2) Does you lease lay out the different, explicit reasons why you may withhold their deposit?

They can withhold your check if they find a violation, and it can take a while for them to get their paperwork together to get your money coming again.So, if you don't absolutely have to accept Section 8, I wouldn't.The exception would be if you have a current tenant you like, who gets their Section 8 voucher after they've been in your building awhile, and they ask you to accept their Section 8, so they can stay - then it might be worth doing.And from my understanding, if you do this, you are not required to then accept Section 8 for all of your other tenants. 

I would not bother with holding a property and scaring off other qualified tenants who don't want to bother with a property that is already taken.

If he is still trying to with hold the funds I would hire a lawyer.

Having another entire set of rules and inspections and paperwork to deal with, with a government agency that will make it nearly impossible to evict your tenant, and can withhold your funds for this and that - is really time consuming and a hassle.  

My daughter changed her income tax withholding so she had more take home pay, and saved the money to use as a down payment, and then made a deal with the IRS to pay them back what she owed them the following year.

The lease stated forfeiting deposit if you do not withhold the terms of the lease. 

They withhold the information on the deal until a week prior to the release of the deal so that you precisely don't have the time to do your own due diligence.

During the move-out meeting with the tenant of Unit B, the landlord can instant sense that the tenant bristles when the landlord mentions she may have to withhold part of the security deposit to cover the damages. 

If they continue to withhold rent, I would file eviction, if you have everything well documented.