit to the subsidized tenant. The HUD Lease Addendum is required by federal regulations.
The HUD Lease Addendum contains all pertinent regulatory language required for assisted tenancies, including the obligations of both the tenant and the owner as set forth by the Section 8 Program. The HUD Lease Addendum prevails whenever there are any conflicts between the Lease Addendum and the owner’s lease. You will find that the HUD Lease Addendum is similar to HUD’s model lease. Owners are no longer required to use that model, but still must abide by its regulatory provisions.
Q. Explain the relationship between rents that the SFHA establishes and rents governed by San Francisco’s Rent Ordinance. Now that the Section 8 program is under rent control, if the SFHA grants a higher rent, whose jurisdiction prevails?
A. Rents are established by negotiating the initial rent amount with individual property owners for all rental units under the Section 8 Program. SFHA’s responsibility is to ensure that the owner’s request is reasonable and comparable to unassisted rental units in the area. The SFHA contracts with a local market survey company that provides existing market rates for all San Francisco neighborhoods. Each year, HUD publishes the Fair Market Rents (FMR) for all jurisdictions across the country. These FMRs become the basis for determining what the SFHA can pay as subsidies on behalf of tenants in San Francisco. The catch is that irrespective of the FMR, all rents must meet comparability.
For example, if the SFHA has a three-bedroom payment standard of $2808, this standard does not mean that every three-bedroom unit will command this same price level as of the publication date of that price. Areas, neighborhoods and units in San Francisco vary a great deal, and each commands an array of rents based on these differences. Inspectors work daily in these areas and neighborhoods and, with the market data, they have a good handle on the rental market. After an owner sets a price for a unit, the inspector will survey the quality of the unit and its location and amenities before he/she agrees to a specific rent amount. If the owner has set the price too high, a revised offer will be made that can be supported by comparability data in the SFHA office.
Owners are free to reject any offer at any time and rent the unit to another family. However, the SFHA's policy is to offer the owner what is reasonable and comparable for the unit based on the housing authority’s analysis. An owner is also free to provide the SFHA with comparability information that can be verified in support of the requested rent.
Once a rent is established, the Rent Ordinance for Voucher Contracts regulates rent increases. For voucher tenancies, owners must notify the tenants 60 days in advance of a desired rent increase. The limit on rent increases for voucher participants is the same as the limit under the Rent Ordinance once the unit rent reaches the payment standard for the precise family bedroom size. The SFHA sets the payment standard each year after HUD publishes the FMRs. Generally, these standards range from 90 percent to 110 percent of the FMR. For units with rents below the payment standard, the rent increase is not limited by the Rent Ordinance and has no limit until it reaches the payment standard. Once again, however, comparability prevails. If the owner is proposing to raise the rent to the payment standard and, if comparability is not met, the SFHA will limit the owner’s increase to a rent that is supported by comparability documentation. It may exceed the locally permitted adjustment percentage, but it cannot exceed the payment standard.
The situation is different in the case of families occupying units prior to receiving assistance by the Section 8 Program. The SFHA is able to renegotiate the current rent for an occupied unit for the purpose of attaching assistance to it under the Section 8 Program. Once the rent is renegotiated and a HAP Contract is executed, then the restrictions on future rent increases kick in as outlined earlier.
Q. Can a one-bedroom voucher be used for a studio or the reverse? What happens when one tenant is left in the unit after the remaining co-tenants have vacated?
A. Families in the Section 8 Program are issued vouchers based on the occupancy guidelines of the Administrative Plan of the Section 8 Program. Generally, it states that no more than two persons may occupy a bedroom, and children over 3 years of age are entitled to a separate bedroom from a parent. As household compositions change, their voucher size changes to reflect the new family size. In cases where the unit is larger than the family's voucher bedroom size, if the family can afford to pay the difference between the unit rent and their subsidy, they are entitled to remain in the unit. The decision, however, rests with the family.
When a family rents a unit, their assistance is based on their voucher size or unit size, whichever is lowest. Thus, a family with a one-bedroom voucher moving into a studio unit would receive a subsidy based on the studio payment standard. Conversely, if the family had a two-bedroom voucher and wanted to move into a three-bedroom unit, they would be limited to a subsidy based on the two-bedroom payment standard.
Q. The FMR for an apartment appears to be determined by both the size of the unit and the number of people living in it. However, if the number of tenants decreases, then the FMR is based on the tenant count even though the unit in question is still the same. Please explain the position of the SFHA on this issue.
A. Initial rents are never established based on the number of residents in the unit. Rents are based on quality, location, size, amenities, etc., but never on the number of occupants. Thus, any changes in the household composition do not warrant a change in the rent.
Q. What are the SFHA's current eviction criteria? How does it relate to the Rent Board’s 14 reasons for "just cause?" Do the Rent Ordinance restrictions also apply to Section 8?
A. The SFHA Section 8 Program does not evict tenants. Its role is simply to provide housing assistance for low-income families. The owner is the only one who has the right and responsibility to evict a tenant. According to the HUD Lease Addendum, an owner may only evict a tenant by instituting a court action. Proper cause must be given and a copy of the summons must be provided to the SFHA. On August 30, 1998, the Section 8 Program came under the auspices of the Rent Ordinance for lease terminations. This meant that for all evictions and lease terminations, owners are required to cite one of the fourteen just causes.
Q. What is the procedure for an owner to get into the Section 8 program? In general, how does an owner sign-up, receive payment and find answers to their questions?
A. If an owner wishes to rent a unit to a Section 8 family, he/she can begin by contacting Shawn Coleman, Ombudsperson, at (415) 674-3229 or Mary Ann Montesa at (415) 674-3257 to list the property for rent with the SFHA. The SFHA provides all tenant participants with a list of these units. The tenants then contact owners directly if interested. Owners are encouraged to screen prospective applicants as they would any other applicants.
Once they have deemed the tenant acceptable, the tenant can provide the owner with a Request For Lease Approval (RLA), which they complete and sign along with the tenant. The tenant returns the RLA to the SFHA office and an inspector contacts the owner directly to schedule a unit HQS inspection. If any deficiencies are found, the owner will have an opportunity to correct them before the tenancy is approved.
Once the unit is approved, the Lease, the Lease Addendum and the HAP Contract are drawn up, signed and returned to the SFHA with proof of ownership. The SFHA staff reviews the returned documents and submits them for payment. This process can take a few days or even a few weeks, depending on how quickly documents are returned. Owners are encouraged to remain in contact with the inspector to answer any questions or clarify any issues during the lease-up process.
Q. Why can't the property owner be given the FMR on the effective date of the contract instead of on the date the property owner signs the contract?
A. FMRs are used in determining the maximum subsidies entitled by a family during the lease-up process. Subsequent to that, any changes to the rents are executed at the contract anniversary, using the HUD Annual Adjustment Factors published in the Federal Register. If the owner does not request the increase in a timely manner, the rent increase would take effect 60 days from the date the request is received rather than on the anniversary date. The date of contract signing is not a factor in determining when the rent increase is effective.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. The information within this article is general in nature. Consult the advice of an attorney for any specific problem. Tony Ucciferri is the Special Programs Manager with the San Francisco Housing Authority. For more information on the Section 8 Program, please contact either Shawn Coleman at 415-674-3229 or Tony Ucciferri at 674-3208 or visit the Housing Authority’s Web site.
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