When a private owner leaves a HUD project-based subsidy program, usually by prepayment of a subsidized mortgage or opt-out of a project-based Section 8 contract, the owner’s obligation to maintain the low rents or accept the project-based assistance at the property is lifted, leaving most of the residents unable to pay the new rent without a new rental assistance subsidy. These new subsidies are provided in two different forms, depending upon the nature of the conversion event and the type of property involved: (1) enhanced vouchers or (2) ordinary tenant protection vouchers.
Congress has authorized and funded enhanced vouchers to subsidize rents for tenants facing opt-out or prepayment, but only upon occurrence of a specified "eligibility event." The authority to provide vouchers in the case of most prepayments was first authorized in 1996, and Congress extended enhanced voucher assistance to tenants in opt-out properties in 1999.
Enhanced vouchers have two key features that supplement the regular housing choice voucher program. First, enhanced vouchers may exceed the public housing authority’s ordinary payment standard (used for regular Housing Choice Vouchers), allowing payment of any rent which is determined "reasonable" by the housing authority, as determined in comparison with market comparables. Second, an enhanced voucher provides the tenant with a right to remain in the unit after conversion to market rents, thus creating an obligation for the owner to accept the voucher. So long as the rent remains "reasonable," in most cases, the tenant’s portion of the rent should not increase; one exception is that tenants who paid a ceiling rent at a subsidized property that was less than 30% of income may see their rents increase with a voucher. If the tenant elects to move, the voucher loses its enhancements and becomes a regular Housing Choice Voucher.
The enhanced voucher statute requires HUD to make these vouchers available to eligible tenants residing in the property at the time of most prepayments or opt-outs, as well as at the time of other "eligibility events," primarily "preservation" transactions such as a conversion to vouchers in Mark-to-Market restructuring.
Tenants often encounter problems with the issuance and use of enhanced vouchers, including:
• PHAs may rescreen tenants for voucher eligibility under their own selection criteria, thereby disqualifying some tenants who previously received project-based subsidies
• units must pass PHA Housing Quality Standards inspections
• owners may require a higher security deposit (e.g., up to two months of the new market rent)
• owners may elect to discontinue the rental use of the property
• the owner may disagree with the PHA on whether the requested rent is "reasonable"
• unit/family size may be "mismatched" under the voucher regulations due to changes in the family composition since the inception of the tenancy, leading PHAs to require tenant to search for other housing or move in order to receive any voucher assistance (especially a problem for larger families who are “overcrowded” under a PHA’s standards
• HUD or PHAs may not enforce the tenants’ right to remain when an owner attempts to terminate the tenancy, either at the time of the initial issuance of the voucher or at subsequent lease expiration
• some non-Section 8 tenants (e.g. Section 236 tenants paying a ceiling rent at the "Section 236 market" rent cap) may have to pay substantial rent increase to 30% of their income
Tenant Protection Vouchers
Congress has also authorized and funded other “tenant protection” vouchers to subsidize rents for tenants facing certain housing conversion actions not covered by enhanced vouchers. These conversion actions include such events as conversions of public housing through demolition, sale or otherwise, foreclosures of HUD-subsidized mortgages, agency-initiated terminations of project-based Section 8 contracts, or, more recently, certain other prepayments (e.g., Section 202 properties, for FY 2009). These tenant protection vouchers are ordinary Housing Choice Vouchers administered by the PHA, and include neither a higher payment standard nor a right to remain in occupancy. Sometimes, even though a conversion event might be nominally eligible for enhanced vouchers, because the condition of the property does not comply with voucher Housing Quality Standards, the tenant must move in order to receive continued assistance and the vouchers are treated as ordinary tenant protection vouchers. These tenant protection vouchers are authorized by various statutes (usually related to the program affected), and funds are appropriated within the tenant-based rental assistance account in annual appropriations Acts.
This NHLP Housing Law Bulletin article from Jan. 2009 details a case heard by the United States Court of Appeals for the District of Columbia Circuit. The court decided that an owner converting federally assisted property to market rate must accept the tenants’ enhanced vouchers, as required both by the federal enhanced voucher statute and by local law prohibiting discrimination based upon source of income. In Feemster v. BSA Limited Partnership, the court affirmed the lower court’s interpretation of the enhanced voucher statute and reversed its decision that the local source of income protection law did not prohibit the owner’s refusal to accept the vouchers. As a result, the tenants may remain in occupancy until their tenancy is lawfully terminated under local law, and the lower court will now determine other available remedies for the local law violations.
