San Diego lawsuit may protect low-income renters from excessive rent hikes statewide

One by one, dominoes are falling in favor of low-income tenants throughout California communities who rely on federal Section 8 housing vouchers to pay rent.

The latest fell in San Diego, when the city’s Housing Commission said it would — for the first time — start denying landlords’ rent increase requests when they exceed the cap set by state law. That change, a spokesperson said, is a response to the federal agency overseeing the Section 8 program recently saying housing authorities have a duty to ensure rent hikes are lawful.

But while celebrating, housing attorneys across the state are watching to see how another potentially seismic domino falls: A first-of-its-kind lawsuit against San Diego’s public housing agency could lead to tens of thousands of low-income tenants across the state having the same protection from excessive rent increases as most Californians.

Filed in November in San Diego Superior Court, the lawsuit says the Housing Commission has been “approving and subsidizing illegal rent increases” in the federal housing voucher program. The plaintiffs, Black Men and Women United San Diego, have asked a judge to compel the agency to recover all public funds illegally paid to private landlords.

The Housing Commission has denied approving any illegal rent increases and said it’s operating under the assumption the state’s cap doesn’t apply to Section 8 voucher holders.

A definitive ruling — though far from guaranteed — could help settle the debate, which has been quietly taking place since the California Tenant Protection Act took effect in 2020. Some housing agencies made changes to ensure rent increases for Section 8 voucher holders followed state law. Others didn’t.

inewsource spoke with five attorneys across the state who are deeply involved with housing law, including shaping policy, litigating and pushing for compliance, and they are keeping an eye on what happens next in San Diego. It could pave the way for similar action across the state.

“The folks who are doing this lawsuit have done work that is going to benefit anyone who tries to hold their local housing authorities accountable,” said Erin Simonitch, directing attorney with the Marysville Rural Justice Unit, a legal aid group that represents tenants in Central California. She said she and her team have spent months advocating for similar changes with the housing authority in her area.

“Now we have a model to work off of.” 

How we got here

The stage was set four years ago when California lawmakers passed some of the strongest tenant protections in the nation. They capped rent increases for many tenants and banned discrimination against those with a Section 8 housing voucher.

Local housing authorities are responsible for running the federal program — paying landlords directly to help cover rents, while also ensuring those rents are reasonable and legal.

But some agencies, including in San Diego, didn’t think the state’s cap covered the federal program.

The result: Some low-income households faced rent hikes that would have otherwise been illegal for other California renters. Advocates and attorneys say the law was never intended to exclude Section 8 voucher holders, who are among the most vulnerable residents in any community.

In an attempt to settle the dispute last summer, California Attorney General Rob Bonta sent a letter to all 96 public housing agencies in the state. He said the law clearly protects voucher holders and warned officials to stop approving unlawful rent increases on low-income families the federal program was intended to protect. Bonta co-sponsored the law while he was an assemblymember representing Oakland and Alameda.

Attorneys who represent tenants said many housing agencies statewide changed policies to comply, including in the city of Encinitas. But others didn’t. An inewsource investigation revealed the San Diego Housing Commission, which helps 17,000 families pay rent in the city, had not made any changes.

Asked to explain the findings of the investigation in November, a top San Diego housing official said the attorney general’s letter isn’t a legal opinion. The agency has instead relied on the opinion of attorneys for the California Legislature, which said soon after the law took effect in 2020 that it doesn’t apply to the federal program.

Despite that position, the agency announced plans in January to apply a rent cap that mirrors state law, without any exemptions. But officials said it couldn’t take effect until it was approved by the U.S. Department of Housing and Urban Development, which oversees and pays for the program.

By mid-February, five of the county’s six housing authorities had already committed to rejecting unlawful rent increases. San Diego was the only one that remained. And then, the Housing Commission received a letter Feb. 12 from HUD.

The letter points to existing federal regulations, as well as Bonta’s advisory, and says every public housing agency in the state has a duty to ensure rent increases comply with state and local laws.

It marks the latest development in a yearslong dispute about whether a cap on rent increases etched in state law applies to the federal Section 8 program. 

