“Illinois Housing Choice Voucher Program” – KSN attorney Jessica Ryan discusses the laws and regulations associated with Section 8 and Affordable Housing in Illinois. (42 mins.)
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Nikki: You are listening to the KSN podcast and today we’re talking about affordable housing in section eight. Welcome to the KSN podcast where you’ll hear from KSN attorneys as they share their experience and insight on legal issues surrounding community associations, collections, property tax appeals, and landlord tenant law. I’m Nikki and today we’re joined by KSN attorney Jessica Ryan. Jessica practices landlord tenant law, as well as condominium, townhome, and homeowner association law. Please note that this is a previous webinar recorded on March 23rd, 2022.
Jessica: So, this afternoon, we’re going to be talking about section eight and affordable housing. I will say, this is one of the dryer topics that we have in our seminar series this year. I usually try to liven things up with some colorful stories but this topic just does not have a lot of them. So, we’ll go through all of the requirements and I’ll talk about different issues that arise with section eight. The process for applications for section eight and terminating leases that have vouchers and some discrimination issues that come up with vouchers. Really quick for anyone joining who does not know me. I’m a partner here at KSN. I’m the head of our landlord tenant department. I have been here 20 years now, which seems unfathomable. I don’t know how 20 years has passed so quickly but I really, really have enjoyed my career, especially as it has developed into the practice area of landlord and rental properties in multi-family housing. I work with the Chicago land apartment association as a legal advisor to the board and on their legislative committee and also as corporate counsel. So, I try to stay very involved in the industry and kind of on the cutting edge of what’s coming down the pipeline so that I can keep my clients informed and be the best council that I can be to my clients. And also, it’s an industry that’s important to me. So, I want to make sure that I am involved in doing what I can to help out. So, all right, let’s get started.
As an intro, section eight is really just a common name for the housing choice voucher program, which can also be referred to as HCV, which is funded by the US department of housing and urban development. The voucher programs are regulated and funded by HUD and they’re administered locally by public housing authorities which you’ll see shortened in my slides as PHAs. So, in Chicago, it’s CHA, the Chicago housing authority. In suburban Cook County, we refer to it as HAC, H.A.C., which is the housing authority of Cook County. So, basically a public housing authority issues rental vouchers to participant families to help them pay for their rent and utilities. There are also, and we’ll touch on this very quickly project-based vouchers which can be called PBVs. That’s not easy to say. And unlike a rental voucher and HCV voucher, that project-based voucher is tied to the unit rather than the tenant. So, we’ll kind of go through the differences between the two programs, but let’s start with the housing vouchers. So, section eight housing vouchers, it’s basically just a form of government rental assistance. It helps the family based on their income level. When Congress established section eight and that’s why it’s called section eight, it is section eight of the housing and community development act back in 1974 one of the goals was to make sure people earning low wages could find decent housing in a suitable living environment outside of public housing units.
So, basically the gist of the program is the third bullet point there, people who meet income requirements can apply to the program to receive a voucher when the voucher becomes available. If the family or the household is approved and selected, then they get to go out and find an apartment or a house to rent using the voucher as additional income and once they’re approved and they find their apartment and it goes through the process and they move into their unit, then the local housing authority starts sending the rental payments or the voucher payments directly to the landlord. So, that’s basically just a summary of how the voucher program works. Let’s talk a little bit more in detail. So, the payments cover some or all of the voucher holders’ rent, depending on the income level of the household. On average, each household pays somewhere around 30% of its income on rent. That’s the rough number that the public housing authority will use and most subsidized housing programs use a similar formula to determine the amount of the subsidy and the amount of rent that the tenant will pay. And this program participant families can pay for housing in the private market, such as apartments, duplexes, condominiums, townhomes, and single-family homes. So, any of those types of rentals, which are privately rented by a private rental property owner can have a voucher holder, a section eight voucher holder as a tenant.
