HUD-Sponsored Research Sheds New Light on HCV Landlords

HUD-Sponsored Research Sheds New Light on HCV Landlords

Highlights

• Landlord participation has been an understudied aspect of the Housing Choice Voucher program, but two recent HUD-sponsored studies are helping to fill that research gap.
• A paired-testing study finds that many landlords do not accept housing vouchers, thereby limiting the housing options available to voucher households.
• Landlords may refuse vouchers for various reasons, including financial considerations, concerns about tenants, and administrative burdens.

The “choice” in the Housing Choice Voucher (HCV) program’s name refers to the opportunity tenants have to choose where they want to live. This choice, however, is heavily dependent on landlords willing to accept vouchers. Unlike the public housing program, in which a limited number of hard units are available in designated housing developments, the HCV program allows tenants to rent a privately owned unit. When public housing agencies (PHAs) issue vouchers, the recipients approach their housing search using the same steps they would follow if they did not have a voucher — they look at available rental listings, visit units, submit an application to a landlord, and eventually sign a lease with the landlord. The HCV program imposes some constraints on the search process — for example, prospective units must pass an inspection, and the rent charged by the landlord must be reasonable — but voucher recipients have considerable discretion to choose their preferred units.

Landlords also have a choice to make: whether to rent to a voucher-recipient. The Fair Housing Act prohibits landlords from discriminating on the basis of race, color, national origin, sex, disability, and more, but it does not explicitly prohibit landlords from refusing to rent to voucher holders. Complicating this issue is the fact that most voucher-holders are members of protected classes. In 2017, 69 percent of voucher households were nonwhite, 79 percent of voucher households had a female head of household, and 23 percent of all individuals in voucher households had a disability. In some cities, voucher receipt is correlated even more strongly with protected class status; for example, of the 47,588 households receiving a voucher from the Chicago Housing Authority, 96 percent are nonwhite. There are 378 PHAs, serving a total of 623,694 voucher families, where at least 90 percent of voucher families are members of a racial minority group.1 Fair housing advocates have expressed concern that landlords may use voucher receipt as a proxy for racial discrimination.

While federal law does not explicitly require landlords to accept vouchers, some states and local governments have passed local source-of-income ordinances that specifically protect housing choice vouchers. As of June 2018, 12 states and the District of Columbia have implemented source-of-income protection laws that cover housing vouchers.2 Many more city and county governments have passed similar ordinances. Outside of these jurisdictions, however, the law allows landlords to choose whether to rent to a tenant with a voucher.

Evidence from the Moving to Opportunity demonstration also suggests that when voucher holders can access low-poverty neighborhoods, their families experience significant mental and physical health benefits. In addition, children who move into lower-poverty neighborhoods while young experience improved long-term economic success, including higher college attendance rates and future earnings.3, 4

Although the HCV program’s success depends on landlords to provide voucher holders with access to safe and decent affordable housing in neighborhoods of opportunity, tightening rental markets throughout the country are making it increasingly difficult for voucher families to find landlords willing to participate in the HCV program.

What factors influence a landlord’s decision to accept or refuse a potential tenant with a voucher? How frequently do landlords turn away voucher holders? Until recently, very little research focused on these questions and others related to landlords.

Landlord Acceptance of Housing Choice Vouchers

HUD’s Office of Policy Development and Research has a long history of sponsoring Housing Discrimination Studies that use paired-testing to document the disparate treatment of protected classes under the Fair Housing Act. These studies typically have focused on housing discrimination against racial and ethnic minorities (such studies were conducted in 1977, 1989, 2000, and 2012). More recent studies have explored housing discrimination against families with children; people with disabilities; and lesbian, gay, bisexual, and transgender individuals. In September 2018, HUD released its first comprehensive study of how landlords treat households with housing choice vouchers. Researchers from the Urban Institute carried out a rigorous testing strategy across five sites to determine whether landlords treat voucher holders differently from similar renters without a voucher.5

The sites included in the study were Fort Worth, Texas; Los Angeles, California; Newark, New Jersey; Philadelphia, Pennsylvania; and Washington, DC. At each site, the research team reviewed online advertisements to identify units that appeared to meet the criteria for the voucher program — units with an appropriate number of bedrooms and a rent below the PHA payment standard. The first stage of the testing process, the “voucher acceptance test,” consisted of a female tester who would be perceived as white calling the housing provider to ask, “Do you accept housing vouchers?” If the landlord was willing to accept vouchers, the test moved on to the second stage, which consisted of paired tests by phone and in person.

