Highly unlikely they will prosecute anyone but, the landlord will be bared from the sec 8 program and fined extensively. 

http://www.ca6.uscourts.gov/opinions.pdf/15a0662n-06.pdf@Logan Hicks this is a recently decided case where a landlord sent a letter to the debtor's attorney threatening criminal prosecution and was hit with a punitive judgment of $7500 because of his attitude. 

Landlords get fined and rent-escrowed by the state, and if they've been really negligent they get prosecuted, but generally they don't go to jail.Go to BREIA landlord meetings the last Monday of each month.

If at any time during the term of this lease Tenant abandons the demised premises or any part thereof, Owner may, at his option, enter the demised premises by any means without being liable for any prosecution therefore, and without becoming liable to Tenant for damages or for any payment of any kind whatever, and may, at his discretion, as agent for Tenant, re-let the demised premises, or any part thereof, for the whole or any part of the then unexpired term, and may receive and collect all rent payable by virtue of such re-letting, and, at Owner’s option, hold Tenant liable for any difference between the rent that would have been payable under this lease during the balance of the unexpired term, if this lease had continued in force, and the net rent for such period realized by Owner by means of such re- letting.

Unless the state is now willing to prosecute a landlord discrimination case based on unsubstantial tacit intent rather than actual evidence no amount of moral hand-wringing and ethical cajoling is going to force you to rent to section 8.

Even though I could never get prosecuted, how I respond is a business ethics issue.

Well, I'm glad I'm at least partially correct, since I have been prosecuting and defending lawsuits, as well as setting up corps, P/Ss, JVs, REITs, etc. and doing estate and tax planning for 32 years.

Interpreting the law is the job of the attorney - to verify whether something is prosecutable - and the judge - how the law applies in a specific case.

That said, most lenders don't, but get caught saying a property is owner occupied when its not and the most severe punishment is prosecution for loan fraud.I understand your being anxious to do something as a vacation rental, but I would just ride out the 1 year as owner occupied and then from there, you wont have any issues.

If that can be proven, the business owner and even his property manager could be prosecuted.