Tenants

Section 8 Tenancies – Pros and Cons

Section 8 tenancies have been around for a while and landlords differ on their views towards these types of tenancies. The term “Section 8” refers to tenants that qualify for the Housing Choice Voucher Program.

There are a number of reasons that tenants may qualify and we will be discussing those qualification terms in this article. We will also be looking at your rights as a landlord and the Pros and Cons of working with the voucher program.

Who Qualifies for Section 8?

There are a number of criteria that tenants can qualify for Section 8 assistance through. It could be employment issues, age or disability. In this section we will be looking at how a tenant can qualify for the voucher scheme.

Income

Tenants that qualify for Section 8 help are employed at the lowest end of the salary scale and are often on extremely low incomes. Tenants on very low salaries obviously have difficulty making rent and help through Section 8 allows them to rent a home with the government paying between 33% and 75% of their rent.

Elderly

A high percentage of those in the program are elderly, often unemployed people. They may not be fit for work or are working in low income or part time jobs. As people get older their ability to find and maintain higher paid work is difficult and as such the government will assist those unable to afford local housing costs by paying between 33% and 75% of their rent.

Disabled

Those with severe disabilities who are unable to work will meet the criteria for housing vouchers. As part of the section 8 scheme, they may also find that they have the right to demand adjustments are made to the property to ensure they able to live at the property without their disability being an issue.

Unemployed

Similarly to those on low incomes, unemployed tenants qualify for the voucher program on the basis of no income. Whereas with employed Section 8 renters who have to show that their income is low enough to qualify, unemployed tenants should in most states automatically qualify for assistance.

Landlord’s Rights

Know your rights. Although this is a nationwide voucher program states do differ on their interpretation of some aspects of the scheme and therefore it is important that you understand what is expected of you as a Section 8 landlord. It also helps to understand if you are required to upgrade your property in any way. If so, it pays to understand just how much you will have to spend to meet the tenant’s needs.

Most landlords take different views on Section 8 tenancies with some flat out refusing to work with the scheme and others thinking it’s a great idea. You will need to understand the rules in your state in relation to accepting or rejecting offers from Section 8 tenants. Whilst the Fair Housing Act (FHA ) does not mention any requirement for you to have to accept offers from tenants on housing vouchers some states will force you to accept Section 8 tenants and will not allow you to take into account the source of their income or their level of government assistance when deciding to rent.

This means in some states you are able to reject Section 8 tenants simply because you do not wish to deal with housing vouchers whereas in others this would be classed as discrimination. Do your research and find out if you have the option to reject a tenant based on their assistance status in your state.

Pros

The scheme offers landlords a number of benefits for accepting tenants on this scheme. Before you reject a Section 8 tenant off hand I think it pays to think about the benefits that dealing with a tenant on assistance can offer you.

Guaranteed Rent

When renting to a Section 8 renter your rent will be guaranteed. This is a huge bonus for a landlord. Tenants living on this program will have at least a portion of their rent covered by the government meaning that problems with unpaid rent is unlikely.

The tenants rent or at least a big chunk of it will be paid by the US Department of Housing and Urban Development meaning that problems with rent could be a thing of the past.

Landlords that have suffered in previous tenancies with issues relating to missed payment of rent or hassle with arrears may find the voucher program very desirable as the rent is guaranteed by a department of the US government.

Long Term

Section 8 tenants tend to stay put for a considerable amount of time once their approval has come through. The leases are generally one year as a minimum and can be longer.

One of the quirks of the scheme is that the approval process is fairly long winded meaning those on the scheme are loath to go through the process again. Which they are likely to have to do should they move.

This means that once approved and agreed the tenants tend to renew more frequently. This is obviously a big benefit for any landlord keen to lower the risk of void periods with no rent coming in.

Another benefit in this area is that even if the tenants do wish to move the scheme puts in place longer notice periods and the need to inform the Housing Authority prior to vacating the property. This plays as a benefit to you as even if the tenants vacate you will be given a significant amount of notice thus given you plenty of time to source a new tenant.

Helping the Community

Helping those in need is always a positive and by accepting tenants on the housing voucher you are benefiting your community. Section 8 renters often come from the most vulnerable sections of society and by accepting them as tenants you really are giving back.

I think it pays to take an objective view when it comes to renting to Section 8 tenants who often have a very bad reputation. But my view is that a large number of Section 8 tenants are simply in unavoidable situations and as such helping rather than rejecting is the right thing to do.

