Master leasing, a legal arrangement in which a master tenant subleases units to subtenants, is a strategy that can expand homeless people's access to affordable housing. With many programs seeking to implement a "Housing First" approach with their homeless clients, master leasing provides a means for accessing housing units that can then be used for clients who are often unattractive to landlords, such as those who have bad credit histories or problems with addiction or mental illness. In addition, by developing collaborative arrangements with providers of services needed by the clients, master leasing becomes a quick way to bring vitally needed supportive housing units on line.

Expanding Access To Affordable Housing Is Essential To Ending Homelessness

The lack of affordable housing in our communities is both a reason why people fall into homelessness and one of the major barriers blocking their return to stability and self-sufficiency. Exiting homelessness is a complicated endeavor, often requiring that people learn new job and life skills, access benefit programs, get treatment for drug or alcohol addiction, and/or obtain health and mental health services. However, these efforts are generally of limited success if the family or individual is unable to obtain permanent, affordable housing. In addition, the longer the time period that people are forced to spend on the streets and in shelters, the more damaging the experience is, and the more difficult it is for them to recover. For these reasons, more and more programs are adopting a "Housing First" approach that seeks to first assist people in accessing stable housing and then to help them address other social service needs. This strategy recognizes that housing provides the basis for all the other work that people who are homeless must do to regain stability and enhance self-sufficiency. [For more information on the Housing First approach, go to: Master Leasing Increases The Supply Of Affordable Housing] Local governments, non-profit housing developers, homeless service providers and advocates have been fighting for years to increase the supply of affordable housing; however the reality of diminishing federal and state funding, high land and construction costs, and "Not-In-My-Backyard" (NIMBY) opposition to new development have meant that the increases in supply achieved have been dwarfed by the need. Nationally, the gap between the available rental supply of units affordable to the poorest households and the demand for them stood at 1.8 million in 1999. In California, 2001 figures show that the number of low-income renter households in the state's metropolitan area exceeded the number of low-cost rental units by more than 2-1, a gap of 651,000 units. Realizing that new development would not eliminate this deficit any time soon, homeless advocates and service providers began looking for ways to access existing housing for their clients. One of the strategies they developed is master leasing. How Does Master Leasing Work?Master leasing is the establishment of a legal sublease arrangement in which an entire building or set of units is leased to a master tenant who them sublets the units to other tenants. The owner receives one monthly rent check from the master tenant, regardless of occupancy levels. They retain their responsibility for renovation and repairs in the building. The master tenant controls operations, taking care of day-to-day maintenance, property management and subtenant selection. Subtenants are able to access housing from a sub-landlord more attuned to their particular needs. Master leasing is not a strategy developed specifically for homelessness; rather it is used routinely in the private sector, such as with shopping malls and office buildings. In the area of homelessness, master leasing typically occurs when a local government or non-profit agency takes over the lease for an entire building or set of units. Often, a source of funding is identified to provide a subsidy for the units to make them affordable to homeless people, and agreements are put in place with service providers so that clients have access to an array of support services, some on-site and others off. These services include case management, health and mental health care, employment services, drug and alcohol treatment, and money management. Master Leasing Benefits Everyone: Clients, Agencies, Landlords, And CommunitiesMaster leasing benefits clients in that it enables homeless people, who are often unattractive to landlords because of their bad credit and eviction histories, low incomes and service needs, to rent apartments. In tight housing markets like the San Francisco Bay Area where Section 8 vouchers are routinely returned because people can't find landlords willing to rent to them, clients are benefited in that the local government or non-profit master tenant accepts the vouchers without problem. Master leasing benefits local government or non-profit agencies in that they are able to expand the housing available to their clients, thus helping them leave the streets. By accessing subsidy funds, they are able to increase the pool of affordable housing in their community. For those agencies providing services, master leasing strengthens their program by combining their services with stable housing. In addition, master leasing provides an opportunity to upgrade the management and health and safety of buildings that often had been operated on the margins.Master leasing benefits property owners in that they receive a guaranteed income regardless of occupancy levels. The master lease shields them from risk and from the day-to-day hassles of property management. Communities benefit from master leasing in that it results in housing for some of the hardest-to serve homeless people and because it often results in the improvement and stabilization of buildings that had been problematic for the surrounding neighborhood. Tips On Initiating A Master Leasing ProgramThe first step is to identify potential properties suitable for master leasing; typically these are privately-owned buildings that are vacant or nearly vacant. They may be marginal buildings, fire-damaged or otherwise in a state of disrepair. The building owner should be someone you think will be trustworthy and responsive, but who will stay out of day-to-day operations. Ideally, master tenants try to lease buildings at a slight lower rate than the units can be rented for, in order to help defray the costs of property management. In high rent, low vacancy housing markets, such as the San Francisco Bay Area, locating properties that can be rented at reasonable prices can be difficult. However, some agencies have found that if they hold on to a property over a long period of time, the landlord will raise the rent less often than with regular tenants. Next, agencies must negotiate with owners over necessary repairs and improvements. Building owners retain responsibility for major repairs and renovation necessary to bring the building into compliance with all health and safety codes. In addition, improvements in the common areas of the building can be negotiated, such as the building out of supportive service and property management offices and of community meeting rooms. Agreement must also be reached on the length of the lease. Program design issues must then be decided. Will property management responsibility stay with the master tenant agency or will it be contracted out? It is important to realize that certain populations such as those with mental illness or addiction problems, tend to require more time from the property manager than the average subtenant. What services will be provided, where and by who? If subsidy funds are needed, where will they come from? Typical sources include Section 8 vouchers, local general fund dollars, and local housing trust funds. Service costs can be covered through a combination of local public and private funds, applicable state program monies, and federal sources, such as SAMHSA, Ryan White Care Funds, HUD Homeless Assistance Funds, and Medicaid reimbursements, especially if services can be provided through a Federally Qualified Health Center. One difficult question that must be resolved is the issue of security deposits. Many clients do not have the resources to pay much of a security deposit. Unfortunately, they do sometimes inflict significant damage on the unit, leaving the master tenant to pay for the repairs. In some communities, the master lease has led to agencies later buying the property. In others, the goal is to stabilize clients so that the landlord will be willing to transfer the lease into their names. Once a client is able to pay rent and utilities, get along with neighbors and prove that he or she can handle the responsibilities of renting an apartment, the landlord may be willing to rent directly to the subtenant. ExamplesThe San Francisco Department of Public Health operates Direct Access to Housing which provides permanent housing with on-site supportive services to approximately 400 homeless adults who have concurrent mental health, addiction and chronic health problems. The housing is provided through master leasing agreements with five single room occupancy (SRO) hotels and a residential care facility. In order to keep the rents affordable and cover service costs, the units are subsidized at an average $900/month from government sources. [For more information, go to: Direct Access to Housing: from Streets and Shelters to Permanent Housing, San Francisco or NAEH: Best Practices: Direct Access to Housing] Other agencies engaged in master leasing include the San Francisco Department of Human Services which master leases and manages over 800 units; Connecting Point in San Francisco which leases 20 rooms per month for their clients from a nearby residential hotel; and Shelter, Inc. in Contra Costa County which master leases scattered site units, some of which can be found at NAEH: Housing First Network.

