Serving Skokie rental property owners, renters and homeowners
Section 8 - What You Need to Know
What are the recent changes to Section 8 and how do they effect you?
Actually, the changes weren't to the Section 8 program itself, but they do impact landlords who previously did not accept Section 8 renters. Up until recently, it was up to the landlord's discretion whether to allow Section 8 tenants. That all changed on May 8, 2013 as the Cook County Board approved a measure that would penalize landlords for discriminating against Section 8 voucher holders.
This article will not explain what the Section 8 program is, or discuss the various pros and cons of the program. That will be saved for a possible future article. If you have those types of questions, please ask any experienced landlord. I guarantee you will get an education. Instead we are just going to discuss how the recent change impacts you as a landlord.
First, let's look at what hasn't changed. While you can't reject a prospective renter for having Section 8, they still must pass all the standard application checks. All applicants should be vetted with a Credit check, Criminal Background check, Eviction check, and verification of employment and current residency. This, as always, is the responsibility of the landlord. The Section 8 program runs none of these checks. All smart landlords already run these checks, and most include the cost in their application fee.
Next, the apartment itself needs to be approved to accept Section 8. This means your apartment will be inspected to make sure that it meets the housing standards of the Section 8 program. The inspector will examine the exterior of the building, the plumbing and heating systems, the exits and hallways, and each room in the apartment to make sure the unit is safe, clean, and in good condition. The unit must be vacant at the time of the first inspection, and all utilities must be turned on. The inspector must have access to the unit itself, the basement, and all common areas. There are many factors that the program considers before approving an apartment. Note: Never offer money to the inspectors to ensure approval, even if they seem to be expecting it. Inspection and approval by the Section 8 office is in no way related to Village health or building inspection, and has no bearing on the actual livability or rentability of the apartment.
Finally, the rent and security deposit charged must be in line with accepted Section 8 limits. So you'll want to find out what those limits are and adjust your rents & deposit amounts accordingly. Never accept an offer of additional payments under the table from the prospective tenant. If it's not in the lease, the renter is under no obligation to pay the additional rent and you will have no recourse for collecting the additional monies.
In summary, these are the steps involved in renting to a Section 8 tenant:
A family with a current Section 8 voucher views your apartment and wants to rent it.
You screen the tenants to make sure they are suitable.
You agree to lease to the tenants and contact the Section 8 office for approval.
The Section 8 office checks to make sure the family can afford the rent, the rent is reasonable compared to other rents in the community, and the lease is acceptable.
The Section 8 office sends an inspector to check your apartment to make sure it meets program standards.
After the apartment passes inspection, the Section 8 office sends you a contract to sign.
You sign the contract with Section 8 and sign the lease with your tenants, and the family moves in.
The family pays its portion of the rent and Section 8 pays the rest.
So the next time a prospective renter calls and asks if you accept Section 8, the answer should be "I don't consider that in the approval process." Then tell them that if they are interested in the apartment, they can come in, fill out an application and pay the (non-refundable) application fee to see if they qualify. Be sure to explain to them the types of checks & verifications performed and the security deposit required. Also, clearly state that the full rent amount must appear on the lease - no exceptions.
Poor families use 'supervouchers' to rent in city's priciest buildings
The high-rise at500 N. Lake Shore Driveis the second-most expensive in the city, with rents for a one-bedroom apartment approaching $3,000 a month, well beyond the reach of most Chicago residents.
But that's not too much for theChicago Housing Authority, which has used federal tax dollars to pick up most of the tab for four lucky residents in the year-old building, with its sweeping views of Lake Michigan, a concierge and a dog-grooming center.
The tenants moved in over the past two years as part of a push by the CHA to expand its housing voucher program so that more low-income residents can leave the city's roughest neighborhoods and start a new life in places with low poverty and crime and close to good schools and jobs.
Yet some landlords say it's a mistake to use scarce tax dollars to pay ultra-high rents for a fortunate few when more than 15,000 people sit on the CHA's voucher waiting list.
“This is nuts,” says landlord Tony Rossi, president of Chicago-basedRMK Management Corp., who describes himself as a liberal Democrat. “In a situation where you're dealing with a low-income person, do they really need a 25th-floor apartment with a lake view? It just doesn't make sense to me.”
It doesn't make any sense toU.S. Rep. Aaron Schock, either. The Peoria Republican last month pushed a measure through the House to curb the payments and says he is seeking an investigation by the inspector general of the U.S. Department of Housing and Urban Development, which pays for the voucher program and sets many of its rules.
“This is about making sure that people are not abusing the system,” he says.