The key as with any tenants is to get solid background checks. There are horror stories about I can tell you plenty of horror stories relating to private tenants also. Take the necessary precautions be don’t discriminate or reject help simply because of rumours.

Cons

As well as the Pros we have listed there are obviously some Cons involved with renting to Section 8 renters that you must consider. In this section we will go over some of the more commonly discussed Cons for renting to someone on the voucher program.

Red Tape

There’s no getting away from it, the approval process for Section 8 assistance is long winded. As with many government agencies there is an amount of red tape involved in getting the approval for the scheme.

The renter must complete some fairly lengthy paperwork, which must be submitted to the Housing Authority (HA) for approval. At this point the proposed property will need to be inspected and approved by the Housing Authority also.

After the property has been approved and inspected by the Housing Authority you and the tenants must submit to a yearly inspection of the property by the HA who will ensure that the property continues to meet the standards of the program.

To pass this inspection your property will need to meet a number of Health and Safety criteria. Should it not you will be required to upgrade the property at your own cost to get the property through the inspection process.

It is also worth pointing out that the inspection is conducted by your area’s Housing Authority Inspector and depending on their line on things you may find it very difficult or costly to pass. Whilst there is a list of criteria you must meet the inspectors do have a level of flexibility and a more “hardline” inspector can really delay the process.

Rent Control

Once your property has been approved by the HA, you will find that they will want to look over your lease and it is they, not you who will have the final say on the value of your property.

This means that the inspector will make a determination (based on the area’s average rental values) just how much rent you can charge. This maximum will then be used to restrict the amount of rent you can charge the tenants.

It is worth pointing out that this may play in your favour as the HA will use your area’s average rental value to determine rent. Meaning that if your property is earning below average rent it will earn a higher amount on the voucher scheme as the value of the property will be brought up by the average value of rental homes in the area.

The caveat to this, is that if your property earns above average rent you will see a capping in the amount you can charge as the HA will use the area’s average values to make their rental determination.

Cost of Repairs

Part of the acceptance process for a Section 8 tenancy is the inspection of the property. At this stage you may be required to carry out substantial works to get your property to the level required by the scheme.

This can be costly and can be an ongoing process as an inspection and subsequent works are required yearly. It is worth thinking about the cost of these additional yearly works when considering the tenant, as they can soon stack up.

Whilst you as a landlord are required for all tenancies to keep the property up to a good standard the frequency of these inspections and the strict nature of many housing inspectors can end up costing you more in the long run.

Mixed Messages

This is a nationwide scheme, however most states have different rules in relation to the scheme. It is also not uncommon for different cities within the same state to have different rules.

This means that it is very difficult of landlords and even brokers to stay up to date with what is required from them. This should be viewed as a Con as it could mean that you are put at substantial risk of falling foul of the law simply by not understanding your city’s rules.

As discussed earlier, some states allow you to reject tenants on the scheme, whilst others view this as discrimination. There are also states in which you are mandated to accept an offer from a Section 8 tenant. Oregon for example forces you to work with Section 8 tenants regardless of your own personal preference.

Some states ask you to “Opt In” when dealing with the scheme, meaning that a database of potential Section 8 properties will be offered to renters on the scheme rather than them simply sourcing their own place. This of course does allow you the option to “Opt Out” and avoid going on the list.

This jumble of state and city laws can be confusing and can be hard to keep up with. This element of the scheme should definitely be viewed negatively and you must remember that it is your responsibility to ensure you understand what is required in your city to ensure you do not fall foul of any discrimination laws, etc.

Conclusion

In conclusion, working with Section 8 tenants is something that you either feel comfortable with or you don’t. In some areas you may have no choice. It is of course, important to remember that there are both Pros and Cons to the setup of the scheme.

My view is favourable and with the right background checks and a kind hearted housing inspector you may find that you are given great, long term tenants that are able to take care of your property in the way you would want it taken care of.

Do your research and if your property is earning below the area’s average rents you may also find that Section 8 tenancies offer you a viable business option as they will increase the value of your rental.

Leave a Reply

Your email address will not be published. Required fields are marked *

Did you like the article? Subscribe to our mailing list to receive a weekly newsletter with our new articles and real estate investment updates. You can unsubscribe at any moment. And we will never sell your contact information.

* indicates required

Related Posts