I would add in the contract that the grace period is a privilege not a right and can be canceled if abused.

I asked them to fill out an application and WHOA... bad credit, lots of late payments, high credit card bills $9k, and she has a criminal record for child abuse, and neither of them provided any verifiable documentation of income. (!)

It's illegal in most states and strongly discouraged in others because of the potential for abuse and the conflict of interest. 

From what I understand, one of the most common abuses that will absolutely get someone kicked out of the program is having someone who is not on the voucher living in the home.

You can be poor and have a 800 FICO score if you don't abuse your credit/have credit. 

I don't know if one of the tenants is abusing the water usage, or can there be a major water problem with the city? 

Tenant is responsible for anything not covered by insurance, including your deductible.When the tenant causes damage through neglect or abuse, they are responsible for the cost of repair.

My father was a very demeaning abusive alcoholic so I kinda feel for the guy.

I did not know that she was abusing the property and I started to fix things.

He most likely abused the plumbing system letting hard waste going through the line and most probably used harsh chemicals such as drainex causing these issues.