It may seem obvious, but now the research can back it up: landlords are firmly biased against tenants using housing vouchers.

The government distributes vouchers to subsidize a portion of a tenant’s rent. Typically, renters pay 30% of their income on rent and the vouchers cover the rest. This system helps low-income households stick to paying the recommended 30% of their income on housing, and allows landlords to collect fair market rents.

Housing vouchers — called Section 8 vouchers — provide low-income tenants with access to high-opportunity neighborhoods. Research shows that children who grow up in wealthier, high-opportunity areas are more likely to earn more income later in life, and thus less likely to need to rely on housing vouchers in the future. For governments, housing vouchers require immediate pay-outs, but can be a forward-thinking solution for the next generation.

But vouchers are no guarantee for housing. Landlords are the gatekeepers to neighborhoods with high economic opportunity, using vouchers to screen out tenants, according to a recent study by the Cleveland Federal Reserve Bank. This is true regardless of the voucher amount, even when vouchers allow for renters to pay above market rent.

In the study, researchers examined high-opportunity neighborhoods. Tenants showed bias against voucher renters in these neighborhoods under the regular voucher system.

Further, when the voucher amount increased $450 on average for high-opportunity neighborhoods, the bias continued even when the vouchers were worth more money. In some cases, the increased voucher amount gave the landlord the opportunity to collect above market rent. Even with the possibility to collect higher rents compared to renting to non-voucher tenants, most landlords chose to screen out tenants using vouchers.

Tenants contacting landlords without the need of a housing voucher received a 50% positive response. Tenants who contacted landlords that mentioned the need for a housing voucher received only a 23% positive response.

The small percentage of landlords who responded positively to higher voucher payments were landlords of single residences. Landlords of multi-family properties showed bias no matter the voucher payment amount.

The experiment was conducted in Washington, D.C. but the researchers claim the results have national implications.

Housing vouchers are a poor substitute for sufficient housing

Is it even legal to deny a tenant due to their reliance on housing vouchers?

In California, it is unlawful for a landlord to discriminate based on a tenant’s source of income. In other words, they may not refuse to rent to a tenant just because a certain amount of their income comes from, say, Social Security payments. [Calif. Government Code §12955(a)]

Until January 1, 2020, Section 8 vouchers were an exception to this law. But with the passage of Senate Bill (SB) 329, Section 8 vouchers are now included under the law prohibiting discrimination due to source of income.

However, while it is no longer lawful for landlords to screen out tenants with housing vouchers, it’s not too difficult for landlords to do so regardless. With today’s high demand for rentals and low vacancy rates, landlords can afford to be picky about their preferences.

Another solution to counteract landlord discrimination against voucher holders is found in Los Angeles, which rolled out two programs to incentivize landlords in 2017. Under the programs, any damages remaining after a Section 8 tenant moves out will be reimbursed. The programs can also cover the tenant’s security deposit and provide utility assistance.

However, both types of solutions are band-aids for the real problem: a lack of affordable rentals in California’s major metro areas.

Households using vouchers are already paying 30% of their income on housing. Wouldn’t it be ideal if enough rentals existed so that all households could find housing at this cost threshold, without the need for government assistance?

To reach this housing utopia, builders need to construct more low-tier, multi-family rentals. Due to the high cost of land in California’s major metro areas, to enable lower rents, local governments will need to get involved. They can encourage more low-tier rentals by taking actions like:

  • waiving permit fees;
  • expediting the environmental review process;
  • waiving parking requirements; and
  • providing tax benefits to builders of low-tier, multi-family rentals.

Some of this action is already occurring in California, encouraged by recent law changes. Read about these efforts here.