Typically it is achieved via zoning regulations, like R1 (single family homes) vs R2 ( MFUs). 

2 - Are there any rent control/ stabilization regulations making the eviction impossible, like in NYC?

They are government owned foreclosures that are open to owner occupants before they are available to investors.

Remember, whenever you hire someone on a regular basis (W2), you face State Employment Regulations: { ssi, workmans comp, tax withholding }. 

There are 3 types of zoning here, "regular rental" (just as it sounds), "regulated rental" (max 5 occupants, in rooms- typically for student type housing), and "rooming house".  

This is a question that is best answered by your local government offices :)

If I am wanting to purchase to fix & flip what are my rules and regulations that I would have to follow being that it is section 8?

My understanding is that expenses can only be deducted from rental income although your tax regulations may be different.

Check fair housing codes and your state landlord tenant regulations.

Others have explained that the banks are not willing to take on the default and interest rate rise risks for these kinds of loans, but they didn't mention that even for 30 year loans a vast majority are sold to (formerly quasi) government entities like Freddie and Fannie.