Master Leasing Increases The Supply Of Affordable Housing

Local governments, non-profit housing developers, homeless service providers and advocates have been fighting for years to increase the supply of affordable housing; however the reality of diminishing federal and state funding, high land and construction costs, and "Not-In-My-Backyard" (NIMBY) opposition to new development have meant that the increases in supply achieved have been dwarfed by the need. Nationally, the gap between the available rental supply of units affordable to the poorest households and the demand for them stood at 1.8 million in 1999. In California, 2001 figures show that the number of low-income renter households in the state's metropolitan area exceeded the number of low-cost rental units by more than 2-1, a gap of 651,000 units. Realizing that new development would not eliminate this deficit any time soon, homeless advocates and service providers began looking for ways to access existing housing for their clients. One of the strategies they developed is master leasing.

How Does Master Leasing Work?

Master leasing is the establishment of a legal sublease arrangement in which an entire building or set of units is leased to a master tenant who them sublets the units to other tenants. The owner receives one monthly rent check from the master tenant, regardless of occupancy levels. They retain their responsibility for renovation and repairs in the building. The master tenant controls operations, taking care of day-to-day maintenance, property management and subtenant selection. Subtenants are able to access housing from a sub-landlord more attuned to their particular needs. Master leasing is not a strategy developed specifically for homelessness; rather it is used routinely in the private sector, such as with shopping malls and office buildings.

