These requirements will apply even if you do not have a formal written lease agreement. 

That's a thing in leasing NOT in selling.

A total cost of 6.3Mn over 23 units equates to 274K/unit...this appears unbelievably low for San Diego...I'd want to see full development budget detailing hard, soft and financing costs as well as month by month projections showing construction and lease up cash flows.What's the 2.2Mn purchase price for?

Have you looked into other commercial real estate asset classes like triple net leases? 

Extending lease might be best bet.    

For example, if market rent was $2,000, I might offer $1,900 and $1,950 for a 2-year lease to start.My leases convert to month-to-month at the end of the term.

So he wants all the upside (fully occupied and cash flowing) without any of the work (rehab and lease-up).Like @Tyler Watts said, the math wont work.

with auto-pay options, automatic late fees, and reminders, lease signing, security deposit collection, etc. 

If they don't pay or violate the lease in any way, they can lose their vouchers. 

For your existing primary, you will need to have it leased with the security deposit and first month's rent collected.