“HUD’s letter is not a legal opinion,” said Marshall, the Housing Commission spokesperson. “However,” he continued, “based on this new guidance, (the Housing Commission) will follow HUD’s recommendations and will begin implementing changes to the process for considering rent change requests in accordance with the rent increase limits and exemptions in the California Tenant Protection Act of 2019.”

At the same time, Marshall insisted no laws were broken because voucher holders have never been protected by law. The agency “does not and has not approved any illegal rent increases for Section 8 housing vouchers,” Marshall added. 

The messaging from the Housing Commission is a carefully crafted strategy, legal experts say.

“They’re operating on two fronts right now,” said Deepika Sharma, director of the Housing Law and Policy Clinic at the University of Southern California’s Gould School of Law. 

On one hand, Sharma said, housing officials have this guidance from the feds that says they need to change. On the other hand, she said, they’re in the middle of a lawsuit and have to be careful about what they say.

There was a very similar lawsuit 15 years ago over rent control in Los Angeles, known as Barrientos v. 1801-1825 Morton LLC. 

In that case, a three-judge panel from the 9th U.S. Circuit Court of Appeals ultimately ruled that voucher holders aren’t automatically exempt from protections that are available to other tenants. The state attorney general cited this ruling in his letter last summer.

“This is how I would also read it and how I think it should come out,” Sharma said. “There are so many exemptions in the Tenant Protection Act, they (state legislators) would have excluded Section 8 if that was the intent.”

Looking beyond San Diego

Legal arguments aside, the lawsuit against the Housing Commission appears to be the first in California that challenges a public housing authority and its duty to scrutinize rent increases, and attorneys across the state anticipate more will come.

Some housing agencies in northern, central and southern California are still approving rent increases without checking if they comply with the caps set by state law, said Ugochi Anaebere-Nicholson, a staff attorney with the Public Interest Law Project, an Oakland-based nonprofit that provides legal aid to California residents.

She said she’s keeping an eye on what happens in San Diego because the lawsuit presents a potential avenue for accountability.

“It may very well be that a judge will have to decide the applicability of the Tenant Protection Act,” she added, “but it seems these letters (from HUD and the California attorney general) are pretty strong indications of the law applying.”

Attorneys predict a few possible outcomes for the lawsuit in San Diego. For example, both parties could settle the case, possibly leaving unresolved the overarching question of whether state law protects Section 8 voucher holders.

A judge could also rule for or against the plaintiff, potentially opening the Housing Commission up to damages or undermining the California attorney general’s reading of the law. Either way, the parties could appeal the court’s decision, further delaying any resolution. But an appeal could lead to stronger, “binding guidance” from the court, Anaebere-Nicholson said.

At any rate, attorneys say HUD’s letter is the strongest piece of evidence yet that Section 8 voucher holders are protected from excessive rent increases, and it could open other housing agencies up to liability.

“I think they’ve been put on notice that they have a duty to review rent increases,” said Madeline Howard, a senior attorney with Western Center on Law and Poverty, a nonprofit that cosponsored the Tenant Protection Act.

Simonitch, the attorney with the legal aid group based in Marysville, said she plans to keep a close eye on the lawsuit in San Diego. 

As the case unfolds, “we’ll be able to see what works, what doesn’t work, what arguments are proving to be the most convincing,” she said, adding that the attorneys involved with the lawsuit are “really doing a heavy lift here.”

Simonitch and her team in Central California have spent the past eight months pushing one small agency to change.

The Regional Housing Authority, which serves hundreds of low-income families in a rural four-county area, had declined to follow the state attorney general’s guidance and continued approving rent increases without regard to state law, Simonitch said. She said her team forwarded HUD’s letter to officials there and were awaiting a response.

About 30 minutes after inewsource reached out to the Regional Housing Authority for comment on this story, Simonitch received the response she and her team had spent months pushing for. The agency will implement changes to comply with the Tenant Protection Act, according to emails shared with inewsource. Officials have not responded to inewsource’s request for comment.

HUD’s letter changes the game, Simontich said. Courts typically defer to regulatory agencies on how to interpret their own regulations.

“It is the federal agency that is giving them their money,” she added, “and it is that agency’s interpretation of the regulations that govern the entire program.”