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In March, 2013 the Berkeley Housing Authority sent property owners a memorandum saying that "opt-outs" were no longer allowed.  This changes everything for Section 8 rentals.

For years it has been understood that while Section 8 tenants, like all tenants in Berkeley, could only be evicted "for good cause", the Section 8 contract could nevertheless be cancelled on 90 days notice.  The ability to terminate a Section 8 contract was important.  A misbehaving Section 8 tenant could not be easily evicted, but when the owner opted out of the Section 8 relationship, the tenant, if s/he stayed, would have to pay the whole of the rent.  Most Section 8 tenants would take their vouchers elsewhere in order to retain the Section 8 subsidy.

Under the new rule, a misbehaving Section 8 tenant will have the same eviction protection as any other tenant, and the owner will not be able to cancel the Section 8 contract.  Bottom line, it will now be doubly difficult to get rid of a misbehaving Section 8 tenant.

Inevitably, this will change the decision structure.  Property owners considering Section 8 rentals will think twice before providing housing to Section 8 tenants.  It is one thing to take a chance with a Section 8 tenant when you know that you can terminate the contract if necessary.  It is something else again to sign up a Section 8 tenant knowing that terminating the contract is not possible.

The BHA memo engages in double-talk.  It says "Participation in the Section 8 … program is voluntary for landlords and households.  Either party may terminate participation in the S8 Program at any time, provided the termination is in compliance with HUD rules."  Reading the fine print, one finds that this is not true.  Tenants can terminate the contract at any time, but property owners cannot.  The conditions that would allow termination are limited to 1) death of the tenant, 2) tenant's losing eligibility by earning too much, 3) lack of habitability of the unit, or 4) for cause, by BHA, if the tenant violates the Section 8 rules.  Bottom line, property owners cannot terminate Section 8 contracts.

The memo says that this happened as a result of changes in federal law, but doesn't say when the law changed, or why.  "We regret any inconvenience this may cause", the memo says.  Inconvenience!  This is a significant, one-sided change in a long-term understanding about how the Section 8 program operates.  It changes basically the basis on which property owners signed up for Section 8 in the first place.

If the BHA was evenhanded about it, they would have offered all property owners a deadline – opt out by a widely publicized date, not thereafter.  But they didn't.  They simply announced the change without giving property owners an opportunity to voice their views.  It's a trap, and the trap is now closed, they are saying.

It could be that this change in the Section 8 rules is not the last.  I have heard that there is pressure in the low income housing community to make it mandatory for property owners to accept Section 8 tenants.  This would be an enormous and very damaging change.  Stay tuned.

[Michael St. John is the principal consultant at St. John & Associates, a property management consulting firm specializing in rent control.  He can be reached at 707-937-3711, by mail at 2115 West Street, Berkeley, CA  94702, by email at msjetal@pacbell.net, or check out his website, stjohnandassociates.net.]