Section 8 Vouchers and the Tea Party
The potential affect of Tea Party influence on the Federal Section 8 Voucher Program as pertaining to New York City multi-family housing.
As both a private landlord and landlord tenant attorney, I sometimes wonder what would happen if all of a sudden I stopped receiving checks from Section 8. In other words, what would be the implications if the Federal Government suddenly decided to not only stop sending me my monthly checks, but to every other landlord with Section 8 tenants by either discontinuing or defunding the Section 8 housing program? With the current political environment we are in, it is not too difficult to imagine a scenario in which Republican House members, under pressure from their Tea Party Constituents, target the Section 8 program in the near future.
Section 8 is the shorthand form of referring to Section 8 of the United States Housing Act of 1937 that authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households. So basically it is a government subsidy for rental housing, much like food stamps is for food, for those who fall below certain income requirements. In this program, tenants pay about 30 percent of their income for rent, while the rest of the rent is paid with federal money. The Section 8 housing program began during the Great Depression and is still popular today with both tenants and landlords, especially in New York City. It was born from the progressive fantasy that housing is a “right”, thus guaranteeing all citizens, (and non-citizens) a place to live. It is obviously popular with tenants because they have someone else pay most of their rent and it is popular with Landlords because payments from the Federal Government are seen as more secure than payments from private parties.
However, renting an apartment to a Section 8 tenant is a more complex procedure than renting an apartment to a purely private party. Once enrolled, a Section 8 landlord is under a contractual obligation to ensure that the apartment meets strict requirements concerning its condition. These requirements are strictly enforced through annual inspections by a Section 8 housing inspector.
Nevertheless a majority of New York City landlords endure the overwhelming bureaucracy, including stringent renewal requirements, additional procedures concerning evictions, and stringent maintenance requirements for a reason. They endure these headaches in return for a “steady” check every month from the government. They believe that a check from the government is better than a check from a private citizen, and up to now, are probably correct. Why else would investors prefer to buy U.S. Treasuries over Corporate bonds? However, with over 14 trillion in debt it cannot be assumed that the status quo will remain the same. In fact, the Federal Government put a stop on all new Section 8 housing vouchers this past year siting both a lack of sufficient funds and overwhelming demand.# Is this a precursor to a complete discontinuance ahead? What will be the impact on both the housing market and the tenants if the Federal Government defunded and/or discontinued all Section 8 payments abruptly?
There is an old saying that you should not put all of your eggs in one basket. However, it is in my personal experience that landlords, especially those in New York City, and in particular the outer boroughs, prefer Section 8 payments over private funds, and this preference has existed over the past decade. This is contrary to the public misconception that landlords discriminate against Section 8 tenants due to their “low income” status, tendency to be an ethnic minority, or other victim categories promulgated by the media. This supposed “discrimination” lead the City of New York to pass a law forcing all landlords in its jurisdiction to accept all Section 8 tenants, thus now making a voluntary program involuntary. Nevertheless, even after the supposed “discrimination” against Section 8 tenants, landlords are known to hold properties with over 50% of their annual revenue coming from the Section 8 program (and to over 75% of revenue coming from one government program or the other once you consider SCRIE, DRIE, Social Services, and other government assistance programs.) If this revenue was to cease, a cascade of both foreclosures and steep drop in multi-family housing values would occur in this highly leveraged field of real estate.
Therefore the factors of 1) increased preference of private sector landlords of government payments over private sector payments due to their perceived reduction in risk 2) increase in legislation forcing landlords to accept these payments and 3) increase supply of Section 8 tenants relative to the tenant pool have led to an inordinate reliance of the private real estate sector on the Federal Government not only to remain profitable but to remain solvent. These factors lead to a trend already seen in many other sectors of society, where an industry is ever more reliant on government largess in order to stay afloat. This ever increasing dependence can only lead to landlords and tenants overwhelming support for the continuance of this subsidy, with all its corresponding market distortions.
The real estate industry needs to envision a scenario where the funds run dry and the program is slowly phased out so as to avoid any existential shocks. It is better to for the public to have this discussion now on the best method to slowly discontinue a wasteful subsidy rather than uncontrollable circumstances dictate an abrupt ending to a program milked by landlords and tenants for the past few decades, to their ultimate detriment.
ABOUT THE AUTHOR: Rosario Parlanti, Esq.
