Overview of Section 8 Housing
The Section 8 housing assistance program is designed to help low-income families, the elderly and the disabled afford the high cost of housing in the United States. To qualify for Section 8, a family’s monthly gross income must be below the very low-income limit or the low-income limit for the area they plan to live in, as determined by the U.S. Department of Housing and Urban Development (HUD). Families who meet the income limit and criteria often have a rental subsidy equal to the difference between how much they pay for rent and 30 percent of their income. The subsidy is paid out by HUD to the landlord directly . For example, if a landlord charges $800 in rent for a 12-month lease, but the family earns $2,000 a month, their 30 percent rent would be $600. The Section 8 program allows the tenant only to pay that portion, with HUD paying the remainder.
There are three overlapping ways to qualify for the Section 8 program:
- Through the Public Housing Agency (PHA) where you live
- Through a PHA with a vacancy
- Through an individual entering the program by virtue of his or her employment in a qualifying position
Section 8 assistance can be administered through either the Housing Choice Voucher, which is often referred to as the Section 8 voucher, or the project-based voucher, which is tied to a specific property and cannot be transferred to a new rental unit.
When You May Raise Rent
Owners and management companies of Section 8 housing face a considerable amount of regulation that, among other things, limits how often rents can be increased. Rents for section 8 housing can only be increased at specific times.
The owner of a Section 8 affordable housing unit can increase the rent after the initial term of an HAP (housing assistance payment) contract expires, but there are specific rules for when the rent increase can occur.
Currently, rent increases for Section 8 housing units are allowed following the expiration of the first HAP contract for a unit. Under certain circumstances, rent increases may allowed after the expiration of a lease, but only if:
When increasing rent after the expiration of the HAP, the owner must provide at least 30 days written notice to the tenant.
If the HAP expires after only a single year, that is not a reasonable period for a rental agreement, and the owner must wait until the tenant has had the benefit of a one-year lease renewal in order to be eligible to raise the rent. That one year lease renewal does not have to be an HAP contract for Section 8 housing, however, it can be a standard lease renewal without government funding.
A change in the HAP contract becomes effective only as to the rental payment due under the first full month following the date of the notice of a rent increase.
Adjustments to Rent by HUD
As with rent adjustments in the Housing Assistance Payment (HAP) Contract, the rental adjustment under the Section 8 Regulations includes an anticipated annual adjustment of the contract rents as well. It is based on the periodic issuance of a notice by HUD, usually on or before November 15, which sets forth HAP contract rent adjustments for the calendar year. The amount varies based on the local area as HUD considers the nationwide proposed annual rent adjustments as a factor in the decision. Each year HUD determines the percentage increases or decreases from the previous year based on its estimated increase or decrease in the national annual adjustment factor (AAF). The AAF reflects HUD’s estimate of the percent change in the rental portion of household expenditures within the Consumer Price Index (CPI) that HUD uses to measure inflation. The current AAFs are shown below. The rent adjustment factor from the previous year is adjusted by the AAF in each future year until adjusted by a new AAF according to HUD. HUD does not publish the specific AAF’s for particular geographic areas. From an administrative perspective, it’s easier for HUD to issue one national AAF annually rather than provide specific variations by area. If the percentage change from the prior year rent amount is negative, the adjusted rent will not be less than 90% of the previous year’s rent. The adjusted amount becomes effective January 1st, and the housing authority or HUD will send a HAP rent adjustment notice to the landlord for signature. Upon receipt of the signed notice, the changes become effective the first of the month after ten days from the date the signed notice was returned. Rent increases and decreases under the HAP Contract follow similar procedures. But those adjustments are limited by the prior year’s contract rent plus the difference in the AAF between the original contract rent year and the rent adjustment year. Importantly, if the rent adjustment notice is not signed and returned, the AAF rent increase may be in the 10% cap range. By failing to sign and return the adjustment notice, the landlord in essence rejects the increase and the rent adjustment will be limited to a lesser amount. As a practical matter, HUD sometimes varies this policy and uses variability in housing costs for certain areas to set the AAF. In the past, Freedom of Information Act (FOIA) requests have identified areas in index areas with lower AAF’s set at higher levels than those areas with higher AAF’s in index locations. HUD has never confirmed or denied such activities.
Requesting a Rent Increase
The process for requesting rent increases is outlined in a section 8 regulation that states the following: "The owner must request a rent increase at least 60-90 days prior to the date the rent increase will take effect and the owner must justify the rent increase before the new rent goes into effect." 24 CFR sec. 982.506(c). This regulation makes it clear that a landlord is advised to submit rent increase requests at least 60-90 days prior to the requested rent increase effective date.
HUD Form 52687 is a required submission for submitting Section 8 rent increase requests to the Housing Authority. This form requires landlords to provide information regarding the rental unit’s tenancy, the current rent, the requested rent, the justification for the requested rent and certain general information relevant to the property. While HUD does not require landlords to provide financial information related to the rent increase, most landlords opt to provide at least one of the following documents: the tax returns for all owners and/or shareholders of the property corporation, the property’s income and expense spreadsheet, and/or a copy of an executed loan agreement on the property. The justification for a rent increase generally includes the before mentioned documents, as well as any increased operating expenses of the property (e.g., due to property improvements or the passage of time and market conditions) and/or comparison rent charges at similar properties.
