What are the pros and cons of section 8 housing?

Question

There is currently a high demand for owners to implement section 8 housing but that is an area I am not familiar with. What are the pros and cons of section 8 housing? Is this something I should look into as a owner of an apartment building ?

Karl B. · Answer

Hi, Bradley. I've had a few Section 8 tenants. One died O.D.ing on fentanyl.

Prior to her death, the local housing authority claimed they couldn't pay (their share and the tenants' share) a penny more than $450 a month for a one bedroom in my neighborhood.

Guess what?

I had the unit rented BEFORE I was done with the rehab (to non-Section 8 renters). I put new flooring in, painted the unit and fixed some damage, and got $590 a month. So when some people say things like Section 8 pays 10% more than market realize that may be true in their market, but not in all markets (certainly not my current market).

Another thing people like to talk about is 'guaranteed money'. Despite the fact Section 8 pays the majority of the rental payment, I had another Section 8 tenant who couldn't even pay her share on time. Also, at one point her voucher was FROZEN because she kept skipping her Section 8 appointment which resulted in The Housing Authority not sending me their share of the rent (which was the majority of the rent). I ended up evicting her when she owned me her share of the rent for too long a time.

Granted, I received late fees from the tenant but dealing with her was a pain. The yard was full of toys and garbage (when I mowed the lawn I had to pick it up) and there was a damn bunk bed frame sitting on the front porch despite me telling her to move the thing.

I realize there are good and bad Section 8 tenants and offices. Speaking of offices, some local housing authorities are a pain to deal with. For anyone who hasn't yet done so, make certain you grab a copy of the Section 8 checklist from the local housing authority to read about the requirements and rules. They can be picky on some things, such as working sash cords on all windows.

It's best to know what nullifies a property for Section 8 as well (such as a duplex that has a finished attic - only one set of steps to the attic bedroom = not Section 8 eligible.

Regarding your apartment building - if you have mostly 1 bedroom units then you'll likely have less issues with Section 8 tenants as your tenants will tend to be older and the older tenants tend to not trash the place (the worst thing about my older Section 8 tenants over the years is most tend to smoke in the unit).

Jenny D. · Answer

Hi Bradley,

I have a single family on the East Coast. I was hesitant about Sec. 8. My property management company has a really strong process to review the Sec. 8 tenant. I decided to step into the space. I've been very pleased. Once all the paperwork was settled, the government pays on time.  The property management company does walk throughs with photos every 90 days (this is for all tenants), take pictures of house condition.  Property was rented to a woman and her child.  Oh...BTW...the government paid at the top end of the rent for my area.

Hope that helps.

Bryan Hartlen · Answer

@Bradley Jernigan your mileage will vary as in many cases the experience will depend on how well the housing authority that administers the tenant’s coupon is.  We have a few Sec8 rentals in the Birmingham, AL area and we deal with 3 different HA’s (Birmingham, Jefferson County & one more I can’t remember)… But it general:

- rents (at least the HA portion) are pretty much guaranteed.  We never missed a payment through Covid… But we have another property that we haven’t received rents for 3 months because the HA couldn’t complete their required re-certification.  We’ll get all of the missed payments this month or next once their process catches up… But the “regular” cash flow” isn’t guaranteed.

- there’s more bureaucracy in dealing with the HA.  Assuming you use a PM company they’ll shield you from most of this except the time factor. It will almost always take longer to place a Sec8 tenant than a private payer.

- In our experience the tenants are long term.  We’ve only been doing this for 5 years but we haven’t had a tenant leave on their own.

- Rents are in general in line with market rents but again there’s bureaucracy in getting those rents and processing rent increases

- I believe M&R costs are a little higher for Sec8.  This is not due to increase wear & tear (many people say to expect this as many Sec8 tenants aren’t working and are home all day), but due to the annual inspection. We’ve found these to be an opportunity for the inspector to justify there position with nit-picky issues being flagged

- You can offer a property to Sec8 and private payer at the same time to test the market.  You don’t have to commit one way or the other until you find an acceptable tenant.

Good luck…

Michael Smythe · Answer

It does depend on the Housing Agency!

We've heard horror stories here on BP about the Pittsburgh area HAs. One outside the city is great, but the one located in the city is so terrible many landlords won't accept tenants with vouchers from it.

In Detroit, it's a mix. Here 's some bullet points to consider:

1) Unfortunately, most HAs no longer take away tenant vouchers for program abuses, including property damages. So, we have to deal with tenants that don't take care of their homes and call about every little maintenance issue. Why? They know the HA won't hold them accountable and the landlord will have to fix everything and cover the cost:(

2) While you can get top of the market rents, it's really up to where the tenants want to live. We're seeing a lot of newbies thinking they can buy a $50k house in a crappy neighborhood and get top of the market rent for it. NOT HAPPENING!

3) Many S8 applicants don't want to or can't come up with security deposits. This can be a tough decision, especially with challenge #1 above in our market.

4) S8 tenants do tend to stay longer.

5) We think it's important to evaluate a S8 applicant's current home. How it looks is how yours will look once they move in.

6) One of the biggest HAs in our area is also a nightmare to deal with. It can take 3-4 months to get them to process paperwork and start monthly payments. Even getting the S8 inspection done can take weeks.

Hope this helps!

Travis Biziorek · Answer

I have 12-doors in Detroit and 3 of them have Section 8 tenants.

A lot of folks will tell you how terrible the program is and how tenants will cost you more in repairs and capex then you'll make it rent.

These are usually folks who have either a) never utilized the program or b) did not do proper tenant screening thinking that section 8 is fool proof.

In a nutshell, the pros:

1) Obviously, automatic payments for all, or some, of the rent

2) Tenants tend to stay longer

3) Ease of raising rents

The cons:

1) Longer tenant placement due to inspection requirements and timing

2) More frequent inspections

3) Tenant vouchers can change without notice

That's the big overview but there are far more nuances than that. Overall, I like the program. A lot of people get tunnel vision and think it's the only path forward. For me, it's simply one tool of many to find the right tenant for each home.

What are the pros and cons of section 8 housing?

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