Screening Section 8 Applicants: What You Can and Cannot Do

You can screen a voucher applicant as carefully as any other applicant. What you cannot do, in a growing list of places, is treat the voucher itself as the reason to say no. Most of the legal trouble in this area starts with a landlord who blurred those two things.

One number shows how easily it happens. An example voucher household pays $450 of a $1,600 rent. A standard "income of 3 times the rent" rule demands $4,800 a month. The program's own math puts that household's adjusted income near $1,500. Almost no voucher holder can pass that test, so the test works as a voucher ban whether you meant it to or not.

The two-layer rule: screen the tenant, not the voucher

Think of a voucher application as two layers.

The first layer is the voucher. It is a source of funds: a government payment that covers part of the rent each month. It says nothing about the person.

The second layer is the applicant. A person with a rental history, references, a record of paying or not paying their bills, and a track record of how they treat a property. That layer is yours to screen. HUD's rules say so directly: the housing authority determines whether a household is eligible for the program, and the owner is responsible for deciding whether the household is a suitable tenant.

The working rule is one sentence. Apply the same written criteria, in the same way, to every applicant, and never let the payment source be the deciding factor.

Underneath all of this sits the federal Fair Housing Act, which applies everywhere. It bars discrimination based on race, color, religion, sex, national origin, familial status and disability. Source of income is not on the federal list. But a rule that looks neutral and falls much harder on a protected group can still create liability, and voucher policies have been challenged on that basis.

Source-of-income laws: where you cannot say no to vouchers

Many states, counties and cities have added source of income to their own fair housing laws, and many of those laws expressly cover housing vouchers. I am not going to list them. The list changes, city ordinances are often stricter than the state's, and a list that is one year stale is dangerous. Look up three levels for every property you own: state statute, county ordinance, city ordinance. Then confirm what you find with a local landlord-tenant attorney or the local fair housing agency.

Where vouchers are protected, the laws commonly prohibit:

• Refusing to rent, or to consider an application, because the applicant has a voucher.
• Advertising "no Section 8" or "no vouchers," in any channel, including a phone call.
• Charging voucher holders a higher deposit, extra fees or different lease terms.
• Applying an income multiple to the full rent instead of the portion the tenant pays.
• Refusing or stalling the program paperwork or the inspection, which many jurisdictions treat as a refusal to rent.

In many of those places, "I do not want to deal with the inspection" is not a defense. The administrative steps are treated as part of accepting the payment source.

Where no such law applies, an owner may legally decline to participate in the voucher program. That does not switch off the federal protected classes. If you take that position, it needs to be one written policy applied to every inquiry without exception, and it is worth having an attorney look at it, because a policy applied unevenly is how a lawful position turns into evidence of something else. Laws in this area have been moving in one direction, so check again each year.

What you can screen: the criteria that remain fully legal

The voucher covers part of the rent. It does not cover damage, lease violations or conflict with neighbors, and you are entitled to screen for all of those. The criteria below are ordinary, lawful and useful when they are written down and applied to everyone.

Two notes. Security deposits for voucher tenants should match what you charge anyone else, within your state's cap. And every criterion needs a business reason you could explain to an investigator. If you cannot say what risk a rule protects against, remove it.

Example: the income test on a voucher application

This is an example. Contract rent is $1,600. The housing authority pays $1,150 and the tenant pays $450. Since the tenant's share runs about 30% of adjusted income, this household's adjusted monthly income is about $1,500.

The first rule measures ability to pay $1,600, which the tenant is not being asked to pay. The second measures ability to pay $450, which is the actual obligation. In the example the authority covers $1,150 of $1,600, or 72% of the rent. Your exposure to this tenant's finances is $450 a month. Over an example three-month nonpayment, that is $1,350 at risk against $4,800 for a market-rate tenant at the same rent. An income rule sized to the full rent misreads the risk and, where vouchers are protected, breaks the law.

What the voucher already tells you and what it does not

A voucher is evidence of a few things. The household's income and composition were verified by the housing authority. The subsidy portion will arrive from the authority each month for as long as the unit passes inspection and the family stays eligible. And the household has something to lose, because serious lease violations can put their assistance at risk.