The idea obviously was to remove public housing as the only option for low-income families and the voucher can be used for rent and utilities. And again, it’s about a 30 to 40% calculation of the household’s income to be used toward rent and utilities. Since there are more families who need assistance than there are funds available, most public housing authorities like CHA are using wait lists to identify eligible families to participate in the program. So, generally when a voucher becomes available, the family at the top of the waitlist is contacted and screened for eligibility. A family is determined eligible using several factors, including that the family must meet HUD’s definition of a family. They must qualify on the basis of citizenship or eligible immigrant status. They have to meet the income limits specified by HUD. They have to provide social security number information, sign all of the required consent forms and pass criminal background screening. About every two years, the families have to reestablish these eligibility criteria and in addition, all household members have to follow the terms of the lease with the property owner, as well as in CHA’s case, in the Chicago housing authorities case, the family obligations, which is a form that they have and each public housing authority has something similar that has certain requirements that the household must meet in their conduct and compliance with lease terms in order to remain in good standing and continue receiving a voucher.
The family is issued a voucher by the public housing authority then and the tenant-based voucher program places the choice of housing in the hands of their participant family and families are issued what we commonly call moving papers. So, once a family has met the criteria and they are issued or approved for a voucher, then they’re issued moving papers and they then have 120 days to find affordable available housing in the private market that suits their needs and the family searches for a unit to rent and at that point, then they will ask the landlord if they accept section eight. And when we talk about discrimination, we will talk about the landlord’s discretion and whether the landlord has any discretion in accepting section eight. And also, it’s very important to keep in mind that the family has to locate the dwelling unit before the voucher expires. So again, once they’re issued moving papers, they only have 120 days to find an affordable, available unit to live in. We’ll talk a little bit more about moving papers. So, the voucher holder has to provide a packet to the landlord who’s participating in the section eight program with a request for tenancy approval, which we refer to as the RTA and these forms also include a request for inspection. So, the landlord completes the RTA and either the voucher holder who’s the prospective tenant or the landlord returns the RTA with the packet to the housing authority with any other additional information that the housing authority needs to allow the landlord to take part in the program.
Once the paperwork has been submitted, both the property owner and the unit must pass the public housing authority’s screening process before the family’s cleared to move in. The property owner actually must pass a criminal background check. LLCs, if the property’s held in a corporation, they only have to provide a certificate of good standing and then the unit itself must pass the housing quality standards, HQS inspection in order to determine if the unit meets the federal housing quality standards. So, after the unit passes the landlord and the public housing authority then begin negotiating the amount of the rent. Basically, the public housing authority makes a rent offer which depends on a few factors including payment standards for the voucher size, the property owners requested rent, the rents of other comparable unsubsidized rental units in the area, basically the market rate and the income of the participant family. It’s very important to remember and take note that the public housing authority does not subsidize and pay for application fees, non-refundable move-in fees, security deposits, or the moving costs of the family. Those have to be funded by the household because the voucher will not cover those.
If the property owner, then accepts CHA or the public housing authorities rent offer, the public housing authority signs, a housing assistance payment contract, housing assistance payment contract, most oftenly referred to as a HEP contract. I have a lot of clients who’ve always just referred to it as a HEP contract and never even realized what it stands for because for years and years and years, you just hear HEP contract. So, the public housing authority signs the HEP contract with the property owner and in that agreement, the housing authority agrees to pay a portion of the participant families’ rent each month. Then the voucher holder, the prospective tenant and the property owner sign a standard lease agreement between the two of them. Very important to note as well. The housing authority is never a party to the lease between the family and the property owner. As a property owner, if you are doing a section eight program with a voucher holder, you will only be signing the HEP contract with the housing authority. The lease will only be between you and the voucher holders and also make sure if you are renting in a section eight situation, the family should not move in until the HEP contract is executed. That HEP contract is your contract, your document in which the public housing authority promises to pay a portion of the voucher holder’s rent. This voucher holder has the voucher because they cannot pay the entire amount of rent.
