Pros and Cons of Section 8 for Landlords

Renting house to Section 8 occupants has its pros and cons some say that there are some advantages that overweigh the drawbacks while others suggest the other way round.  If you own a property that can potentially be rented out to Section 8 tenants. Some of its advantages include government-subsidized income and free advertising. There are certain hardships of being a Section 8 landlord that overshadow the prospective rewards.

Here we are going to discuss both features of renting the property to low-income tenants of Section 8 housing program.

 Pros

  1. Renting to the Section 8 tenants with housing vouchers can be a profitable decision for many owners due to multiple reasons as it is easier to work with the housing authority because the properties usually rent more quickly.
  2. The decision whether to work with US Department of Housing and Urban Development (HUD) depends on many factors for example the size of the owner’s business as big property management companies easily manage the extra work that accompanies Section 8 rentals than those individuals who have own small units and find it difficult to handle the same. The list of benefits of renting out to Section 8 tenants includes;
  • Consistent Rent Payments: The chief benefit of accepting Section 8 subsidies for one’s property is that a major part of the rent will be paid on time every month via direct deposit or a check. The tenants also are also bound to pay their portion on time, because failing to do so can cost them the government assistance coupled with an eviction notice. Another important factor is that if the tenant loses their job or receives lower wages than before, the government ensures the payment of the rent by increasing its assistance after their 30% of income amount and the owner will not suffer.
  1. Constant Tenant Base (Lower Vacancy Rates): The Housing Choice Voucher Program is popular and insufficient to offer assistance to all homeless people in a particular state and especially in the urban areas where hundreds, and in some cases thousands of tenants on waiting lists. By participating in the program, the property becomes more marketable with enhanced chances of getting it rented continuously without any period of un-occupancy.
  2. Pre-Screened Tenants: Another advantage of renting out to Section 8 tenants is that the participants of the programs are verified after getting selected for housing assistance by the relevant housing authority. The pre-screening involves the background checks the criminal record and drug testing for all family household members over 18 years of age. This procedure gives extra protection for the property and the landlord. This also includes the provision of last and previous addresses of the potential tenant.
  3. Free Advertising: One more advantage to consider is the distinctive marketing opportunities available to section 8 landlords. There are marketing prospects both online and in person. The HUD has a website that potential lodgers can use to find the availability of low-income housing units in a specific locality. Many local housing authorities in multiple States also maintain similar websites with lists of landlords who accept housing vouchers in their areas. This free advertising also increases the value of your property.
  • Rewards: There are business organizations that provide rewards and scholarships to landlords doing business with Section 8. These rewards serve to obtain advanced property management training and discounts on everyday property maintenance materials.

Cons

  1. While there are advantages renting out to tenants with housing vouchers there are detriments many property owners consider, connected with the same. It would be imperative to mention the cons of renting out to section 8 beneficiaries which include:
  2. Rental Pricing Regulations: It is mandatory for the landowner to comply with the Housing Program the requires fixing rental prices according to the Fair Market Rent (FMR) calculated by HUD vary according to your specific county. For example, if HUD says that the FMR in your locality for a 2-bedroom is $900 dollars, you will be asked to keep your rental rates at $900 or less. Therefore, if you want to have the market value of your property located in a higher-rent neighborhood, it may be difficult to find renters of Section 8.
  • Risk of Renting in Lower Income Areas: As already mentioned, if you own property in a higher-income area is unlikely to make financial sense to participate in housing vouchers program. On the other hand there is considerable profit to be made in lower-income areas, but there too are many risks involved, including, more crime and drug issues, higher chances of damage done to property, City authorities ignoring water/safety issues in the area given the reason that such areas are being ignored by the city authorities etc.
  1. No payment Until Tenant Moves In: A common problem is when you will receive first rental payment as the landlord is not paid until after the tenant moves into the housing unit. This is mostly due to the managerial process involved in it, which is slow initially. Afterward, a landowner can expect regular monthly payments. Those without the financial backing to wait a couple of months to receive the first month’s rent, they should reconsider renting to Section 8 tenants.
  2. No Security Deposits: HUD provides monthly housing vouchers to pay the tenant’s monthly rent, but there is no facility for the property owner to have some security deposits (representative for most rentals). Those landlords who wish to collect a security deposit can discuss the same with the tenant but this is implausible that he or she gets it as the tenant has already shown to have income issues.
  3. Chances of having Difficult Tenants: It is assumed that Section 8 tenants are in difficult financial conditions and, even with the housing subsidy, may still be unable to pay their percentage of rent. For example, many individuals, qualifying for housing subsidy are physically or mentally unable to hold a job, which may be with old age, disabilities, or other health issues. Due to this fact they may not be able to maintain a high standard of property upkeep and cleanliness. They also may constantly need more safety and assistance during their rental period. Many landlords are suspicious of Section 8 tenants since these tenants are not paying much rent, they have prone to keep the property in great shape.
  • Difficulty to Evict Tenants: In a Section 8 eviction landlord will need to comply by state and local laws governing expulsions just like with any other tenant. It becomes increasingly difficult as you will need to coordinate with local housing authority office i.e. sending copies of documentation throughout the eviction process etc. Including copies of notices sent to the tenant explaining the violation(s). In certain states rules requiring notification that the landlord receives permission from the housing authority to proceed against the tenant in court.
  • Yearly Section 8 Inspections: When you rent to a Section 8 tenant, you will have to deal with frequent inspections of your property. The local Authority will oversee the process annually. This assessment has to be done even if there has been no tenant turnover. The inspector checks whether your unit meets HUD’s Quality Standards which are around 13 aspects that include sanitary system, lead-based paint, water supply, electrical and smoke detectors. The Section 8 program has very strict standards, so it is not unusual to fail a Section 8 inspection. In case of failing the inspection, you will be given a list of items that need to be fixed. Once you fix all another re-inspection will be scheduled, making it a lengthy process.
  1. Non-Section 8 Tenants May Not Want to Live at the Property: Potential tenants without rental assistance may be turned off by the fact that the property was rented out to Section 8 tenants. They may think that a property owner is a “slumlord,” that the unit will be unclean or that the tenants will be impolite and loud. The only thing one can do is make sure you place quality tenants in your property and that you keep up with property maintenance.

 

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