A subsequent blog will provide more information related to the reasonable accommodation process under the Fair Housing Act related to a request for a Section 8 rent increase.
Tenants’ Rights Against Rent Increases
There are protections in place for tenants against unjustified rent increases. The first protection is that the tenant is not obligated to pay any portion of the rent that is considered "over the fair market rent" portion of the rent. As stated above, this is the portion generally paid by the government. Normally more rent is paid for a larger apartment, but sometimes the landlord will try to raise the rent beyond the expected amount by claiming that the unit has a more desirable feature than other comparable units .
Tenants may appeal any rent increase via an informal review with the Public Housing Authority (PHA) or the Los Angeles Housing Authority via its Rent Adjustment Commission. If a tenant’s plea is denied, they still have a right to file a grievance through the grievance process or 504 grievance process at the PHA to challenge their rental increase.
In order to assist tenants with understanding these rules and filing their complaints, a list of attorneys who are familiar with the programs is available in our list of program resources.
Effects on Tenants and Landlords
The impact of rent increases on Section 8 tenants and landlords can be significant. For tenants, substantial rent increases could force them to seek housing they can more easily afford, potentially leading to more homelessness. Landlords must manage the often unexpected costs associated with finding new eligible tenants who can afford a higher rental price. On top of these more obvious costs, the community could bear the brunt of any societal impact caused by an increase in homeless individuals, and the costs to non-profits and HUD to house and reduce homelessness, respectively.
While the costs may vary from place to place and even block to block, as the number of those who depend on HUD rental assistance to pay their rent increases, so too will the number of those who are turned away because of high rental prices, creating vacancies in the housing stock, and diluting the safety net for those in need of affordable housing.
Changes to Rent Increase Policies
As with other HUD regulations under the 1937 Act, regulations and guidelines are continually updated. Most recently (September 18, 2013), HUD issued a letter to PHAs clarifying its position on rent increases, explaining: Specifically, HUD would like to remind you that, with the exception of transfers between bedroom size categories (which will be discussed below), no PHA can increase its rent to more than the Payment Standards as set forth in its Board approved MTW Plan. Not only should this ensure that a household is paying no more than the board-adopted Payment Standards, it will also help to ensure that an HCV market rent trend for a specific property is in compliance with market rents being set by the PHA for its own properties. The Department wishes to remind PHAs that, at their discretion, PHAs may reduce their payment standards for new admissions and/or continue to utilize MTW funds to supplement payment standards above the published FMRs. HUD views such a practice as an appropriate use of MTW funds. However, if a PHA charged a tenant rent increase above the PHA’s Payment Standard, but continued to set the Payment Standard above the Area of Opportunity Rent Level for new admissions because its plan states that its payment standards are set at a percentage of the HUD published FMRs, the PHA should reconsider its payment standard policies. All PHA policies and procedures regarding MTW funding and local MTW policies must be consistent with the MTW agreement between the two parties. Contrary to past guidance, this latest letter seems to discourage or perhaps even prohibit both payment standard increases for new admissions and rent increases for existing families despite being insufficient housing stock. It also encourages extending MTW authority and funds to cover payment standard increases. With the major decreases in the number of landlord participants in the HCV program over the past couple of years, HUD has increasingly sought to preserve its vouchers and avoid expanding the program, and we will continue to see more of this type of intervention and encouragement as Congress continues to cut HUD funding.
Frequently Asked Questions About Section 8 Rent Increase
Will the housing authority automatically permit a rent increase when I request one?
In most jurisdictions, a rent increase is not permitted unless the specific amount or percentage is requested and the housing authority issues a revised HAP contract that reflects that requested amount or percentage.
Do I have to explain why I want a rent increase?
Not generally; in most jurisdictions, a rent increase is permitted if the rent requested is comparable to similar properties in the area regardless of why the new rent is needed. However, a few housing authorities may require landlords to provide a basis for the new rent, even though the authority does not have a rule allowing a new rent decrease. In any event, the landlord should never give a tenant or housing authority full financial information regarding the landlord’s finances when a rent increase is requested. At most, the landlord could show that the new rent is needed because of specific changes in the landlord’s expenses such as significant increases in property taxes, utility rates , or mortgage payments on the rental property.
How often may I request a rent increase for a property rented to a Section 8 voucher holder?
Most housing authorities make a landlord wait at least 12 months between rent increases. Many housing authorities have a policy of only permitting a new rent increase if at least a year has lapsed since the last new rent was approved. Some housing authorities allow the rent increase to take effect earlier than a year even if a new HAP contract shows the new rent earlier than a year after the prior lease has been approved, but most housing authorities will only approve the new rent to take effect on the first of the month after the HAP contract is approved with the new rent amount.
Are there limits on how much rent I can charge a tenant with a Section 8 voucher?
Most housing authorities have a "payment standard" that reflects how much rent they are willing to pay toward the cost of renting to a Section 8 applicant with a voucher. Generally, the payment standard is a percentage of the average rent charged in the neighborhood in which the property is located. Housing authorities use this payment standard to determine the "reasonable accommodation" for the Section 8 applicant who cannot afford the fair market rent amount. Housing authorities also use this amount to determine if the landlord’s lease terms and amount are reasonable and do not represent a "family bonus," which is impermissible under the law.