August 15, 2012

Do You Accept Section 8?

If you are a landlord then its likely that you've been asked if you take Section 8.   We currently have a rental vacant that we're advertising and we've had three separate people call asking if we take Section 8.  My wife and I do not take Section 8.   Thus far we've not wanted to deal with "the hassle" of it.   But by not taking it we are missing out on an under served portion of the rental market.   If you're a landlord then you should know about Section 8 and how it works.  

What is Section 8?

Section 8 is a housing voucher program where the government helps subsidize the rent payment for families with low income.   The Housing and Urban Development (HUD) department runs the Section 8 program.   They call it the Housing Choice Voucher Program Section 8.   The system is funded by HUD but administered at the local level by public housing authorities (PHA).   Generally the program is set up so that the family will pay up to 30% of their gross household income towards the rent and utilities and then the government will pay the rest of the rent.  So for example if a family has $2000 income then they'd pay up to $600 in rent.  If fair market rents are $1000 then the government will pay the remaining $400 via the Section 8 voucher.   The tenants pick the rental they want independently so they're free to live in any rental that accepts the vouchers.

Do you Have to Accept it?

Generally landlords are not required to take section 8 vouchers.   Federal law does not require landlords to take Section 8.    However there are some states or cities that may have laws mandating that you do not discriminate based on such a program and/or simply require that landlords accept Section 8.   While in general its not mandatory in most areas, you should check your local laws to see if its optional or not.

What does a Landlord have to do?

If you do want to take section 8 then theres a few things landlords need to do.   First is that the property must pass a HUD inspection.     The inspection ensures that the house meets HUD Housing Quality Standards.  The inspection checklist doesn't look bad to me and is mostly concerned with basic safety features.   They do have particular attention to lead based paint so that could be a issue in older houses.    In addition to the inspection the landlord also has to maintain the house in a satisfactory manner.   This part shouldn't differ significantly from normal laws that already require you to keep the property safe and habitable but there could be some details that are different.

PROS
- Portion of the rent is automatically paid by the government
- Cater to a specialized renter audience, there may be more tenants with section 8 vouchers than landlords willing to accept it.
- Tenants may be more likely to stay after they find housing that accepts Section 8.
- Good rental rates, you can charge the fair market rent which is usually fairly good rent rates.
CONS
- Have to submit to the government inspection.
- Extra scrutiny of your rental by the housing authority.

Basic Steps for Section 8 Rental

1. The family applies for and gets Section 8.  This is usually a difficult thing for the low income family to get and theres usually waiting lists.
2. You rent your property and the tenant finds it.  
3. You agree to rent to the tenant and accept their section 8.
4. You and the tenant fill out a government form.
5. You schedule an inspection with the housing authority.   They come out and inspect your house.
6. Assuming your house passes inspection and your rent isn't too high then you sign the lease with the tenant.
7. When the tenant is moved in you will get a portion of the rent from the tenant and a portion direct from the housing authority.

What the government does and does NOT do.

For section 8 housing the government pays a portion of the rent and inspects the housing.    Thats mostly it.   The government housing authority does not screen tenants and they do not match renters and landlords.   As a landlord you will still need to property screen the tenants, check references, etc.   You should not assume that just because someone has a section 8 voucher that they are in any way screened by the government as thats not part of the process.

Are they good tenants?

This is a topic with a lot of disagreement.   Some landlords dislike Section 8 and have a negative stereotype of the type of tenants they get.   Other landlords are perfectly happy with Section 8.   I'm sure it varies as much as anything and you can get good or bad tenants with Section 8 just like you can get good or bad landlords.   I personally would not want to stereotype the tenants nor develop prejudices.   And keep in mind that in some areas you are legally banned from discriminating based on Section 8.

- -

3 comments:

  1. We are closing on our first rental house next week, so this is very relevant. My first thought is no to section 8. I've always felt that people take better care of things when they have to pay for them. I guess if we can't find a renter we might look into it. I hope we dont' have to.

    ReplyDelete
  2. What is an undeserved portion of the rental market"? Better yet, what is a deserved portion of the rental market?

    Don't people generally get what they deserve?

    ReplyDelete
  3. Terry,

    That was actually a typo (or spell check goof). I fixed it. Sorry for the confusion.

    I had incorrectly said 'undeserved' when I meant to say 'under served'. By under served I mean a group that has fewer landlords willing to rent to them and where demand from renters may exceed supply of housing. Thats a good situation for a landlord looking to fill vacancies.

    Jim

    ReplyDelete

Blog Widget by LinkWithin