The Final Check: Understanding the PHA's Approval Process
Once you and a prospective tenant have submitted the Request for Tenancy Approval (RFTA), the ball is officially in the Public Housing Authority’s (PHA) court. This stage is the PHA’s formal due diligence process. Before they can agree to enter into a Housing Assistance Payments (HAP) contract with you, they must rigorously verify that all program requirements are met.
Think of it as a final, non-negotiable checklist that protects the tenant, the program’s integrity, and you, the investor.
Approval is not automatic. The PHA must confirm that the tenancy meets four fundamental pillars of the program before giving the green light.
The PHA’s Four-Point Final Review
According to the official handbooks, for a tenancy to be approved, the PHA must ensure every one of the following conditions is met. A failure in any single area will result in a disapproval of the tenancy.
- The unit passes a Housing Quality Standards (HQS) inspection.
- The rent is deemed reasonable for the market.
- The owner is eligible to participate in the program.
- The family’s share of the rent does not exceed the affordability limit.
Let’s break down exactly what the PHA is looking for in each of these critical steps.
Requirement 1: Passing the HQS Inspection
The physical condition of your property is paramount. The core mission of the Section 8 program is to provide decent, safe, and sanitary housing.
Before the lease term can begin, the PHA must inspect the unit and officially determine that it meets all HQS criteria. You cannot proceed, and no HAP contract can be signed, until the unit gets a passing grade.
Note
Some PHAs have the flexibility to approve a tenancy and begin HAP payments even if a unit fails an inspection, but only if the deficiencies are not life-threatening. According to PIH Notice 2017-20, this flexibility is an option for the PHA, not a right for the owner. You should always aim to have your unit 100% pass-ready before the initial inspection to avoid any potential delays or complications.
(For a comprehensive guide on what inspectors look for and how to prepare your property, see the articles in the Property Standards folder.)
Requirement 2: Verifying Rent Reasonableness
The rent you request on the RFTA must not only work for your bottom line; it must also be fair according to the local market. The PHA is required to conduct a rent reasonableness determination, comparing your proposed rent to the rent for similar, unassisted units in the immediate area.
This step ensures that the HCV program does not artificially inflate local market rents. Even if your requested rent is below the PHA’s Payment Standard, it can still be denied if it’s higher than comparable unassisted units on your block.
Tip
Be Prepared to Negotiate
If the PHA determines your requested rent is too high, they will disapprove the tenancy. However, the Housing Search and Leasing Guidebook notes that the PHA may engage in negotiations to reduce the rent. An investor who shows a little flexibility on a small rent reduction may find it far more profitable than having the tenancy denied and the unit sitting vacant for another month.
Requirement 3: Confirming Owner Eligibility
Just as the PHA screens tenants for eligibility, they also conduct a basic screening of property owners. This is primarily to ensure you are in good standing with the federal government. The PHA will verify that you (or your business entity) are not:
- Debarred, suspended, or otherwise subject to a limited denial of participation that would prohibit you from doing business with the federal government.
- In a prohibited relationship with the tenant (e.g., a parent, child, or sibling), unless the PHA has granted a specific waiver as a reasonable accommodation for a family member with a disability.
(For a full list of reasons an owner may be disapproved, please see the Owner Eligibility article.)
Requirement 4: The “40 Percent Rule” for the Family
This is the final and perhaps most misunderstood hurdle. Even if your property is perfect, your rent is reasonable, and you are an eligible owner, the tenancy can still be denied based on the tenant’s affordability.
This rule, often called the “Maximum Initial Rent Burden,” is a critical protection for the tenant.
Important
Understanding the 40% Rule
The rule is simple: at initial lease-up, the family’s share of the Gross Rent (their portion of the rent plus the utility allowance) cannot exceed 40% of their monthly adjusted income.
- This rule only applies when the family first moves in or transfers to a new unit. It does not apply to rent increases after the 1st year.
- This rule only applies if the proposed Gross Rent for the unit is higher than the PHA’s Payment Standard. If the Gross Rent is at or below the Payment Standard, this rule is not a factor.
- This is a hard limit. If the family’s share exceeds this 40% threshold, the PHA is legally barred from approving the tenancy.
Example Calculation
| Parameter | Value |
|---|---|
| Family’s Monthly Adjusted Income | $2,000 |
40% Affordability Limit ($2000x0.40) |
$800 |
| Calculated Family Share of Rent | $850 |
| Result | Disapproved |
The tenancy must be disapproved because $850 is greater than the $800 limit.
Caution
The Silent Deal-Killer
This rule can be a source of immense frustration for investors. Your property can be immaculate and your rent can be perfectly reasonable, but if the combination of that rent and the family’s specific income pushes them over the 40% burden, the deal cannot proceed. It is a crucial, final check that is entirely based on the tenant’s financial situation.
Approval or Disapproval: The Final Word
After the PHA has completed its review of these four points, it will promptly notify both you and the family of its decision in writing.
- ✅ If Approved: Congratulations. The PHA will now move to prepare the HAP contract. The next step is for you and the family to execute your lease and for you and the PHA to execute the HAP contract.
- ❌ If Disapproved: The notice will clearly state the reason(s) for the denial (e.g., failed HQS inspection, rent not reasonable, 40% rule violation). This ends the process for this specific tenancy request.