Help! Section 8 security deposit question

[Richelle T.]

Hi everyone I decided to rent a house to a section 8 tenant. Long story short, section 8 misquoted the total rent rate they would pay and the tenant portion. They told me to allow the tenant to move in, I did (bad move!) then the paperwork had the tenant and section 8 payment portions reversed. The tenant said they could not afford the increase of $200/mo and section 8 would not honor the quotes rent amount with the tenant paying the lower amount. Since section 8, me and the tenant could not come to a resolution, we agreed to return the tenants voucher. Tenant was a nightmare so I'm happy this ended without an eviction. Now here is my question. The tenant moved in and lived in the house for 2 months paying what was supposed to be their portion of the rent. With no section 8 contract, section 8 has not paid their portion of the rent. This means that of the two months I have not even made the equivalent of one months rent. The tenant moved out and is now demanding a return of her security deposit. Unfortunately, even with her deposit, her account is negative about $500. My question is am I allowed to keep the security deposit considering I'm still at a net loss. It seems like I should considering that's the role do the security deposit but with section 8 in the mix I'm not sure what my rights are. Help please!