So, if you don’t have a signed HEP contract, you don’t have a promise for the housing authority to pay the remaining rent that the voucher holder can’t cover and if you allow the voucher holders to move in without the signed HEP contract, and something goes wrong at the last minute, you are not going to get payments from the housing authority. So, it’s very important that you get that HEP contract executed before you allow the voucher holders to move in.
Okay. Next one. So now let’s talk about how the voucher program is different than those project-based subsidies. So, a tenant receiving an HCV, that’s our voucher subsidy, will hold the voucher for as long as the tenant is eligible for the program. Remember we talked about the different criteria that a household must meet to become eligible. So as long as the tenant and the household are eligible for the program, they can hold a voucher under the HCV program. Then if the tenant decides to move, the voucher follows the tenant. So, the tenant can take the voucher to any housing authority in the country as well as Puerto Rico and other US territories that administer an HCV program. So, HCV, the voucher follows the tenant and when they move, the tenant, if they want to move, they’re given their moving papers and the process begins again. Different than the project-based voucher program, PBV. I’m just going to have to keep saying project-based voucher, cause the PVB is not coming out easily. That program, the project-based program, is connected to the unit, not the family, not the tenant. So, in Chicago, the CHA maintains 15-to-30-year HEP contracts for thousands of units at CHA board approved multi-family properties.
When a project-based voucher unit becomes available, CHA then provides the wait list of potential families to the property manager, property owner who screens and leases the unit. CHA also conducts annual eligibility reviews and inspections of each project-based voucher property to ensure ongoing contract compliance. Some obligations while a unit is on the project-based voucher program the participant families and the property owners will still be governed by all applicable rental laws in the city of Chicago or whatever municipality they might be in, but they also have contractual obligations to the housing authority that they must fulfill. On the participant family side, their responsibilities include and this is not an exhaustive list, but some of the most important responsibilities that the family will have is obviously one, paying their designated portion of the rent and utilities. They have to keep the unit in a safe, decent and sanitary condition, which will be determined and insured by the annual inspections that the housing authority will conduct. The families have to follow the terms of the lease and always upon request allow the property owner and the housing authority to inspect the unit.
So, in the project-based voucher program, those are some of the responsibilities the families have to adhere to. On the property owner’s side, the property owner’s responsibilities include and again, this is not an exhaustive list, just some of the highlights. They obviously have to collect the designated portion of the rent from the families. They have to make timely repairs to the unit, when necessary, they are required by the PBV, oh my goodness program, by the requirements of the program to enforce the terms of the lease when the situation arises and the owners must allow the housing authority to inspect the unit. So those are some of the differences. The basic difference, just to remember the difference between the two, a housing choice voucher, the HCV program, what we refer to as our section eight, that voucher follows the tenant and the tenant is eligible for the voucher and the tenant can use that voucher anywhere in the United States that has an HCV program, they get their moving papers, they re-certify their eligibility and can take that voucher with them to any unit anywhere in the US or its territories, the project based voucher, PBV, I would just have to stop saying it, it’s terrible, PBV program that voucher is tied to the unit. The unit is approved to be a PBV unit by the housing authority and the housing authority, when the unit becomes available, will provide a wait list of families that are on the list.
Alright. So, differences covered those. Let’s talk a little bit about the fair housing act and how discrimination plays into section eight and the voucher program. Just to be clear later in the year, we will have a webinar on discrimination issues in multi-family rental properties. So, I’m not going to get into a ton of detail on discrimination in general, because I don’t want to take away from the webinar coming up later in the year, but there definitely are some discrimination issues that arise with section eight tenants that we definitely need to hit on today. So, the first bullet point, I think everybody’s very familiar with state and federal law prohibit housing discrimination based on race, color, national origin, religion, sex, including sexual harassment, family size or disability. State law also prohibits discrimination based on sexual orientation, which includes gender identity, marital status, military status and age which is generally 40 and over. When section eight comes into play, if you look at the Cook County and Chicago fair housing ordinances, they add another protected class. So, when I say protected class, I’m talking about the different categories of individuals that are protected by fair housing. So, race, national origin, sexual orientation, those categories. Those are called protected classes. In Cook County and Chicago, they’re local fair housing ordinances also prohibit discrimination based on source of income.
