Section 8 Landlording Shouldn’t Be Mandatory

By Walter Olson of Cato.

"Last year I wrote:

In principle, the federal housing-voucher program known as Section 8 ought to win points as a market-oriented alternative to the old command-and-control approach of planning and constructing public housing projects. While allowing recipients wider choice about where to live, it has also enabled private landlords to decide whether to participate and, if so, what mix of voucher-holding and conventionally paying tenants makes the most sense for a location….
For landlords, participation in the program has long carried with it some significant burdens of inspection, certification, and reporting paperwork. So long as participation was voluntary, these conditions were presumably worth it in exchange for the chance to reach voucher-holders as a class of potential tenants. When accepting Section 8 tenants stops being a voluntary choice, however, the balance is likely to shift. And one of the big policy pushes of the past decade — zealously promoted by the Obama administration — was the local enactment of laws and ordinances prohibiting so-called source-of-income discrimination, which in practice can mean making it a legal offense for a landlord to maintain a policy of declining Section 8 vouchers.

Since then, battles over whether landlord participation in Section 8 should remain voluntary have continued to flare around the country. While progressive litigators have thus far failed to derive an obligation to participate from the “disparate-impact” branch of housing discrimination law, they have persuaded the American Bar Association to endorse laws along these lines. Among the many local battles is a long-running controversy in Baltimore County, Maryland, the subject of this useful opinion piece in yesterday’s Baltimore Sun by local businessman Ben Frederick III.

It is sometimes claimed that to not participate in the program is to "discriminate” against voucher-holders, and suggestions of proxy racial discrimination are often not far behind. But as Frederick notes, landlords (many of whom are minority themselves) object above all to the strings:

There is nothing discriminatory about a person who has invested their life savings in a rental property deciding that they do not want to lose two month’s rent while waiting for a voucher holder to be approved and move in before they begin seeing rent; or from refusing to sign a federally mandated 12-page lease addendum; or from being subject to the whims of government funding for approval for how much rent might be paid; or from being subjected to annual inspections that are unpredictable and inconsistent, where the government will stop paying rent if the rental unit needs repairs, even if tenants abuse and damage the property.

A Johns Hopkins study last year for HUD of low-rent housing markets in Baltimore, Cleveland, and Dallas found that among landlords who chose not to participate in the voucher program, “the primary reasons stated were negative experiences with the program itself, including frustration with the inspection process, general bureaucracy, and disappointment when the PHA [public housing authority] did not take the landlord’s side in conflicts between landlord and tenant.”

Frederick notes that other landlords can and do build a business model around serving Section 8 users. That might involve developing standardized procedures, hiring and training staff with an eye to compliance know-how, and cultivating relationships with government actors. This is all more easily done at scale by adequately capitalized entrants in the rental property market. As it happens, however, the ranks of real-world landlords — perhaps especially in less affluent communities with older housing — include many mom-and-pop landlords short on the skill and inclination needed to pull this off.

Other government voucher programs, Frederick points out, get along with voluntary provider participation. “According to the Kaiser Family Foundation, 72% of physicians accept Medicaid, the government-funded health care program for the poor; 75% of food retailers, including grocery stores, convenience food stores and farmer’s market retailers, accept SNAP, more commonly known as food stamps.” In both cases, shouldering the regulatory burdens gives them access to valuable customer markets. But when they don’t find the burdens worth it, no one compels the doctors and food retailers to participate (at least not yet.)

“As business owners,” Frederick writes, “landlords should be free to make the same choice.” Indeed."