Section 8 Housing For Landlords – Pros and Cons

Pros	Cons
1. Getting the Rent on Time	1. In Bed with the Government
2. Lowest Vacancy Rates	2. Annual Inspections Costly
3. Unit Must be Maintained	3. 1st Rent Payment Delayed
4. Higher Rents	4. Damage Payments Delayed
5. Pre-Screened Tenants	5. No Security Deposit
6. Unit Inspected – Declared Safe	6. Tenants Need Mothering

By Terry Painter/Mortgage Banker, Author of The Encyclopedia of Commercial Real Estate Advice – Wiley Publishers

 

Is Renting to Section 8 Tenants a Good Idea?

Is renting to section 8 tenants a good idea, a bad idea, or something that could ruin your life? Renting to Low Income Renters may recall rusty bikes and junk on the patios, having to get in someone’s face to pay the rent, people who make domestic violence a weekly habit - Or worse yet, not being able to evict bad tenants easily. 

 

Some of my landlord clients love section 8 tenants and have systems in place to choose the best ones and they manage the whole process brilliantly. If they own a larger, affordable rent apartment complex, they often have professional management that specializes in low income tenants. And the truth is, it shouldn’t take any longer to evict a section 8 tenant than market rent tenants. Here are 6 pros and 6 cons of renting to section 8 tenants from my experience. At the end of this article, I will give you 6 tips on how to rent to them safely with little or no headache.

 

What is The Section 8 Housing Program?

Also known as the Housing Choice Voucher Program it is funded by HUD and managed by local housing authorities. Their mandate is to give low-income renters subsidies, so they can choose not only where they want to live, but also hopefully a place that is in better condition, sanitary, and in a safer neighborhood than if they had to rent on their own.

 

Who Qualifies for Section 8 Vouchers?

Usually, families earning 50% or less of the medium household income for the area qualify for section 8 and the housing authority pays from all to an average of 60% of the rent. The housing authority usually does not want the tenant to pay more than 30% of their household income for their share of the rent. To ensure that housing authorities can keep their HUD funding, they must supply a minimum number of families housing annually. For this reason, they keep a longer waiting list than is necessary and the wait can be years.    

 

 

The Pros of Renting to Section 8 Tenants

 

Pro Number 1 –  Blue Collar workers are more likely to pay the rent on time during a recession – Recessions happen on average every 6 years. During the coronavirus recession, blue collar workers making less than 15 dollars per hour with section 8 vouchers paid rent in full and on time more often than those that did not have vouchers.

Why? Firstly, because the housing authority is going to pay you directly and is just not going to run out of money. Secondly, if the tenant doesn’t pay their share of the rent on time – you can snitch on them to the housing authority, and the renter knows this. The last thing the tenant wants is lose their voucher.

 

Pro Number 2 – Vacancy rates can be the lowest with Section 8 tenants. These tenants tend to stay where they are and renew year after year. The housing authority will allow annual rental increases as long as there is proof that rents have gone up in the area – and rents almost always do. 

 

Pro Number 3 – HUD usually allows higher than average market rents. Why?  Because HUD knows that there is a shortage of landlords willing to rent to section 8 tenants so they often allow landlords to set rents at the higher end of the fair market rent spectrum. 

 

Pro Number 4 – Tenants musk keep the property in good condition. As landlord, you can inspect the property with 24 hours notice and the housing authority does this annually. Renters know that if they trash the place, the housing authority will revoke their voucher.   

 

Pro Number 5 – All Section 8 tenants are pre-screened by the Housing Authority. We are talking about a background check, and verification of identity, employment, income and cash in the bank.  

 

Pro Number 6 – The unit has to be declared safe and in good condition by an inspector prior to being occupied. So you just don’t worry as much about the tenant suing you for having an unsafe property.  

 

 

Cons of Renting to Section 8 Tenants

 

Con Number 1 – You are in bed with the government. Yes, there will be a nice spool of red tape – this begins with  a lengthy approval process for you and your property. Then you have to abide by all of HUD’s rules. There are a lot of rules!

 

Con Number 2 – Annual inspections can be costly – A very thorough property condition and safety report covering the 13 areas required by HUD is done every year. Of course, inspectors need to earn their fee, and seldom find nothing wrong.  This could be costly or just a bad time for you to make repairs within the 30 – 90 days allowed.

 

Con Number 3 – Delay in processing your first rent payment.  This can easily take 60 days.

 

Con Number 4 – Delay in getting reimbursed for damages by HUD – The housing authority will reimburse you for tenant damages after the unit is vacated, but this can take 60 days or more.

 

Con Number 5 – The Housing Authority does not get involved with Security Deposits. They are not paid with section 8 vouchers. If you want one, you will have to work it out with the tenant. Often, they can pay the rent but just don’t have the savings to cover a deposit. 

 

Con Number 6 – Section 8 tenants often need more mothering – We are talking about complaints from neighbors and other tenants about noise, domestic problems, and as mentioned at the beginning – junk lying in plain view. If your kids have already left home, and you just don’t want to show off your parenting skills – Section 8 tenants might not be right for you.  

 

 

How to Rent to Section 8 Tenants with Little or No Headache

1.    Check rental references thoroughly – My clients tell me that section 8 tenants with good rental references are almost always great renters.

2.    Pull each tenant’s credit – Those that have a minimum 600 or even better 640 credit score, are paying their bills and are likely to be good tenants.

3.    Rent to those who have a job and contributing something to the rent. This is a no brainer. This means they are contributing to society and are more likely to be givers rather than takers.

4.    Rent to more elderly tenants – They tend to take exceptionally good care of your property and their share of the rent is likely coming from social security.

5.    Rent to conscientious mothers who express their love of your property because of good schools and safety. They tend to be great renters.

6.    Lastly, if you are not sure if you have the time or patience for section 8 tenants, hire a property manager who has the experience and stomach for it.