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Landlord Leader Says Section 8 in Trouble

Friday July 09, 2004

The former head of a local African American landlords association has charged that the Berkeley Housing Authority’s new Section 8 rules will result in a severe reduction in available Section 8 housing and a drop in minority renters using the program. 

Jim Smith, a Section 8 landlord and current vice president of the Berkeley Property Owners Association (BPOA), warned that the new rules could push landlords out of the Section 8 program just as the city is about to exhaust its limit of allotted 1841 Section 8 vouchers.  

“Believe me, when landlords learn that they won’t have the guarantee of a market rate they are going to leave the program,” he said.  

The Berkeley Housing Authority, facing federal cutbacks and a scathing audit report that found some landlords were receiving higher than market rate rents, is tightening its rules for overseeing the city’s Section 8 housing stock. 

In a July 1 memo, the housing authority warned that requests for rent increases would be denied unless the landlord could “clearly” show that the unit in question was below market and that it would slash rents for Section 8 units found to rent for above comparable market rate apartment units within the same apartment building. 

But an outflow of landlords from the Section 8 program, as predicted by Smith, like the one which happened after the repeal of rent control on vacant apartment units sent rent prices surging, would cost the housing authority precious federal funds. 

Smith, who until recently had headed the Black Property Owners Association, said he met with eight Section 8 landlords Saturday to discuss the new rules and begin planning a response that could include a legal challenge. 

Through Section 8—the federal government’s most popular low income housing program—tenants pay 30 percent of their income towards rent while the housing authority uses federal funds to pay the remainder. 

Berkeley Housing Director Steve Barton said the move is in response to a Bush administration policy capping the average housing assistance payment the housing authority can pay to landlords.  

Already the housing authority pays on average $10 more per one-bedroom unit than the $1,039 set by the Department of Housing and Urban Development HUD, Barton said. The differential is estimated to cost the housing authority $200,000 this year as it struggles to remain solvent. 

Barton said the memo doesn’t change Section 8 rules guaranteeing landlords a market rent; it simply warns them that rules long ignored will now be enforced.  

By law the housing authority is required to make annual market rent determinations for all of their units. However, a report from an independent auditor, released last spring found that among other shortcomings, the housing authority failed to calculate market rents and opted not to reduce rent subsidies even in the declining rental market. 

After years of receiving below market rents, Section 8 landlords have enjoyed years of rising federal subsidies to catch up with the market. But when Section 8 rents attained parity in 2002, local rents started dropping, while the housing authority kept Section 8 rents stable. 

The upshot, Barton said, is that some Section 8 landlords now receive higher than market rent. He insisted the new policies would still guarantee landlords the high end of market rent. 

But Smith countered that Section 8 landlords, who, he said are disproportionately older minorities with few apartment units and many long-term tenants, need the higher rents from Section 8 to offset below market returns they receive from rent controlled units. 

“A lot of minorities are stuck with people paying 50 percent of market,” he said. “There is an injustice when the rules for above market units all of a sudden change, but the rules for below market units stay the same,” he said. 

Smith also fears that with the Bush Administration calling for millions in Section 8 cutbacks, once Berkeley rents start rising again, Section 8 units won’t be able to keep up.  

“When rents start going up, nobody is going to make sure Section 8 goes up too,” he said. “The government doesn’t work that way.”