So, a landlord cannot deny applicants who use a section eight housing choice voucher as a source of income to support their rental or the purchase of housing in Cook County or Chicago. So, if you think about the source of income, you cannot consider where their money for rent is coming from. If they have some money for rent coming from a voucher, you have to allow them to rent. So, Cook County and Chicago landlords do not have any discretion whatsoever in allowing or denying tenants based on section eight, you must allow tenants who have vouchers to rent at your property. Elsewhere in the state, the state of Illinois does not include a source of income in the state statute, and it is not included in the federal act. So outside of Cook County unless there is a local ordinance, I believe Naperville may have a source of income. There are a few around, so you have to be a little bit careful, but generally in the state of Illinois, source of income is not a protected class. So outside Cook County in general you can deny section eight.
So, let’s talk about some examples of what might get you in trouble if you are in Cook County or the city of Chicago. If you refuse to rent or sell to an otherwise qualified person, because that person would use a section eight voucher to support the rent or purchase price. Obviously, that’s what we just talked about. That is the general form of discrimination. That one’s the obvious one. The next few aren’t quite as obvious. If a landlord can be shown that the landlord refused to cooperate with all those administrative requirements of the section eight voucher program, you know, completing the routine paperwork, allowing inspections of the property, if it can be shown that the landlord is willfully purposely refusing to cooperate so that the landlord can avoid having section eight tenants that landlord’s conduct will be considered discriminatory and the landlord’s going to be in trouble. So, if you are having issues completing some of the paperwork or scheduling an inspection, make sure you are keeping a paper trail. I have a lot of clients where CHA isn’t responding timely and my client has absolutely diligently been trying to complete the paperwork or schedule the inspection and the fault has been on the housing authority. We don’t want the applicant or the section eight voucher holder to get the impression that we as clients, as the landlord, you know, that they’re trying to avoid the process or mess up the process so they don’t have to take the voucher holder.
So, having a really good paper trail that you have diligently followed all of the requirements and have been trying to submit the materials or get your questions answered to complete the paperwork or schedule the inspection, it’s very, very important to keep that paper trail to defend against any discrimination case that could arise when a voucher holder thinks maybe you’re intentionally trying to mess up the process. Another example, making any kind of written communication, expressing a limit in the sale or rental of housing based on source of income and this is a big one. You cannot in Cook County, the city of Chicago or any municipality that has source of income as a protected class you cannot in your application materials or your marketing materials or on your website say, “no section eight, section eight not approved, not set up for section eight.” You cannot have any language like that. That’s a pretty clear discrimination, but you would be surprised how many smaller clients who just know that it’s a hassle and they just don’t want to go through all of the red tape and the paperwork. They just will say, when a tenant applies, sorry, we don’t take section eight and right there that is a black and white discrimination case.
So be very, very careful that you do not convey any communications that make it sound like you don’t take section eight as a bright line rule. And then another form of discrimination that has a lot of gray area is if a landlord is engaging in different treatment of the price, the terms, the conditions, or privileges of tendency based on the use of a section eight voucher or any other source of income. So, you cannot have a higher security deposit for section eight tenants or double the move in fee because somebody is a voucher holder. You cannot have different terms for repairs as far as which party is responsible for different repairs. Your lease and application process should be exactly the same for section eight voucher holders, applicants, and any other applicants and tenants. All right. So, the fair housing ordinances, they apply to all housing units in Cook County or Chicago, the ones we’ve been talking about with source of income and they apply regardless of your building size or if you are an owner-occupied building.
