By Harvey S. Jacobs August 7, 2010
Residential landlords, do you have vacant apartments or nonpaying tenants? Are late rent payments and tenant turnover cutting into your profit? You might be surprised to learn where you can find tens of thousands of qualified, prescreened local tenants whose rent is guaranteed to arrive on time each month and who tend to stay in a rental unit twice as long as others.
Look no further than the local housing authorities, including the District of Columbia Housing Authority, the Housing Opportunities Commission of Montgomery County and the Fairfax County Department of Housing and Community Development. These agencies, as well as their counterparts in other jurisdictions, make up the largest source of residential tenants in the Washington metropolitan area.
The housing authorities administer the Federal Housing Choice Voucher Program, formerly known as the Section 8 program. The voucher is for eligible tenants, subsidizing their rent. Tenants are required to pay a portion of the “market rent,” as it is known, equal to 30 percent of their household income. The housing agencies pay the difference between this tenant-paid amount and the market rent.
There are income limits for tenant eligibility. For example, in order to qualify for an HCVP voucher in the District, a family of four can have a gross annual income of no more than $54,400. There are also limits on market rents. These limits are based on a number of factors, but basically they go according to the number of bedrooms, the location and the amenities included in the rent. For example, in the District’s Glover Park area, a two-bedroom apartment with all utilities included has an “approved rent” of $1,643 a month. Of this amount, the tenant would be responsible for paying $493, and the housing agency would pay the remaining $1,150 directly to the landlord. Some of the agencies will even use direct deposits to deliver rent to the landlord’s bank account on the first day of each month.
The advantages to landlords of participating in the HCVP program include the ability to receive a stable source of subsidized rent at essentially market rates; reduced turnover; and high-quality tenants who have been prescreened, interviewed and subjected to criminal background checks. Typical HCVP tenants are working lower-income or disabled people. Their rental history is also factored in when the housing agencies determine eligibility. Another landlord benefit is that if the tenant’s income decreases, the amount of rent subsidized can increase so that the landlord does not suffer any diminution in rent.
As with any government subsidy, there are, of course, some strings attached. To register a rental unit in the program, it must be inspected at the start of the lease term and annually thereafter. The checklist of inspection items is available online and should be consulted before you schedule the inspection, because they can take up to three weeks to line up. In the District, the landlord is required to visit the housing agency’s offices to register units in the program initially. Afterward, registration can be accomplished online.
Landlords can use their own lease forms, and the landlord-tenant relationship is not affected by the HCVP subsidy. Should the tenant violate any term of the lease, including payment of rent, the landlord can initiate eviction proceedings. But HCVP tenants have an enormous incentive to pay their portion of the rent; if they are evicted, they lose eligibility for future participation.
There is one additional agreement between the housing agencies and the landlord: In essence, for complying with the inspection requirements, the housing agency agrees to pay the subsidized portion of the rent.
There is no shortage of tenant applicants. Montgomery has a waiting list of 30,000 applicants for 6,000 available vouchers, according to Les Kaplan, director of the Office of Community Partnerships for the county’s housing commission. The program generates $74 million in rent payments to county landlords.
With a budget of $220 million, the District has 10,500 vouchers with an open waiting list of more than 30,000 applicants. The city also administers a local program that provides approximately an additional 750 housing vouchers, according to Dena Michaelson, director of public affairs and communication for the D.C. Housing Authority.
Attesting to the stability of the tenants, only about 500 vouchers become available in Montgomery each year. In the District, that number is even smaller: only 300 voucher turnovers. Because of enormous demand, the agencies are seeking more landlords to participate. The agency in Fairfax holds landlord briefings throughout the county. The Montgomery commission has established landlord forums to facilitate communication between landlords and the agency. Additional information can be found at dc.housing.org, fairfaxcounty.org and hocmc.org.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, jacobs@jacobs-associates.com or ask@the