The researchers found that just finding eligible housing units and completing the voucher acceptance test was extremely difficult. For 16 months, they screened more than 341,000 advertisements to find 8,735 units that appeared to be eligible for a voucher recipient. Some of those units subsequently turned out to be unavailable or ineligible, and in the end only 3,780 voucher acceptance tests were completed, meaning that the researchers reviewed an average of 90 advertisements for each completed voucher acceptance test. The voucher acceptance tests revealed further voucher rejection. In Fort Worth, 78 percent of landlords stated that they would not accept a tenant with a voucher. The voucher denial rate was similarly high in Los Angeles (76 percent) and Philadelphia (67 percent). Voucher denial rates were considerably lower in Newark and Washington, DC, at 31 percent and 15 percent, respectively. Notably, Newark and Washington, DC, were the only sites fully covered by state or local laws that require landlords to accept vouchers.

The researchers also explored whether the poverty rate of the neighborhood in which a unit was located affected landlords’ responses. They found that in four of the five sites, the voucher denial rate in low-poverty neighborhoods was significantly higher than in high-poverty neighborhoods. For example, in Philadelphia, the voucher denial rate was 83 percent in low-poverty neighborhoods but only 55 percent in high-poverty neighborhoods. Washington, DC, was the only site where voucher denial rates in low- and high-poverty neighborhoods were not statistically different; this finding could be because Washington, DC, was the only site in which payment standards varied by neighborhood, meaning that the HUD subsidy in a higher-rent area would be larger (and more appealing to the landlord) than the subsidy in a lower-rent area.

In Los Angeles and Fort Worth, researchers were able to complete only 126 and 142 paired telephone tests, respectively, because voucher denial rates in these cities were extremely high; the number of in-person tests completed at these sites was even lower. As a result, the paired-testing portion of the study took place almost entirely in Newark, where the researchers completed 426 paired telephone tests and 374 paired in-person tests. Paired testing revealed that landlords would often fail to show up for scheduled appointments, and voucher testers experienced these “no shows” significantly more often than did control testers. Control testers were also told about more units, although the difference was small (1.39 units for control testers and 1.19 units for voucher testers). Otherwise, differential treatment was minimal and may even indicate a preference for voucher tenants; for example, in-person tests showed landlords were more likely to ask control testers for information about their employers. Note, however, that the in-person tests were conducted with a subset of landlords — specifically, those who had already indicated a willingness to accept vouchers and had followed through with scheduling and showing up for an in-person meeting.

This study highlights the difficulties facing low-income housing seekers wishing to rent an affordable rental unit with a voucher, particularly in opportunity neighborhoods and in markets without source-of-income protections.

Reasons Why Landlords Choose To Participate in the HCV Program

Why do some landlords turn away voucher holders, whereas others are more willing to participate in the HCV program? What do landlords like or dislike about the program? Questions such as these are the focus of another recent study sponsored by HUD and carried out by researchers from the Poverty and Inequality Research Lab at Johns Hopkins University. This study presents findings from 127 in-depth interviews with landlords and property managers in Baltimore, Cleveland, and Dallas as well as direct ethnographic observations with approximately one-third of interviewees.6 The researchers sought to understand the respondents’ business strategies and attitudes about the HCV program. Most of the landlords interviewed participated in the HCV program and offered substantial insight into the costs and benefits of participation.

One important observation from this study is that the landlords who were interviewed were surprisingly heterogenous. They were demographically diverse: 53 percent were nonwhite, and 40 percent were female. A wide variation also existed in the number of units they owned and operated, with some landlords owning only a few units and others owning 100 or more. Some landlords were real estate professionals; others were amateurs with little business expertise who were seeking supplemental income. The low end of the rental market, where most of the interviewees focus their real estate activity, is very challenging, and most landlords expressed some degree of economic vulnerability. An unexpected repair, an extended vacancy, or a tenant who does not pay the rent could pose a significant business threat for many of these landlords.

HUD’s Housing Choice Voucher program depends on the participation of private landlords. Photo courtesy of Daro Management Services

Because of the volatility of the low-rent market, many landlords are attracted to the stability and certainty that the HCV program provides. The guaranteed rent from the PHA was cited as a positive aspect of the HCV program by 48 percent of Cleveland landlords, 59 percent of Baltimore landlords, and 61 percent of Dallas landlords. Another reason some landlords cited for liking the HCV program was the desire to “do good” or “help others.” Across the three sites, 15 to 22 percent of landlords mentioned such altruistic motivations. Although most of the landlords accepted vouchers, they still had complaints about the program. These complaints may help explain why other landlords refuse to accept vouchers.