So, I just kind of wanted to distinguish that since some of you are I’m sure familiar with the Chicago RLTO or the Cook County new RTLO where there are some exemptions for smaller buildings or owner-occupied buildings. Those exemptions do not apply to the fair housing ordinances. You are still subject to the source of income protected class provision of the fair housing ordinances in county or Chicago, regardless of building size or owner occupancy. A property owner is important to know, and I get this question a lot, you can apply the same reasonable tenant selection criteria and tenancy rules as you would apply to any other applicant. So, you can apply the same criteria as far as the amount of income and you know, three times the rent for the income, all of the same criminal background criteria, credit criteria, all can be applied to voucher holders in the same way they are applied to other tenants.
The difference is part of the voucher holders’ income will be the amount of the voucher, and that obviously has to be considered as additional income for the voucher holders. Your rules and practices, you treat them all the same, all your perspective and actual tenants must be treated equally and your policies and practices cannot disparately impact voucher holders in a different way than regular other tenants who do not hold vouchers, unless you have proof of some type of business necessity. So that disparate impact has become a term of art in the last maybe 15 years and basically that just means if a landlord’s policy, even though it is not discriminatory on its face and even if it does not have an intention to treat people differently or to discriminate. If a policy has a different impact, a disparate impact on a certain protected class versus others at the property, that policy can be deemed discriminatory. So, you just have to be very, very careful in any policies that you have where a voucher holder might end up being treated differently than the other tenants at your property, even if it doesn’t treat them differently on its face. So, lots of gray area there. You just need to be very, very careful that voucher holders don’t get treated differently at all.
And last one is another question that we get all of the time. It’s really, really important to remember, there is no requirement to hold a rental unit for a voucher holder if another qualified applicant is ready to rent. So if you have two applicants for the only two bedroom that you have available, and one is voucher holder, and the other is not a voucher holder, and you begin the screening process at exactly the same time for both applicants, and you are able to run the credit check and then criminal background check on the non-voucher holder and get them through the process faster than the voucher holder goes through the process with the public housing authority, it is okay to rent that unit to the non-voucher holder because they qualified more quickly than the voucher holder. So, you do not have to hold that rental unit for a voucher holder while the process is going through. If it happens where another qualified applicant comes through and is ready to rent and takes the available unit, you then would let the housing authority know, and the voucher holder know that the unit has been rented and that you can put that voucher holder– you can let them know as soon as another unit becomes available, or if you have another unit, maybe they were looking at a two bedroom and you have a one bedroom and a three bedroom available you can offer those units to them as well. Obviously if you have another two bedroom that’s the best-case scenario, and hopefully it will all work out but then you would start the process over with a different unit.
Terminations, so how do you terminate a tendency of a voucher holder? So, the lease can be non-renewed or terminated at the end of its term, at the expiration of the lease or any renewal term by either the property owner or the family for any reason. So, if the lease is coming up on its expiration, and you do not want to renew the lease, you are allowed to non-renew and terminate that tendency at the end of the term of the lease, or if there was a renewal period, any renewal team term. Otherwise, at all other times, during the course of the lease, good cause is required for termination. Good cause means nonpayment of rent, breaches of the lease, having to do with conduct failure to recertify. So, you have to show good cause. Generally, we’re going to be doing this anyway with a five-day notice or a 10-day notice for our regular tenants and we would have good cause to terminate at any point during the tenancy. And once you have terminated, so if you serve a five day or a 10 day notice you not only will serve it as you normally would on the tenants, but you also need to send a copy to the housing authority so that they are put on notice that you are terminating the tendency for good cause and that the tenants will need moving papers and to move on and provided the family or any member of the household hasn’t committed a serious lease violation or breached its obligations under the program, the voucher will still continue and the public housing authority will allow the family to move with continued assistance to another unit.