The authority can also help with your screening. On request, it must give an owner the family's current and prior addresses and the names and addresses of those landlords, as shown in its records. Ask for it on every voucher application. It is a reference source you do not get with a market-rate applicant.

What the voucher does not tell you:

• Anything about how the applicant treated their last unit or their last neighbors.
• Whether they paid their own share on time.
• A full background check. The authority screens for program eligibility, which involves a narrow set of disqualifiers, and not for suitability as your tenant.
• Any guarantee of the tenant's portion or of damages beyond the deposit.

So the voucher is neither a warning sign nor a substitute for screening. It settles most of the income question and leaves the rest for you to check. How the two tenant types compare on cash flow is covered in Section 8 vs market-rate tenants.

A compliant screening process, step by step

1. Write the criteria before you list. One page: income multiple and what it applies to, rental history standard, eviction lookback, credit items, criminal history policy, occupancy limit. Date it. Give it to every person who asks for an application.
2. Advertise the property, not the tenant you want. Describe the unit, the rent and the criteria. Say the same thing in the listing, on the phone and at the showing.
3. Use one application and one fee. Process applications in the order received, and offer the unit to the first applicant who meets the criteria.
4. Verify the same way every time. Same screening vendor, same report, same thresholds. Confirm identity. Call the prior landlord, who has no reason to shade the truth to move a tenant out.
5. Request the authority's landlord information for voucher applicants.
6. Decide against the written criteria and note which standard was met or missed. A short checklist in the file is enough.
7. Deny in writing. State the criterion that was not met. If a credit or background report played any part, federal law requires an adverse action notice naming the reporting agency and the applicant's right to dispute the report and get a free copy.
8. Handle accommodation requests. A request tied to a disability, such as an assistance animal or a different way to submit paperwork, gets a real review and a written response.
9. Keep the records. Applications, the criteria version in force, screening reports and your notes. Three years is a common rule of thumb. Ask your attorney what your state expects.
10. Then run the program steps: Request for Tenancy Approval, inspection, rent reasonableness review, HAP contract, and a lease that carries HUD's tenancy addendum.

If you are buying a building with voucher tenants already in place, you inherit tenants you did not screen. The files, the HAP contracts and the inspection history become your due diligence, which is covered in analyzing a property with Section 8 tenants in place.

Where landlords get sued and how not to be one

The same fact patterns show up in complaints again and again.

• The ad or the phone call. "No Section 8" in a listing, or said out loud to a caller. Fair housing groups use paired testers, where one caller mentions a voucher and the other does not, and they record what each is told.
• Inconsistency. Waiving a credit issue for one applicant and enforcing it against another. An exception is fine only if you would make it for anyone with the same facts, and you wrote down why.
• Income multiples on the full rent, as in the example above.
• Different terms. A larger deposit, an extra fee or a shorter lease for voucher holders.
• Stalling. Not returning the program forms, missing the inspection, letting the clock run until the applicant gives up.
• Familial status. Steering families to certain units, limiting children, or occupancy rules tighter than the code.
• Disability. Refusing an assistance animal or charging pet rent for one.
• Blanket criminal record bans with no individual review.
• Your agent's mouth. You are responsible for what your property manager or leasing agent says. Train them on the script and the criteria.

The defense is boring and cheap: written criteria, the same process every time, and a file that shows your reasoning. An hour of a local attorney's time to review your criteria and your denial letter costs less than answering a single complaint.

Next steps:

1. Look up source-of-income rules at the state, county and city level for each property, and confirm with an attorney.
2. Rewrite your income standard so it applies to the tenant's share of rent.
3. Put your criteria on one dated page and hand it to every applicant.
4. Train anyone who answers your phone.

Screening is worth this effort because of what a bad placement costs. As an example, 30 vacant days at $1,600, a $1,800 turn and $500 of leasing cost come to $3,900, which is 20% of a year's $19,200 gross rent. Good screening protects the same cash flow your underwriting projected. Run the deal in the Section 8 analyzer with honest vacancy and turnover assumptions either way, because a careful process lowers the odds of that $3,900 year and does not remove it.

This article is general information, not legal advice. Laws vary by state and change often: confirm anything you plan to act on with an attorney licensed where the property sits.