A real estate company that rents homes exclusively to housing voucher holders has pulled out of the Bexar County market, citing cost concerns and a lack of communication from housing authorities of San Antonio and Bexar County.
Dallas-based High Opportunity Neighborhood (HON) Partners has scrapped plans to buy 100 more homes in the area and has sold all 31 of its residential properties in the area, representatives told the San Antonio Report.
The for-profit company purchases homes in neighborhoods with high-performing school districts and low crime rates and rents them exclusively to tenants who have qualified for Housing Choice Vouchers — a federal housing subsidy program better known as Section 8.
The company’s goal is to both turn a profit and combat generational poverty and economic segregation by giving poor residents a chance to reap the structural benefits that come from living in a “good” neighborhood.
Now residents who rented from HON likely will have an uphill battle to find landlords who accept vouchers in their current neighborhoods — or anywhere else, given the stigma surrounding Section 8 tenants.
Main Street Renewal, the company that took over the management of the properties, which HON sold to a limited liability corporation, rents to voucher holders, but not exclusively, meaning they aren’t required to set rents at levels a voucher holder can afford.
Matthew Berke, HON’s founder, said the company has “been trying for two and a half years to make San Antonio a viable market — and we’re in enough cities to see the difference between housing authorities who want this to succeed and those who either don’t care or … let’s just leave it at don’t care.”
Both the city’s and the county’s housing authorities said they were following HUD regulations and procedures, and rejected the notion that they don’t care about economic mobility for their residents.
The HON business model
HON owns more than 300 properties in Dallas-Fort Worth, Houston, Tampa and Minneapolis, and its formula of buying homes in good neighborhoods and renting them to Section 8 tenants appears to work well in those cities.
Under the U.S. Department of Housing and Urban Development’s program, voucher holders pay a maximum of 30% of their income toward the cost of rent, with the voucher making up the rest.
But the value of the voucher is ultimately determined by housing authorities, who calculate their worth based on the neighborhood where the voucher-holder would like to rent.
In the past, Section 8 covered two-thirds of rent up to a metropolitan area’s “fair market rent,” which often didn’t reach an area’s true rental costs.
In San Antonio, that confined most voucher holders to parts of the city with the cheapest rents in often not-so-great neighborhoods.
Under HUD’s updated policy, which finally launched in 2018 after it was put on hold by the Trump administration, vouchers can now cover the fair market rent within individual zip codes where homes are located, meaning vouchers can now cover the cost of rent even in higher-rent zip codes.
As determined by HUD, the 2022 fair market rent in the San Antonio-New Braunfels metropolitan area is $961 for a one-bedroom home and $1,849 for a four-bedroom. But the new program allows housing authorities to increase those amounts, depending on the fair market rent within a zip code.
That’s the policy HON capitalizes on. The company began buying homes in neighborhoods where mortgages could be covered by the rent from the now more-valuable vouchers. It purchased at least 30 homes in Bexar County’s jurisdiction and one in San Antonio’s housing authority jurisdiction over the past two years.
But the company said the vouchers offered by the housing authorities weren’t enough to cover management and mortgage costs, and said the agencies couldn’t provide timely information on how much rent vouchers would cover, said Berke.
The company found both local housing authorities to be generally “noncooperative” when it came to determining acceptable rents, Berke said. “[They] agreed to a certain rent with us … and then change[d] their mind.”
Incompatibilities emerge
Opportunity Home — formerly the San Antonio Housing Authority — didn’t “change [its] mind” on rent, said President and CEO Ed Hinojosa.
The agency recently increased its maximum fair market rent to 110% of HUD’s standards, but it still requires market research to determine what rent is reasonable for any particular area, Hinojosa said.
“We don’t really have the staff or resources to be able to [determine] rent reasonableness ahead of time until someone actually finds a unit that they’re interested in,” Hinojosa said.
“What we found in … this particular landlord situation was they were charging higher [rent] than what the comparable market rates were in that area,” he said.
Hinojosa noted that vouchers in “high-opportunity” areas are more expensive because the fair market rent is higher there, so they cost more than vouchers in lower-income areas — and that reduces funding for other vouchers.
Neldys Ortiz, interim executive director of the Housing Authority of Bexar County, declined to comment on HON specifically, but said in a statement that the voucher program is funded and regulated by HUD and “all parties must follow and understand” its guidelines.
Bexar County has just over 2,000 vouchers it can award to low-income residents, while Opportunity Home has about 12,000 vouchers.
Jessica Thorsheim, head of the Main Street Renewal’s real estate management division, said in a statement that the company intends to work with residents and the Bexar County housing authority to keep “as many residents as possible” in their current homes.
But Evon, a voucher tenant who lives in a home formerly owned by HON, said she has been unsuccessful in her attempts to renew her lease with Main Street Renewal. The San Antonio Report agreed to withhold Evon’s surname to protect her privacy.
Main Street has not yet responded with a lease agreement, Evon said. It’s possible the company will renew the lease, but it could also increase the rent above what her voucher is authorized to cover. Main Street did not comment on specific leaseholders.
“I don’t know if they’re going to renew the lease or what’s going to happen,” Evon said. “I’m just sitting here waiting, giving them time and patience. Hopefully, they’ll do the right thing.”
She lives in a middle-class neighborhood in a four-bedroom home with her three children. Living there has contributed to her family’s stability and her ability to find a part-time job, she said.
Rich Acosta, a local affordable housing advocate who worked as a real estate agent for HON, said residents like Evon are now at risk of displacement.
“Any landlord can sell their home, that’s their right and that shouldn’t be a problem,” Acosta said. “The problem is: where is the family going to go?” Most likely, they will be relegated to poorer neighborhoods, he said.
Acosta has been advocating for local housing authorities to expand their use of “project-based” vouchers, in which the vouchers are tied to properties instead of tenants.
Project-based vouchers could ensure the long-term availability of a specific home, Acosta said, meaning tenants don’t have to worry every time their lease is up. “That’s real stability.”
But that kind of system would ultimately decrease landlord and tenant choices, Hinojosa said.
“There isn’t any developer that exists today that wouldn’t love that, because it improves the financials of their projects,” he said. “We don’t get any new vouchers, what we have is what we have. So if we tie them up with a particular landlord, it’s really taking a housing choice away from another landlord. … It takes away choices from our residents as well.”
For its part, HON is agnostic in regards to project-based vouchers, Berke said, but it was a potential way for the company to stay in Bexar County.
Hinojosa said Opportunity Home is open to exploring partnerships with other landlords and organizations to expand the availability of homes to rent to voucher holders, “with our preference being to talk with nonprofits versus for-profit organizations for the obvious reason that, you know, they’re in it for the bottom line.”
Evon’s bottom line: her lease expires in February.
She dreads the prospect of having to move again, especially to a neighborhood with poorer schools and higher crime.
“I probably wouldn’t qualify [for] this area again, so my kids have to be uprooted from another school again — just when they’re doing good,” she said.
