Section 8 tenant vs normal paying tenant in a recession

[Terry Lao]

With all the talk of a recession or down trending economy, which type of tenant would be better, Section 8 vs. Normal rent paying tenant. First, these are for area C neighborhoods, lower economic, typical 2 bed 2 bath apartment. I would like to make the case for choosing section 8 based upon the below points.

1, Rent paid first of month by Section 8 not matter the economy.

2. In recession, layoffs or business closure, would result in missed rent payments

3. No eviction due to section 8 vs. possible and eventual eviction due to no job.

4. The great recession of 2008 resulted in many foreclosures due to tenant losing job, and still stay in apartment. The eviction process resulted in no rent, time to get tenant out, and without cash flow, property eventually went back to bank.

Which would you choose, section 8 vs. normal paying tenant?

Terry

[Patti Robertson]

In my opinion having 100ish SEC 8 leases and 150ish leases, in low income neighborhoods, I’d rather have a SEC 8 tenant in any economy.  We have very few SEC 8 tenants who don’t pay their portion.  When we do have them that get behind, we give them a list of all the charities in our market that help people at risk of homelessness.  If we have to take them to court to get a judgment in order for them to qualify for assistance, that’s what we do.  It is a very rare occurrence that we don’t eventually get paid, even for repairs.

Take this example. Let's say you and I both have side by side rentals, and both of our tenants work for the shipyard. Mine is a SEC 8 tenant, and yours is not. Last time we had a government furllow our shipyard workers were all laid off. (This time thankfully they were not.) Upon layoff, both of our tenants will march down to the unemployment office and will end up getting 60% of their pay. Mine will the march to the SEC 8 office to report their change of income, and SEC 8 will adjust their payment to 100% until the tenant secures another job or gets called back to work. No where is there insurance like this for a landlord, outside of HUD voucher programs and similar grant programs.