Why Is It Legal for Landlords to Refuse Section 8 Renters?

Thursday, December 13, 2018
Kriston Capps
CityLab

Families who receive housing aid in Baltimore and San Jose may soon have a better shot at finding an affordable place to live. That’s good, because right now, their odds are slim-to-none.

This week, the San Jose City Council asked the city attorney to draft an ordinance that would compel landlords to consider tenants who accept federal aid in the form of Housing Choice Vouchers, the program commonly known as Section 8. Baltimore’s city council is looking to pass a similar law. In these cities and in much of the nation, landlords are currently free to disregard or screen tenants merely on the basis of receiving assistance.

Even in areas with protections in place, equal treatment is far from a given. From city to city, a patchwork of policies influences how landlords look at Section 8 voucher holders—either as renters with federally guaranteed rent or red-flagged liabilities. Their attitudes can cement housing patterns at a broad scale. New research about landlords and renters points to tendencies that drive segregation by race and poverty. Unfortunately, these biases are hard to uproot—but some places are having an easier time of it than others.

“It’s very common for landlords to outright deny voucher holders,” says Martha Galvez, senior research associate at the Urban Institute.

Rules like the ones on track in Baltimore and San Jose would not “force” landlords to accept Section 8 vouchers (as some landlords might tell it). That’s a misperception, Galvez says. Rather, these laws prohibit landlords from rejecting tenants based exclusively on where the rent check is coming from.

Why these laws are necessary to begin with is harder to say. Several counties in Maryland* already prohibit discrimination on the basis of lawful income, but the state law does not. There’s more debate about what state law says in California, and court challenges abound in this state (and others). Beyond the legal debate, landlords plainly have misgivings about taking rent that is guaranteed by Uncle Sam.

Prejudice is one reason. In many cities, the words “Section 8” function as a powerful slur. When a white woman in McKinney, Texas, told a black girl and her friends at a public pool to “go back to your Section 8 homes” in a 2015 incident that quickly escalated to police brutality, that woman was tapping biased perceptions about race and class that are inextricably linked to housing segregation. Housing vouchers are part of both the problem and the solution.

Filtering Section 8 applicants, housing advocates say, is a backdoor way for landlords to discriminate against minority renters. (Back in 1973, when Donald Trump and his father were sued by the Department of Justice for racial discrimination under the Fair Housing Act, the future president accused the government of trying to force him to rent to “welfare recipients.”) Nationwide, 69 percent of voucher holders are racial minorities. In cities, that share can be much higher: As the Equal Rights Center notes, more than 90 percent of voucher holders in Washington, D.C., are black, despite the fact that African Americans now make up only 48 percent of the city’s population.

But racial discrimination is at best an incomplete explanation for why landlords avoid renters who are receiving housing aid.

A lot of what we know about landlords’ attitudes stems from “classic” studies on inner-city landlords from the 1960s and ‘70s. Most low-income landlords aren’t racist slumlords, this research concluded, but they are inefficient managers with little knowledge about real estate, finance, or government programs; most are financially vulnerable themselves. More recent research shows that this is still largely true of low-income landlords today.

For their part, skittish landlords say that accepting tenants who use federal housing aid means signing up for tedious paperwork, frustrating delays, and demanding inspections. One survey of Illinois landlords finds that participation in the Housing Choice Voucher program is driven by social cause. Yet another survey in Cincinnati shows that the local housing authority makes almost no effort to recruit more affluent landlords into the ranks of the housing vouchers program—limiting the progressive potential of Section 8. Landlords everywhere complain about working with housing authorities, Galvez says, and she acknowledges that the program varies widely from place to place.

While low-income landlords might be the victims of systemic segregation, too, they do make decisions that actively further the concentration of poverty. Landlords will sometimes accept vouchers for properties in poorer neighborhoods but screen them for others in wealthier areas, as a 2017 lawsuit demonstrated in Dallas. Even when Texas nonprofits act as intermediaries for low-income families—meaning landlords never need to interface with a housing authority or even a tenant—they will still encounter resistance from landlords.

But there’s no research to show that voucher holders make worse tenants than any other renters; in fact, there’s some research to indicate that landlords ask more questions of other low-income applicants than they do for Section 8 applicants. Landlords understand “the value of the voucher in increasing a household’s ability to pay the rent,” the Urban Institute report concludes. Yet landlords still reject them.