The CHA says in a statement that the “exception payments” for high-cost apartments cover less than 2 percent of the authority's roughly 38,000 outstanding vouchers. The higher payments—known as supervouchers—are necessary to help low-income residents move into better neighborhoods, which have few affordable housing options, the authority says.
Most landlords agree with the effort to expand the use of “housing choice vouchers,” formerly known as Section 8 vouchers, to more prosperous parts of the city. Vouchers have become a bigger part of the CHA's policy since it tore down big public housing projects likeCabrini-Green, offering recipients more flexibility to choose where to live so they can escape the cycle of poverty.
Under the voucher program, which is federally funded but run by local agencies like the CHA, an eligible resident can rent an apartment in a privately owned building. Voucher holders generally must pay up to 30 percent of their monthly income, if they have any, to cover rent and utilities, with the CHA picking up the rest.
PUBLIC HOUSING'S NEW LOOK
The CHA has approved supervouchers for low-income residents in some of the most expensive apartment buildings in the city.
500 N. Lake Shore Drive The CHA has approved vouchers for residents in four apartments with rents ranging from $2,235 to $2,673 a month.
The Streeter, 345 E. Ohio St. A family of three used a voucher for an apartment at the Streeter costing $3,060 a month.
Aqua Tower, 225 N. Columbus Drive One voucher holder lives in Aqua Tower at a rent of $2,566 a month.
Source:Chicago Housing Authority, CoStar Group Inc.
HUD caps how much the CHA can pay a landlord. A few years ago, the CHA could not pay more than 110 percent of a fair market rent calculated by HUD. The current fair market rent in Cook County for a one-bedroom apartment is $826 a month.
But HUD allowed the CHA to change its rules in 2010, pushing the cap up to 300 percent in designated “opportunity areas,” such as downtown and Lakeview, where poverty is low and subsidized housing is scarce.
Raising the threshold was essential because rents are so much higher in opportunity areas, making them off-limits under the old restrictions, saysAlexander Polikoff, co-director of public housing at Business and Professional People for the Public Interest, an advocacy group.
“It was from a good motivation and a sound policy reason,” he says. “The CHA is to be commended for being one of the only housing authorities in the country that understands the idea of housing mobility.”
The CHA has approved 706 supervouchers since HUD signed off on the higher limits, and the number has jumped in the past two years. The CHA approved 364 in the first half of the year, up from 291 for all of 2013, 44 in 2012 and seven in 2011, according to the authority. Eighty-seven payments exceeded 200 percent of HUD's fair market rent in the first six months of the year, versus 49 for 2013 overall.
Eleven leases hit the 300 percent cap in the first six months of 2014, up from three for last year, according to the CHA. High-end apartment buildings with the highest voucher payments included 500 N. Lake Shore Drive,Aqua Towerin Lakeshore East andthe Streeterin Streeterville.
In the South Loop, the CHA is subsidizing three tenants at Amli 900, a 440-unit building at 900 S. Clark St.
“Amli supports the efforts in a number of communities across the country in which we operate to provide affordable housing to qualified people,”Greg Mutz, CEO of Chicago-based Amli Residential, which owns the building, says in a statement. “Amli does not support the push to provide luxury rental housing to a lucky few when so many are on the waiting list for basic housing.”
According to the CHA, 15,230 people were on its waiting list for housing vouchers at the end of 2013.
Even Mr. Polikoff, who supports the CHA's broader push, says subsidizing low-income residents in ultra-high-rent buildings is “an inappropriate use of taxpayer money.”
In its statement, the CHA says exception payments provide “CHA families the ability to choose where they want to live and enjoy the great diversity that Chicago communities have to offer.” A HUD spokesman declines to comment.
Some building owners are happy for the business. Justin Elliott, principal at Chicago-based Marc Realty Residential, has few complaints after the CHA approved supervouchers for 36 leases this year and last in a 96-unit building Marc owned at 2300 S. Michigan Ave. Marc recentlysold the building, which had the most supervouchers by far among all properties, according to the CHA.
“All in all, we viewed this as a very positive experience,” Mr. Elliott says.
Still, the image of a person on public assistance living in a luxury apartment building could generate a political problem for HUD and the CHA.
In Washington, Mr. Schock's proposal would prohibit exception payments above 120 percent of an area's fair market value calculation. The measure is not expected to go far in the Senate.
Closer to home, Mr. Polikoff says CHA officials told him that the authority plans to lower the cap to 150 percent. The CHA won't confirm that, but its statement did not rule out a change:
“As it does every initiative, CHA has and will continue to evaluate program impact and make adjustments as necessary to ensure it meets objectives—with the ultimate goal of expanding housing options for families in a variety of Chicago neighborhoods.”
Visit us on Facebook at Skokie Independent Landlord Association.