One complaint that the landlords expressed involved financial concerns. Although participating landlords appreciate the reliable rent stream from a housing voucher, their opinions vary about the amount of rent they receive. Among Cleveland and Dallas landlords, 33 percent and 21 percent, respectively, believed that payment standards for voucher holders were lower than the rent they could get from a market-rate tenant. When voucher payment standards are lower than market-rate rents, landlords are less interested in choosing voucher tenants. Many other challenges, including vacancies and property damage, ultimately affect the landlord’s bottom line.

A second complaint concerned voucher tenants themselves. Landlords often worry about tenant “quality.” A “bad” tenant might be less likely to pay the rent, more likely to cause damage, or more likely to cause problems that may require intervention by law enforcement officials. Landlords had mixed feelings about whether voucher tenants were “better” or “worse” than market-rate tenants. Across the three cities, 21 to 44 percent of landlords saw voucher tenants as better or about the same as market-rate tenants. The most common sentiment, however, was that voucher tenants are worse than market-rate tenants, according to 20 percent of Baltimore landlords, 30 percent of Dallas landlords, and 45 percent of Cleveland landlords. The researchers state that disentangling landlords’ prejudices from attitudes informed by actual negative experiences is difficult. Although conflicts between landlords and tenants — often related to housing maintenance and repairs — are bound to happen sometimes, landlords expressed frustration that the PHA did not take their side during such conflicts.

Finally, landlords complained about their interactions with the PHA. Many landlords (50% in Baltimore and 60% in Cleveland) see housing quality standards inspections as burdensome and costly. Only 12 percent of Dallas landlords felt that way, perhaps because their housing stock is newer and higher in quality. The most frustrating part of the inspection process seems to be the inconsistency and unpredictability of outcomes. Along with the inspection process, landlords express a general frustration with PHAs and bureaucratic hurdles. In Baltimore and Cleveland, nearly half of interviewees cited interactions with the PHA as a negative factor. At all three sites, fewer than 6 percent of interviewees cited PHA interactions as a positive factor.

The study suggests that there are opportunities to recruit landlords in the HCV program by focusing on the things that are most important to them: reliable rent payments and tenants that stay and care for the property. Some PHAs have already undertaken measures to address these issues, including having a fund for paying rent on an empty unit so that landlords do not lose money while waiting for an inspection or when rehabbing a unit damaged by a previous tenant.

Conclusion

Landlords are critical to the success of the HCV program and in the housing and neighborhood opportunities available to voucher tenants. For the first time, we have rigorous, quantifiable evidence on how frequently landlords accept vouchers. We also have rich, qualitative information on landlords’ attitudes about the HCV program and the reasons they choose to participate in the program. Some of this new evidence is concerning — for example, the extremely high rate of voucher denial in some sites. In other ways, however, the research is encouraging; landlords are more likely to accept vouchers under certain circumstances, and those circumstances are mostly within the control of HUD and PHAs. By seeking to understand landlords’ perspectives, HUD and PHAs have a real opportunity to increase landlord participation in the HCV program, increase the diversity of housing options available to voucher tenants, and help tenants access housing in higher-opportunity neighborhoods.

— Meena Bavan and Paul Joice, HUD Staff

1. Author's analysis of data from: U.S. Department of Housing and Urban Development. "Picture of Subsidized Households" (www.huduser.gov/portal/datasets/assthsg.html). Accessed 4 November 2018.
2. Poverty and Race Research Action Council. 2018. Expanding Choice: Practical Strategies for Building a Successful Housing Mobility Program, appendix B. Updated 14 September.
3. Lisa Sanbonmatsu, Jens Ludwig, Lawrence F. Katz, Lisa A. Gennetian, Greg J. Duncan, Ronald C. Kessler, Emma Adam, Thomas W. McDade, and Stacy Tessler Lindau. 2011. "Moving to Opportunity for Fair Housing Demonstration Program: Final Impacts Evaluation," U.S. Department of Housing and Urban Development.
4. Raj Chetty, Nathaniel Hendren, and Lawrence Katz. 2016. "The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Project," American Economic Review 106:4, 855–902.
5. Mary Cunningham, Martha Galvez, Claudia Aranda, Robert Santos, Douglas Wissoker, Alyse Oneto, Rob Pitingolo, and James Crawford. 2018. "A Pilot Study of Landlord Acceptance of Housing Choice Vouchers," U.S. Department of Housing and Urban Development.
6. Philip Garboden, Eva Rosen, Meredith Greif, Stefanie DeLuca, and Kathryn Edin. 2018. "Urban Landlords and the Housing Choice Voucher Program: A Research Report," U.S. Department of Housing and Urban Development.