In the area of homelessness, master leasing typically occurs when a local government or non-profit agency takes over the lease for an entire building or set of units. Often, a source of funding is identified to provide a subsidy for the units to make them affordable to homeless people, and agreements are put in place with service providers so that clients have access to an array of support services, some on-site and others off. These services include case management, health and mental health care, employment services, drug and alcohol treatment, and money management.

Master Leasing Benefits Everyone: Clients, Agencies, Landlords, And Communities

Master leasing benefits clients in that it enables homeless people, who are often unattractive to landlords because of their bad credit and eviction histories, low incomes and service needs, to rent apartments. In tight housing markets like the San Francisco Bay Area where Section 8 vouchers are routinely returned because people can't find landlords willing to rent to them, clients are benefited in that the local government or non-profit master tenant accepts the vouchers without problem.

Master leasing benefits local government or non-profit agencies in that they are able to expand the housing available to their clients, thus helping them leave the streets. By accessing subsidy funds, they are able to increase the pool of affordable housing in their community. For those agencies providing services, master leasing strengthens their program by combining their services with stable housing. In addition, master leasing provides an opportunity to upgrade the management and health and safety of buildings that often had been operated on the margins.

Master leasing benefits property owners in that they receive a guaranteed income regardless of occupancy levels. The master lease shields them from risk and from the day-to-day hassles of property management. Communities benefit from master leasing in that it results in housing for some of the hardest-to serve homeless people and because it often results in the improvement and stabilization of buildings that had been problematic for the surrounding neighborhood.

Tips On Initiating A Master Leasing Program

The first step is to identify potential properties suitable for master leasing; typically these are privately-owned buildings that are vacant or nearly vacant. They may be marginal buildings, fire-damaged or otherwise in a state of disrepair. The building owner should be someone you think will be trustworthy and responsive, but who will stay out of day-to-day operations.

Ideally, master tenants try to lease buildings at a slight lower rate than the units can be rented for, in order to help defray the costs of property management. In high rent, low vacancy housing markets, such as the San Francisco Bay Area, locating properties that can be rented at reasonable prices can be difficult. However, some agencies have found that if they hold on to a property over a long period of time, the landlord will raise the rent less often than with regular tenants.

Next, agencies must negotiate with owners over necessary repairs and improvements. Building owners retain responsibility for major repairs and renovation necessary to bring the building into compliance with all health and safety codes. In addition, improvements in the common areas of the building can be negotiated, such as the building out of supportive service and property management offices and of community meeting rooms. Agreement must also be reached on the length of the lease.

Program design issues must then be decided. Will property management responsibility stay with the master tenant agency or will it be contracted out? It is important to realize that certain populations such as those with mental illness or addiction problems, tend to require more time from the property manager than the average subtenant. What services will be provided, where and by who? If subsidy funds are needed, where will they come from? Typical sources include Section 8 vouchers, local general fund dollars, and local housing trust funds. Service costs can be covered through a combination of local public and private funds, applicable state program monies, and federal sources, such as SAMHSA, Ryan White Care Funds, HUD Homeless Assistance Funds, and Medicaid reimbursements, especially if services can be provided through a Federally Qualified Health Center.

One difficult question that must be resolved is the issue of security deposits. Many clients do not have the resources to pay much of a security deposit. Unfortunately, they do sometimes inflict significant damage on the unit, leaving the master tenant to pay for the repairs.

In some communities, the master lease has led to agencies later buying the property. In others, the goal is to stabilize clients so that the landlord will be willing to transfer the lease into their names. Once a client is able to pay rent and utilities, get along with neighbors and prove that he or she can handle the responsibilities of renting an apartment, the landlord may be willing to rent directly to the subtenant.

Examples

The San Francisco Department of Public Health operates Direct Access to Housing which provides permanent housing with on-site supportive services to approximately 400 homeless adults who have concurrent mental health, addiction and chronic health problems. The housing is provided through master leasing agreements with five single room occupancy (SRO) hotels and a residential care facility. In order to keep the rents affordable and cover service costs, the units are subsidized at an average $900/month from government sources. [For more information, go to: Direct Access to Housing: from Streets and Shelters to Permanent Housing or NAEH: Best Practices: Direct Access to Housing]

Other agencies engaged in master leasing include the San Francisco Department of Human Services which master leases and manages over 800 units; Connecting Point in San Francisco which leases 20 rooms per month for their clients from a nearby residential hotel; and Shelter, Inc. in Contra Costa County which master leases scattered site units, some of which they have subsequently purchased.