When a property owner participating in a federal voucher program fails to meet unit health and safety obligations, the public housing agency (PHA) administering the program must step in to enforce compliance or face potentially serious consequences.
A notice issued by the U.S. Department of Housing and Urban Development (HUD) in March 2023 outlines the remedies PHAs have for dealing with poor-performing owners in the federal Housing Choice Voucher (HCV) and Project-Based Voucher (PBV) programs. Compliance issues don't typically arise with property owners, the notice explains, but when they do, they're usually tied to a failure by an owner to maintain a unit per federal health and safety standards, also known as housing quality standards (HQS).
"The requirement that [voucher] program funds be used in units that are decent, safe, sanitary, and in good repair is a cornerstone of HUD's mission," the notice states. "If the owner fails to maintain the dwelling unit in accordance with HQS, the PHA must take prompt and vigorous action to enforce the owner obligations."
PHAs that don't enforce HUD's voucher requirements for owners can face legal and financial ramifications. Before we touch on those, let's dig into the HCV and PBV programs and the tools PHAs have to keep property owners in compliance.
Explained: HCV and PBV programs
The HCV program is designed to assist low-income families, the elderly, and disabled individuals in finding safe, decent, and affordable housing in the private rental market.
Under the program—administered locally by public housing agencies—eligible families or individuals receive a housing voucher that can be used to help pay a portion of their rent to a private landlord. The assistance provided is based on the family's income, family size, and rental rates in the local housing market.
Once a voucher becomes available, the family or individual is given a set amount of time to find a suitable rental unit. Once the rental unit is approved by the PHA, the family or individual signs a lease with the landlord, and the PHA pays a portion of the rent directly to the landlord. The family or individual is responsible for paying the remainder of the rent, generally set at 30 percent of their income.
The PBV program is similar to the HCV program. However, unlike the HCV program, which provides rental assistance to families and individuals in the private rental market, the PBV program offers rental assistance for specific units in a particular development.
Under the PBV program, a PHA enters into a contract with a property owner to reserve a certain number of units in their development for low-income families or individuals. The rental assistance is tied to the specific unit rather than the tenant, and the tenant can only receive the rental assistance while living in that unit.
The property owner agrees to rent the units to eligible low-income families or individuals at a reduced rent. In exchange, the PHA pays a portion of the rent directly to the property owner. The amount of rental assistance is based on the family's income, family size, and rental rates in the local housing market.
Verifying voucher program compliance
When property owners partake in the HCV and PBV programs, they must enter a Housing Assistance Payment (HAP) contract with the PHA they're partnering with.
Under the HAP contract, the PHA agrees to provide rental assistance payments on behalf of eligible low-income families or individuals, while the property owner agrees to maintain the unit at an affordable rent. The contract also outlines the terms and conditions of the rental assistance payments and the obligations of both the PHA and the property owner.
Breaches of contract can occur if the property owner violates conditions under the HAP contract. In most cases, these breaches are related to failing to maintain voucher units according to HQS.
HUD developed HQS to ensure units rented through HCV and PBV are safe, decent, and sanitary. The standards cover various aspects of the rental unit, including:
- Sanitary conditions: The unit must have a working bathroom with a toilet, sink, bathtub, or shower. The kitchen must have a working sink and a stove or cooktop for food preparation.
- Security and safety: The unit must have working smoke detectors, no exposed wires, and working locks on all doors and windows.
- Space and accessibility: The unit must have adequate space for the number of people living there, with at least one bedroom for every two people. The unit must be accessible for people with disabilities, with no physical barriers preventing access to the unit or its amenities.
- Health and environmental hazards: The unit must be free of lead-based paint and other environmental health hazards such as mold, radon, or asbestos.
PHAs are responsible for conducting regular inspections to ensure that units comply with HQS throughout rental assistance contracts. Inspections can take place at a PHA's discretion.
Responding to a voucher program compliance violation
A PHA must notify the property owner in writing regarding a unit violation and include any corrective action the owner must take to bring the impacted unit into compliance, according to HUD.
PHA remedies for noncompliance can include:
- suspending, reducing, or terminating housing assistance payments;
- terminating the HAP contract; and
- judicial action, including an order for damages or injunctive relief.
In the event of an HQS violation, the PHA must suspend housing assistance payments to the owner until the defect is corrected by the owner, according to the HUD notice. Life-threatening HQS defects must be corrected within 24 hours. All other HQS violations must be corrected within 30 days.
Excluding owners from voucher program participation
Before a property owner can participate in the HCV and PBV programs, the PHA must ensure the owner meets HUD's eligibility requirements.
The PHA must not approve an owner's participation in HVC or PBV if the owner has been debarred from the program (typically due to criminal activity or severe program violations) or has violated the Fair Housing Act, according to HUD.
PHAs have the discretion to exclude owners from HCV or PBV for several reasons, including if the owner:
- has previously violated HAP contract obligations;
- has committed fraud, bribery, or any other "corrupt or criminal act" in connection with a federal housing program;
- has participated in drug-related or violent criminal activity;
- has refused to evict tenants assisted under the HCV or PBV programs that pose a health and safety threat to residents and staff or are actively participating in drug-related or violent criminal activity;
- has a history of renting units that fail to meet state or local housing codes; or
- has yet to pay state and local real estate taxes, fines, or assessments.
HUD's notice clarifies that evictions should be used as a last resort for owners to remedy noncompliance and that owners should not be penalized by PHAs for seeking effective alternatives to eviction.
When PHAs can't meet their administrative responsibilities
HAP contracts outline contractual obligations for PHAs, not just property owners. PHAs administering HCV and PBV programs must follow the requirements outlined or risk financial repercussions, according to HUD's notice.
For example, if a PHA fails to enforce HQS requirements, HUD can reduce the fee it pays the PHA for administering the voucher program on HUD's behalf. HUD can also force a non-compliant PHA to use the payments to improve its administrative enforcement efforts.
Failure to enforce HQS can potentially result in legal liability for a PHA if the property owner's compliance issue results in a resident's injury or death.
In rare cases when a PHA has failed in its oversight of property owners, HUD can find the PHA in default and take possession of "any PHA property, rights, or interests" in connection with the voucher programs, the HUD notice states.
This article is for general information only. HAI Group makes no representation or warranty about the accuracy or applicability of this information for any particular use or circumstance. Your use of this information is at your own discretion and risk. HAI Group and any author or contributor identified herein assume no responsibility for your use of this information. You should consult with your attorney or subject matter advisor before adopting any risk management strategy or policy.