So, generally the housing authority will kind of re-certify them make sure they are still eligible and that it hasn’t been a serious lease violation like violence, drug activity, things like that in the property and at that point the housing authority will issue moving papers and allow the family to move with continued assistance to another unit. [Inaudible: 34:41], if they have good cause can terminate the HEP contract, that means for whatever reason, the property owner has not lived up to their end of the obligations under the HEP contract, keeping the unit in good repair, complying with inspections, making timely repairs. All of those things that the unit owner is obligated to do, if the unit owner fails to do that, the housing authority can terminate that HEP contract and at that point, the property owner will no Longer receive assistance from the housing authority and that property owner will only be left with the voucher holders’ portion of the rent. The housing authority also has authority for a good cause again, if there’s good cause to terminate the family’s assistance under the program.
So here, if the family does not meet the eligibility requirements anymore could be as simple as one of the children turned 18 and got a full-time job, and now their income exceeds the limits set by HUD and they no longer qualify for assistance. Or it could be that they were evicted from their last property for a serious lease violation and no longer are eligible for the voucher. So, if the housing authority terminates the family’s assistance under the program, because the family is no longer eligible their payments no longer will go to the landlord and at that point, the family is responsible for the full amount of rent and the landlord can act to terminate the lease for nonpayment if the family does not fulfill the obligations for the amount of full rent under the lease.
So, let’s just summarize. So basically, the public housing authority issues a voucher to an eligible applicant family and before the voucher expires within those 120 days, the family has to locate a unit in the private housing market. So, this is not public housing. This is a private rental unit that will be rented using a voucher. At that point, the landlord receives the RTA and their entire packet from the housing authority, fills it all out and submits it to the housing authority and the RTA basically stops the clock on the voucher term for those 120 days. So, if something does not work out, the clock does not continue ticking on those 120 days. That 120 days will be paused while the property owner’s RTA and paperwork is processed and submitted and if something doesn’t work out the 120-day clock will then resume. Once the landlord has fulfilled all of their documentation, the housing authority will come out to inspect the unit to ensure it complies with the housing quality standards. The public housing authority and the landlord then begin their negotiations for the rent, housing authority offers a reasonable rent to the owner which you hope is reasonable and comparable to the market rates and if the housing authority approves the unit upon inspection and the negotiations for rent are finalized, then the family will sign the lease agreement with the property owner and the owner also signs the HEP contract directly with the public housing authority.
So, the owner is entering into two different contracts, a lease with the voucher holders and a HEP contract with the housing authority. At that point under the two different contracts, the family ends up paying a reduced portion of the rent that’s calculated by the housing authority and it’s equal to a percentage of the family’s adjusted gross household income, generally between 30 and 40% and then the housing authority pays the difference between the family’s contribution and the total rent by sending the landlord a monthly housing assistant payment as outlined in the HEP contract. So, that’s the summary. That is the housing choice voucher program in a nutshell. If you have any other questions, feel free to send them to my email there, or give me a call. I really thank you guys for joining me this afternoon and keep a lookout for our series. Each month, we are going to be doing a different seminar webinar on rental properties. We are skipping a couple of the summer months because who wants to sit on their computers inside and listen to a webinar when they could be out on a patio somewhere having lunch but otherwise, we are trying to offer one each month for our clients. So, thank you guys so much for joining me this afternoon and have a great day.
Nikki: That was KSN attorney Jessica Ryan. She practices landlord tenant law, as well as condominium, townhome and homeowner association law in the city of Chicago and the surrounding suburbs. KSN is an experienced legal resource, ready to provide you with quality advice and exceptional service. We look forward to demonstrating how we’ve earned the trust of thousands of clients over the past 35 years. If you’d like to reach Jessie or any one of KSN’s experienced attorneys, please call 855-537-0500. You can also visit ksnlaw.com and complete the contact form to send us a message. Thanks for listening.
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