This NHLP Housing Law Bulletin article from Feb. 2006 details a resounding victory for residents of federally assisted housing. The United States District Court for the Eastern District of New York found congressional intent to create a private right of action to enforce the enhanced voucher provisions of the United States Housing Act, 42 U.S.C. § 1437f(t). The case, Estevez v. Cosmopolitan, involved a challenge by residents of a Section 8 Moderate Rehabilitation landlord’s refusal to accept enhanced vouchers. The Estevez decision is an important victory both for the plaintiffs in the case and for residents of HUD-assisted developments throughout the country.
This NHLP Housing Law Bulletin article is from Nov.-Dec. 2004. In a case of first impression, a federal district court in New York ruled that federal law requires owners leaving the project-based subsidy programs to accept the replacement subsidies provided by Congress. This ruling provides clear and direct support to the position that Congress itself has required owners to accept these subsidies, joining the position long espoused by tenant advocates and even by HUD since 2000.
This NHLP Housing Law Bulletin article from March 2008 describes how HUD has issued a new Notice, PIH 2008-12 (Feb. 15, 2008), which provides real protection to families that are “overhoused” at the time of conversion. In 1999 Congress passed unified authority requiring the Department of Housing and Urban Development (HUD) to provide “enhanced vouchers” for all tenants facing housing conversion actions in many privately owned, federally supported properties, including owner opt-outs and prepayments. Unfortunately, the law as passed and implemented by HUD fails to clearly protect tenants. This article provides an overview of the notice and its ramifications.
This NHLP Housing Law Bulletin article from Oct. 2007 details Barrientos v. 1801-1825 Morton, LLC, in which a federal district court granted a permanent injunction allowing 22 assisted tenants to remain in their apartments and orders the owners to comply with the city’s eviction protection ordinance when the owners sought to evict them in order to raise rents. The court also held that HUD regulations permitting owners to evict voucher tenants based on business or economic reasons did not preempt the eviction protections of the Los Angeles Rent Stabilization Ordinance.
This NHLP Housing Law Bulletin article is from Nov.-Dec. 2005. As a result of the settlement of a nationwide class action challenging the failure of HUD to adjust voucher subsidies provided after certain mortgage prepayments during the late 1990s, public housing authorities should now be taking steps to identify and reimburse affected class members. HUD has issued two notices advising public housing agencies of the settlement and their duties to identify tenants who should have received subsidy adjustments and provide them with lump„sum reimbursements or rent credits. This article provides a step-by-step process for local housing advocates who are helping affected tenants seek reimbursement.
This Housing Law Bulletin article from August 2009 reviews recent developments in the Barrientos case, including the filing of an amicus brief by the United States and the issuance of a HUD Notice, both clarifying that local eviction protections are not preempted.
C.A. NO. 00-CV-12311-GAO, sub nom. Brighton VIllage Nominee Trust v. Malyshev, 2004 WL 594974 (D.Mass. Mar. 23, 2004), Elderly and disabled project which prepaid its HUD-held mortgage in 1986 and opted-out of Section 8 in 1995, when regular vouchers were issued. Owner sued tenants in state court for nonpayment of rent when their vouchers did not cover the rents charged. Tenants filed third party complaint aginst HUD, which then removed case to federal court, challenging the prepayment as contrary to Section 250 of the National Housing Act, and the opt-out as illegal under then-applicable 42 U.S.C. Sec. 1437f(c)(9). Plaintiffs sought monetary relief for affected tenants who had to pay more with regular replacement vouchers until enhanced vouchers were issued in 2000 after the statute was changed to make them eligible. Tenants also opposed owner's motion to remand to state court. The trial court subsequently ruled that HUD violated both Section 250 and Section 1437f(c)(9), claims brought under the APA, and awarded financial restitution to the tenants under the APA's waiver of sovereign immunity.
No. 1:05-CV-4318 (JG) (E.D.N.Y. Nov. 28, 2005) A challenge to an owner's refusal to accept enhanced vouchers after a Section 8 opt-out, based on enhanced voucher statute, 42 U.S.C. sec. 1437f(t). After briefing and hearing, the court found that the statute requires the owner to accept enhanced vouchers of prior tenants, that this statutory right is enforceable through an implied private right of action, and issued a preliminary injunction.