We represent investors, landlords, and businesses in commercial litigation, landlord/tenant disputes, contract law, and real estate transactions. Our client relationships are rooted in our expertise in real estate management, investment, development, and other related businesses. We provide a cost-effective alternative to businesses seeking top-notch legal services without the related high fees.
Copyright Parlanti & Cooperman LLP
More information about Parlanti & Cooperman LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Section 8 is the shorthand form of referring to Section 8 of the United States Housing Act of 1937 that authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households. So basically it is a government subsidy for rental housing, much like food stamps is for food, for those who fall below certain income requirements. In this program, tenants pay about 30 percent of their income for rent, while the rest of the rent is paid with federal money. The Section 8 housing program began during the Great Depression and is still popular today with both tenants and landlords, especially in New York City. It was born from the progressive fantasy that housing is a “right”, thus guaranteeing all citizens, (and non-citizens) a place to live. It is obviously popular with tenants because they have someone else pay most of their rent and it is popular with Landlords because payments from the Federal Government are seen as more secure than payments from private parties.
However, renting an apartment to a Section 8 tenant is a more complex procedure than renting an apartment to a purely private party. Once enrolled, a Section 8 landlord is under a contractual obligation to ensure that the apartment meets strict requirements concerning its condition. These requirements are strictly enforced through annual inspections by a Section 8 housing inspector.
Nevertheless a majority of New York City landlords endure the overwhelming bureaucracy, including stringent renewal requirements, additional procedures concerning evictions, and stringent maintenance requirements for a reason. They endure these headaches in return for a “steady” check every month from the government. They believe that a check from the government is better than a check from a private citizen, and up to now, are probably correct. Why else would investors prefer to buy U.S. Treasuries over Corporate bonds? However, with over 14 trillion in debt it cannot be assumed that the status quo will remain the same. In fact, the Federal Government put a stop on all new Section 8 housing vouchers this past year siting both a lack of sufficient funds and overwhelming demand.# Is this a precursor to a complete discontinuance ahead? What will be the impact on both the housing market and the tenants if the Federal Government defunded and/or discontinued all Section 8 payments abruptly?
There is an old saying that you should not put all of your eggs in one basket. However, it is in my personal experience that landlords, especially those in New York City, and in particular the outer boroughs, prefer Section 8 payments over private funds, and this preference has existed over the past decade. This is contrary to the public misconception that landlords discriminate against Section 8 tenants due to their “low income” status, tendency to be an ethnic minority, or other victim categories promulgated by the media. This supposed “discrimination” lead the City of New York to pass a law forcing all landlords in its jurisdiction to accept all Section 8 tenants, thus now making a voluntary program involuntary. Nevertheless, even after the supposed “discrimination” against Section 8 tenants, landlords are known to hold properties with over 50% of their annual revenue coming from the Section 8 program (and to over 75% of revenue coming from one government program or the other once you consider SCRIE, DRIE, Social Services, and other government assistance programs.) If this revenue was to cease, a cascade of both foreclosures and steep drop in multi-family housing values would occur in this highly leveraged field of real estate.
Therefore the factors of 1) increased preference of private sector landlords of government payments over private sector payments due to their perceived reduction in risk 2) increase in legislation forcing landlords to accept these payments and 3) increase supply of Section 8 tenants relative to the tenant pool have led to an inordinate reliance of the private real estate sector on the Federal Government not only to remain profitable but to remain solvent. These factors lead to a trend already seen in many other sectors of society, where an industry is ever more reliant on government largess in order to stay afloat. This ever increasing dependence can only lead to landlords and tenants overwhelming support for the continuance of this subsidy, with all its corresponding market distortions.
The real estate industry needs to envision a scenario where the funds run dry and the program is slowly phased out so as to avoid any existential shocks. It is better to for the public to have this discussion now on the best method to slowly discontinue a wasteful subsidy rather than uncontrollable circumstances dictate an abrupt ending to a program milked by landlords and tenants for the past few decades, to their ultimate detriment.
ABOUT THE AUTHOR: Rosario Parlanti, Esq.
We represent investors, landlords, and businesses in commercial litigation, landlord/tenant disputes, contract law, and real estate transactions. Our client relationships are rooted in our expertise in real estate management, investment, development, and other related businesses. We provide a cost-effective alternative to businesses seeking top-notch legal services without the related high fees.
Copyright Parlanti & Cooperman LLP
More information about Parlanti & Cooperman LLP
View all articles published by Parlanti & Cooperman LLP
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
