Housing Choice Vouchers: The Right Choice for Market Rate Developers?

Particularly in this post-pandemic environment with rising housing costs that are pricing out even market rate renters, there is a push by communities and governing bodies for developers to include affordable housing in new or existing developments. In response, market rate developers often raise the basic question of how the inclusion of affordable units can work from an operating budget standpoint.

Developers may not be aware of Housing Choice Vouchers (HCV) that low-income tenants may use to pay a portion of market rate rents, allowing them to afford market rate housing, including in areas of opportunity or neighborhoods with escalating housing costs. In jurisdictions with a landlord incentive program, there may be an additional financial reward for accepting tenants using HCVs. Thus, developers should investigate HCVs and associated landlord incentive programs when considering leasing units to those earning significantly less than the area median income.

What Are Housing Choice Vouchers?

Designed to aid low-income families, the elderly, and people with disabilities in finding suitable safe housing, the HCV program is the federal government’s largest rental housing assistance program. The HCVs are administered locally by public housing agencies (PHAs). Participants in the program are responsible for finding housing in the private market to rent, but unless in a jurisdiction with laws prohibiting source of income discrimination, landlords have the option to accept tenants who use HCVs to pay a portion of their rent. Landlords renting to HCV tenants are paid directly by the PHA and can receive at or near market rental rates.

Landlords can select and approve voucher recipients based on their own rental criteria. Once selected, landlords complete the voucher recipient’s Request for Tenancy Approval form. After the landlord and tenant agree on lease terms, the PHA must inspect the dwelling. The rental units must meet the minimum health and safety standards, as determined by the PHA. The PHA also determines that the rent requested by the landlord is reasonable compared to similar units in the marketplace and not higher than those paid by unassisted tenants on the premises. One of the goals of PHAs when reviewing reasonableness is to approve rents that are desirable for owners of high-quality private-market units.

After PHA approval, a housing subsidy is paid directly to the landlord by the PHA on behalf of the participant. The participant pays any difference between the actual rent charged by the landlord and the amount subsidized by the program. Simultaneously, landlords must also enter into an agreement with the PHA called a Housing Assistance Payments Contract, which runs for the same term as the lease.

Eligibility for HCVs

Eligibility for a HVC is determined by the PHA based on the total annual gross income and family size. Participation is limited to US citizens and specified categories of non-citizens who have eligible immigration status. By law, a PHA must provide 75% of its HCVs to applicants whose incomes do not exceed 30% of the area median income. Median income levels are published by the U.S. Department of Housing and Urban Development (HUD) and vary by location.

Housing Minimum Standards

An inspector will conduct a housing quality standards inspection. All housing units with HCV tenants must meet the following 13 housing quality standards at the commencement of the assisted occupancy and throughout the assisted tenancy:

Sanitary facilities
Food preparation and refuse disposal
Space and security
Thermal environment
Illumination and electricity
Structure and materials
Interior air quality
Water supply
Lead-based paint
Access
Site and neighborhood
Sanitary conditions
Smoke detectors

The housing units must pass the program’s housing quality standards and be maintained up to those standards as long as the development receives housing assistance payments.

Landlord Incentive Programs

Recipients of HCVs frequently struggle to find housing due to landlords’ often incorrect perceptions of the financial impact of HCV. Responding to these perceptions, landlord incentive programs have been a useful tool to educate landlords and help HCV recipients find homes. Landlord Incentive Programs help combat the perceived added risks of renting to lower-income households. There are numerous landlord incentive programs in Pennsylvania and throughout the country that could benefit current rental property owners and future developers.

Many states, cities, and Public Housing Agencies (PHAs) are attempting to increase the range of rental housing options for low-income residents. Due to their potential to appeal to market rate landlords, HCVs are viewed as a tool that can provide access to rental units outside of the typical affordable housing space and potentially in areas of opportunity. These incentive programs are one way that state and local governments are encouraging landlords to accept HCVs.

For example, in Pennsylvania, multiple counties and municipalities have introduced landlord incentive programs. Some examples are below:

Allegheny County
- Launched the Housing Navigator Unit to recruit and support landlords and connect potential tenants with available units.
- If participating in the Housing Navigator program, case managers conduct regular home visits and landlords can access up to $3,000 to offset costs associated with damages above the security deposit.
- Landlords are also eligible for a $2,000 sign-on bonus and a $1,000 retention bonus.
Bucks County
- Launched the Bucks County Housing Link to promote public/private partnerships, and to coordinate connections between landlords and tenants.
- Landlords that work with the Housing Link through the Bonus for Bucks program are eligible for continuity payments, bonus payments, and a finder’s fee of $2,000 for referring a new landlord to the program.
Lehigh County
- Landlords that participate in the Landlord Engagement Program are eligible for a signing bonus ($1,000 for the first unit, $500 for the second unit, and $250 for each additional unit), and up to $2,500 for mitigation.
Montgomery County
- Landlords that work with the Your Way Home program are eligible for a one month “hold” payment if the rental process causes a unit to remain vacant, unpaid rent reimbursement if a program participant vacates, and payments of legal fees associated with evictions.
Pittsburgh
- In addition to any incentives available to landlords in Allegheny County, those within the City are also eligible for incentives for participating in the Emergency Housing Voucher program, including $1,000 for participating in the program, and $2,000 for retaining a unit in the program.
Philadelphia County
- Landlords that participate in the HCV program can receive a per-unit signing bonus of $300, and landlords with units located in higher-income neighborhoods are eligible for up to $1,000.
- An insurance fund has been established to pay landlords up to $2,500 above the security deposit to repair damages caused by a tenant.

Multiple states, municipalities, and PHAs outside of Pennsylvania offer similar incentives. These incentives, combined with existing legislative incentives, such as zoning bonuses for the inclusion of affordable housing units, make this a good time for landlords to explore HCVs.

Interested in Becoming an HCV Landlord?

Landlords who would like to rent to voucher holders should contact their local PHA. There are specific details for the process and the method for posting your vacant units. You can find your local PHA at PHA Contact Information.

Developers who want to go beyond leasing to those of low income and are interested in setting aside a portion of the units in an otherwise market rate residential building should also consider applying for project-based vouchers (PBV) from their local PHA. PBVs are tied to units rather than tenants and similarly cover a portion of the rent. With some exceptions, PBVs are awarded through a competitive process. The PBVs are provided pursuant to a Housing Assistance Payment Contract, typically for a 20-year term.