471 F. Supp. 2d. 87 (D.D.C. 2007), aff'd in part, rev'd in part and remanded, 548 F.3d 1063 (D.C.Cir. 2008). Successful challenge to owner's refusal to accept tenants' enhanced vouchers after Section 8 opt-out. After the trial court awarded judgment based on federal statutory claims, the D.C. Circuit upheld that judgment, ruling that the tenants have a federal statutory right to remain until their tenancies are validly terminated under local law, but also recognized the tenants’ valid claim for source of income discrimination under local law.
No. CV 06-06437 (C.D Cal., orders Sept. 11 and Oct. 24, 2007), aff'd, No. 07-56697, 2009 WL 3260544 (9th Cir., Oct. 9, 2009). Tenants receiving enhanced vouchers sought to prevent property owners, under the Unified Enhanced Voucher Authority Statute and the Los Angeles Rent Stabilization Ordinance, from evicting them for a business or economic reason. The trial court ultimately issued judgment for tenants on both claims, and awarded attorney’s fees. On October 9, 2009, this judgment was affirmed by the Ninth Circuit, which held that local eviction protections are not impliedly preempted by federal law because there is no conflict. Although the court agreed that the eviction also violated the enhanced voucher tenants' right to remain, it found such a holding unnecessary.
No. 03 Civ. 8669 (BSJ) (S.D.N.Y. decision Aug. 9, 2004)
A challenge to the owner's refusal to accept enhanced vouchers following opt-out from project-based Section 8 contract. The court issued preliminary and permanent injunctions requiring the owner to accept the tenants' enhanced vouchers, finding the federal law providing the tenants with an "election to remain" was clear. The owner did not appeal.
636 F.3d 1150 (9th Cir. 2011).
After owner opted out of project-based Section 8 program, elderly tenants obtained preliminary injunction enforcing their federal statutory right to remain with enhanced vouchers.
No. 00-CV-12311-GAO, sub nom. Brighton Village Nominee Trust v. Malyshev, 2004 WL 594974 (D.Mass. Mar. 23, 2004) An elderly and disabled project prepaid its HUD-held mortgage in 1986 and opted-out of project-based Section 8 in 1995, when regular vouchers were issued. The owner sued the tenants in state court for nonpayment of rent when their vouchers did not cover the rents later charged. The tenants filed a third-party complaint against HUD, which then removed the case to federal court; the complaint challenged the prepayment as contrary to Section 250 of the National Housing Act (since mortgage was HUD-held), and the opt-out as illegal under then-applicable 42 U.S.C. § 1437f(c)(9). Plaintiffs sought monetary relief for affected tenants who had to pay more with regular replacement vouchers until enhanced vouchers were issued in 2000 after the statute was changed to make them eligible. The tenants also opposed the owner's motion to remand to state court. The trial court subsequently ruled that HUD violated both Section 250 and § 1437f(c)(9), claims that were brought under the APA, and awarded financial restitution to the tenants under the APA's waiver of sovereign immunity. Tenants subsequently obtained an award of attorney’s fees under EAJA.
61 F.Supp. 2d 879, No. 98-64 DWF/AJB (D. Minn. Aug. 30, 1999) A successful challenge to HUD's approval of an opt-out using a HUD form notice due to lack of clarity regarding the owners’ intent and failure to state reasons (the latter required by the version of 42 USC §1437f(c)(9) then in effect, since repealed); HUD's enhanced voucher policy of not subsidizing subsequent rent increases was contrary to authorizing law; favorable dicta on Fair Housing claims 42 U.S.C. §§ 3604 and 3608, failure to consider the effects on racial minorities, disabled individuals, and failure to affirmatively further fair housing.
339 F.3d 1 (1st Cir. 2003) The plaintiffs of Develco Apts. challenged HUD's approval of Section 8 opt-out and provision of enhanced vouchers under Administrative Procedures Act based on notices that do not comply with state and federal statutes, and failure to affirmatively further fair housing under 42 U.S.C. § 3608(e). The District Court dismissed all claims against HUD, and partially dismissed claims against the owner. On plaintiffs’ appeal to the First Circuit, the court upheld the lower court's judgment, finding that HUD acted consistently with governing statutes in issuing enhanced vouchers despite deficient opt-out notices.