Explicit racial discrimination or no, the effect is the same: Landlords who slam the door shut steer voucher holders toward areas of concentrated poverty in minority neighborhoods. In Houston, less than 1 percent of families who receive vouchers live in areas described as “high opportunity.” Landlord laws can have a big impact on how far Section 8 stretches.

Place turns out to be a major driver in the effectiveness of housing aid. That’s built into how the program operates. Housing Choice Voucher recipients pay 30 percent of their income toward the rent, while the voucher pays the rest, up to a cap set at the local market rate. When apartment rents rise, families are responsible for making up the gap, while the value of the voucher dwindles. (The national affordability crisis is a special disaster for low-income voucher holders.) The limited number of affordable homes within reach of low-income families shrinks to zero when landlords choose to simply shut them out.

For a pilot study supported by the U.S. Department of Housing and Urban Development, Galvez and her colleagues at the Urban Institute conducted some 4,000 tests over 16 months across five cities. In Philadelphia and D.C., the researchers called rental listings that met area requirements for vouchers to ask whether the landlords accepted them. In Los Angeles, Fort Worth, and Newark, New Jersey, the researchers went a step further, tracking how landlords interacted with matched-pair testers (meaning one prospective housing applicant with a voucher and one without).

The results showed just how severe an obstacle landlord bias can be. Landlords denied applicants with Section 8 at high rates in Fort Worth (78 percent) and Los Angeles (76 percent). The rejection rates were even higher in more affluent neighborhoods. In Philadelphia, 67 percent of landlords refused to take vouchers, while another 10 percent set conditions for saying yes. For the tests, researchers sifted through more than 341,000 listings to find 8,735 potential units—a mountain of frustration and rejection.

Denial rates were lower in Newark (31 percent) and lowest of all in the District of Columbia (15 percent). In New Jersey, it’s illegal for landlords to refuse tenants on the basis of housing assistance. It’s illegal, too, in D.C., where the law is obviously more effective. Yet the same source-of-income protections apply in Philadelphia—where 83 percent of landlords in well-to-do neighborhoods nevertheless denied test applicants with Section 8 vouchers.

“There are other things going on, on the ground, that could impact whether or not landlords accept vouchers, and impact whether how well these laws work,” Galvez says.

States have a great deal of say in how landlords treat Section 8 renters, from California (where the state’s source-of-income law doesn’t apply to vouchers) to Texas (where state law preempts any city from passing local protections). Dizzying state and local ordinances alone do not explain why there’s so much variance between places where this particular box is banned.

Other research sheds a light on why landlords might be biased against vouchers in the first place. Context drives landlord decision-making, according to researchers at the University of Hawaii, Georgetown University, Johns Hopkins University, and Princeton University. Landlords weigh the value of housing vouchers against the potential benefit of what researchers call a counterfactual tenant —another hypothetical renter who might walk through the door with an application. This means that landlords, too, are testing Section 8 applicants against control groups (of their own imagining).

Local market conditions shape what landlords imagine to be an alternative, ideal, or likely candidate. The researchers explain:

We show that in Baltimore, the old housing stock makes [Housing Choice Voucher] inspections cumbersome, but the financial benefits of renting through [Housing Choice Voucher] make participation worthwhile for a substantial number of landlords, relative to the risks of renting to poor market tenants. Whereas Cleveland has a similarly aging housing stock, there is less of a financial incentive to rent through the program, and landlords perceive the counterfactual tenant to be quite similar to the voucher tenant. This makes inspections and other bureaucratic hurdles too costly to motivate landlords to participate if they have other options. Finally, we show that in Dallas motivation is shaped by market niche: for landlords with B and C- class housing in high-poverty neighborhoods there is strong motivation to participate, but those in opportunity neighborhoods have no trouble attracting reliable market tenants and thus they say they do not need to participate in the voucher program.

It’s important to remember that the Housing Choice Vouchers program is incredibly successful, despite the charges of racial discrimination or excessive red tape that critics have levied against it over the years. Some 2.5 million low-income families use vouchers to maintain affordable housing every day. Endless waiting lists are the biggest crisis for housing vouchers: More than 3 million families are stuck in this limbo. For the families who do receive a voucher, finding an apartment that will accept it is another hurdle. Landlords are largely responsible for how this process works.

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