D.C. Landlords Say Voucher Program In ‘Disarray,’ But Proposed Reform Would Be ‘Seismic Disaster’
Some 12,000 families take advantage of D.C.’s Housing Choice Voucher Program, a federally funded initiative to help low- to moderate-income families rent apartment units across the city.
But recent updates to the program have the landlords who manage those units concerned, as they claim the system is already hampered by bureaucratic delays and a lack of support from housing officials.
"The voucher program has become something very, very hard to work with," Ruddy Management founder and managing principal Peter Ruddy said Thursday at Bisnow’s Small Residential Owner and Operator Summit. "Vouchers take up a large percentage of the housing market in D.C., and processing times are a large issue."
This summer, the D.C. Housing Authority reformed the way it evaluates how much it should be paying for units, to comply with requirements from the U.S. Department of Housing and Urban Development. Meanwhile, there is a new proposal moving through the D.C. Council that would subject units leased through the program to rent control measures.
Landlords at the event raised concerns that the changes will throw a program they say is already backlogged and unpredictable into even more uncertainty, eventually diminishing the ability for those landlords to provide affordable housing at all.
“The politics have really moved in an adverse direction that makes me less compelled and less inclined to want to lease that to an affordable tenant,” Goodwin Cos. managing principal Marcus Goodwin said at the event, held at the Marriott City Center hotel.
The voucher program, managed by DCHA, subsidizes privately owned units throughout the city. Residents pay what they can up to 30% of their income, and HUD funds the rest. Around 3,400 property owners in the District participate in the HCVP program, but landlords say there is a backlog, and the waitlist is closed.
The program’s funding structure was overhauled this summer to comply with HUD guidelines, after the agency released a report in September 2022 that found DCHA was not conducting required annual rent reasonableness assessments in accordance with HUD regulations and its Moving To Work Demonstration program.
As a result, on July 1, DCHA put in place a rent reasonableness and utility standards program to comply with HUD, using a new software to determine what reasonable rents are for units. Previously, the agency would largely just sign off on whatever rents landlords said they would charge the District for voucher units, regardless of the market price, the Washington Post reported in an investigation. The Post found the city had overpaid landlords by millions because of a lack of due diligence.
Now, a new bill from Ward 3 Council Member Matt Frumin aims to place apartments rented through the HCVP under D.C.’s rent stabilization law, which limits rent increases on most older apartment buildings in the District.
Advocates for rent reasonableness and other reforms that aim to curb the prices D.C. pays for affordable units say that the inflated prices not only waste agency money, but also hurt overall affordability, driving up rent standards across the city.
Landlords at the event said the proposed changes are causing confusion and uncertainty in an already-tenuous market. They said the rates for tenants with vouchers are justified based on the additional support some of those residents require.
“We've worked with a lot of sellers who are concerned ... and with people looking to purchase, will it be $2,500 per month for that rent through the voucher program, or will the rent reasonableness cut it in half?” Marcus & Millichap Senior Associate Lorenzo Wooten Jr. said at the Bisnow event.
Coba Properties CEO Jay Gross pointed to a 16th Street Heights property his firm built six years ago to rent to voucher tenants. They had been charging the same rents for six years, he said, but that changed under the rent reasonableness program. After a tenant was killed in a shooting, he said Coba is being offered 25% less rent to refill the unit.
“That's obviously very problematic, because our loans are tied to the rents we’re receiving. Our property taxes are tied to the rents we’re receiving,” Gross said.
“It's very difficult to operate in an environment of uncertainty, which is, I think, what a lot of these regulations have done. Especially, the rent reasonableness program has created a lot of uncertainty," he added. "And I think the regulations are moving in the wrong direction."
Madison Investments co-founder and CEO Barry Madani said the rent reasonableness program “has thrown the voucher program into a little bit of a disarray,” noting that the task of assessing unit by unit on a rolling basis makes it hard to predict rents and makes the voucher process “clunky.”
But when asked about bright spots in the market looking ahead, Petra Development Director Ashley DeRosa noted that the changes weren’t all bad news.
“I do know that some of the rents did go down, but a lot of the rents went up, right?” she said.
As for the Frumin bill, the panelists argued that the finances don’t work.
Units that house tenants with vouchers are exempt from rent stabilization measures that limit the amount by which landlords can raise the rents on most apartment buildings built before 1976 to 2% plus inflation, or a maximum of 6%.
Frumin’s bill would do away with that exemption for most units rented to tenants with vouchers.
At the event, Craig London, a multifamily owner and board member of the DC Housing Providers Association, said the bill would be a “seismic disaster to the whole voucher program.”
“Financially, it's not going to work for landlords, and it's going to crush tenants who are going to be out there competing with people that have 800 credit scores and have had 20 years on the job, and they're going to be shut out of the market,” he said.
“The message to the elected officials about the Frumin Bill is that it will destroy the rental housing industry. It will put you out of business,” Small Multifamily Owners Association founder and CEO Dean Hunter said.
Frumin, asked by Bisnow to respond to landlords' critiques of his bill, said they are an "incorrect assessment" of how the legislation would impact the voucher program.
"The bill would remove incentives that have led to the cannibalization of one form of affordable housing in favor of another, leveling the playing field for both voucher recipients and private tenants," Frumin said in a statement. "These two forms of affordable housing already exist side-by-side, and my plan would preserve housing voucher dollars and avoid artificially inflated rents beyond fair market rates.
"I have extensively discussed my proposal with these landlords to fully understand their claims and respond through the mark up process where appropriate; while there may be modifications, the heart of the legislation is critically important," Frumin added.
These newly enacted and proposed changes to the program come as landlords say they already find it difficult to maneuver the system.
“You may have somebody approved for a particular number, you have a lease, and you're waiting two months on inspection, and in that timeframe if something comes up and it doesn't go through, we're left with properties that are sitting for months,” Ruddy said.
D.C. Council Member Robert White, who serves as head of the Committee on Housing, acknowledged those concerns at the start of the event.
"I know the process for housing vouchers is slow, it is tedious," he said. "And the delays keep people homeless longer. They burden landlords who maybe want to rent to somebody who has a voucher, but there's only so long you can wait for an inspection. There's only so long you wait for government processes to work the way that they need to."
White said he has identified backlogs and other issues and is working to fix them one by one, from adding social workers to reducing inspection times and shortening the periods DCHA is “sitting” on the voucher applications.
To this point, landlords said there isn't enough government support, which means they end up being the ones to provide the wraparound services.
“Housing specialists or case workers who are supposed to deal with these tenants, in my experience, have done a poor job,” Goodwin said.
He said he has had to buy furniture, food and other supplies for tenants out of his own pocket, purchases for which he will never get reimbursed.
“I don't have faith that the government officials and providers are really doing their due diligence and proper service to people that need the housing,” Goodwin said. “That onus is falling on the landlord and disincentivizing them from wanting to take in the fully affordable or government-sponsored tenant.”
“This is candidly why the voucher program is a little bit in disarray,” Gross said in response.