No. CV 02-1120-AA (D. Ore. filed 2002)
A class action suit brought by tenants in Portland and San Diego on behalf of all tenants holding enhanced vouchers who paid rent increases as a result of HUD’s unlawful policy to only increase the payment standard to cover an owner’s first rent increase following prepayment of the HUD mortgage. The suit requested that HUD identify, locate and reimburse tenants for subsidy amounts unlawfully withheld. Court granted HUD's motion to dismiss the plaintiffs' APA claims for reimbursement on grounds of sovereign immunity. HUD and the plaintiffs then negotiated a settlement, approved on May 16, 2005, which generally requires PHAs to identify and reimburse affected tenants from funds under their ACC, their reserves, or funds created by turnover vouchers. HUD has issued Notices directing PHAs to undertake specific activities, so the implementation process should have been ongoing from August of 2005 through at least January of 2007.
No. 2005CV105622 (Ga. Super. Ct., filed 2005), on removal, No. 1:05-CV-2335 JTC (N.D. Ga. 2005)
A challenge to a PHA's denial of voucher assistance to certain tenants of a property where a project-based Section 8 contract was terminated by HUD for owner breach. The PHA had denied tenants for various reasons, primarily alleged prior criminal activity during the past decade, despite tenancies in good standing. Upon demand, the PHA provided vouchers for most tenants who were initially denied, except two plaintiffs. Claims based on federal statutes, including the enhanced voucher statute, 42 U.S.C. Sec. 1437f(t), and MAHRAA Sec. 524(d), as well as federal regulations. Case was filed in state court, where a TRO was obtained after the hearing and decision. Prior to PI hearing, the PHA then removed case to federal court, which issued an opinion and order denying PI after hearing.
NHLP has compiled a list of other enhanced voucher cases that may be useful for advocates developing their own pleadings.
(Troubled Properties) (May 1998)
(Prepayments/Opt-Outs) (Aug. 2000)
Enhanced Vouchers carry a right to remain, which includes a good cause for eviction requirement, both during the term of the lease and at lease expiration, per HUD's Section 8 Renewal Policy Guide. Because this requirement of good cause at lease expiration differs from that provided under the ordinary voucher program, advocates should encourage their PHAs to use this sample lease addendum to ensure that tenants, owners and courts understand the special protection of enhanced vouchers.
Statutes and Regulations
codified at 42 U.S.C. §1437f(t), enacted by Pub. L. No. 106-74, §538, 113 Stat.1122 (Oct. 20, 1999), as amended by statutes below; Amended by: Pub. L. No. 106-246, §2801, 114 Stat. 569 (July 13, 2000) (clarification of tenant’s right to remain).
§§205, 114 Stat. 1441A–2 (authorizing HUD to establish "reasonable limits" on EV payment standard) and 228, 114 Stat. 1441A–30 (expanded eligibility for prior opt-outs to those after FY ‘96) (Oct. 27, 2000).
§§902, 114 Stat. 3026 (changing the retro eligibility date to after FY ‘94) and 903 (inserting "no harm" protection for tenants on HUD’s authority to limit EV payment standards) (Dec. 27, 2000).
§632, 115 Stat. 2224 (Jan. 10, 2002) (including EV coverage for prepayment or voluntary termination of mortgage insurance since FY ‘96).
§531, 113 Stat. 1113 (Oct. 20, 1999) (amending MAHRAA §524(d), requiring enhanced vouchers for all Section 8 contracts that are not renewed).
§613, 115 Stat. 2224 (Jan. 10, 2002) (adding Sec. 525 of MAHRAA, which provides for consistency in rent levels between the "market rent" determinations in project-based Section 8 contract renewals and amounts allowed as reasonable for enhanced vouchers).
(definition of "eligible low-income housing," prepayment of which triggers eligibility for enhanced vouchers as referenced in 42 U.S.C. § 1437f(t)(3)(B), through Pub. L. No. 104-204).
Chapter 8 of the Guide covers opt-outs and Chapter 11 covers "Resident Issues," including notice requirements. Chapter 11, Section 3 describes tenants’ right to remain with enhanced vouchers. Appendices 11-1 and 11-2 prescribe the required form of notice, which includes a certification that the owner will accept enhanced vouchers.
"Section 8 Tenant-Based Assistance (Enhanced and Regular Housing Choice Vouchers) For Housing Conversion Actions - Policy and Processing Guide" (Nov. 14, 2001, expires Nov. 30, 2002).
“Enhanced Voucher Requirements for Over-housed Families” (Feb. 15, 2008)
A nationwide organization of local tenant associations working to preserve and improve HUD multifamily properties.
This site provides the applicable regulations, Notices and guidelines.