How do you raise section 8 rents?

Question

Hi folks,

I just purchased a 5 unit mfh, with rents well below market. One of the tenants just qualified for section 8 assistance, and was asking me if I could start accepting it.

I’ve been reading up on the rules, and I could practically double the rents and still be at HUD’s fair market rents...but they talk about “rent reasonableness” and that rent can’t be higher than for other units on the property. So with 5 tenants, all on staggered leases, how can I go about getting more from section 8?

Patti Robertson · Answer

The info shared here is good.  I have even more details in a blog I wrote to save my fingers from typing the same info over and over, because the SEC 8 questions come up so often on BP.  Here’s a link.   https://www.biggerpockets.com/...

James Mc Ree · Answer

@Lois S.I have two thoughts for you to consider: (1) What happened with your expenses over the past year for the property? (2) What is the market rent for the property compared to what you are charging?

My guess is your expenses probably went up this year. The folks who you paid probably weren't concerned about the optics. They provided a valuable product or service that you wanted or needed, or took your taxes. You are one more business who is charging more for your product, just like so many other businesses. If you feel a need to justify yourself, you can cite rising expenses.

You mentioned your rent is below market. Show this to your tenant. I just sent a traditional tenant a notice of an increase. I included a mention that their new rent is the cheapest of all the similar properties in the area and the next closest cheaper renting property is in an area that is not nearly so nice. No one likes paying higher prices, but when your tenants are presented with the alternative, they may very much appreciate their current situation. Don't assume they already know they have a great deal.

Zachary Ray · Answer

You will be working with a housing authority specialist and they will assist you in raising the rents. They are your source for information regarding the voucher system. Best of luck to you!

Marc Rice · Answer

@Jon Blackburn

Tricky, following this to learn. If you had them all month to month then could you raise them all at once?

Lois S. · Answer

Your Intro to Section 8 is great.  Thank you!

I've had a good tenant in a SFH for about 10 years.

I've asked for & received rent increases annually for the past several years, but rent is under market rate.  Tenant is self-employed, and has continued paying timely even thru the current pandemic.

The optics of asking for a rent increase now are not great, so, wondering if I should hold off on asking for annual increase or not.

Any advice will be appreciated.    Thanks.

Kenneth Garrett · Answer

@Jon Blackburn

The process takes awhile.  Once they are approved (voucher) they will advise there case worker.  The case worker will email you the documents.  They will need to review your lease.  Once all paper work is in and is good they will inspect the unit to verify it meets the HUD standards.  Yes you still need to meet the fair market rent for your area even though the FMR for your zip code might be higher.  There usually pretty healthy rents.  Utilities are backed out of the rent amount.  You will receive an approval if all is good.  You will enter into a contract with the Housing Authority.  If you have a current tenant and you want to raise the rent at lease renewal, the HA must receive the paperwork a minimum of 60 days prior to the lease expiring.  I usually have the tenant sign a new lease and send it to the caseworker a minimum 75 days before the lease expires.

Hope this helps.

James Mc Ree · Answer

There is a difference between qualifying for Section 8 assistance and actually getting it. The tenant needs a voucher to get the assistance. Do they have a voucher that matches the type of unit they are in (2BR voucher for 2BR unit)? There may be some very long backlogs if they don't have a voucher. Around me, last I heard is the waiting list is estimated at 8 years.

If they have a voucher, then they also have a case worker. You can call the caseworker to find out how the process works. You and your tenant will probably need to sign a Section 8 lease and submit to a Section 8 inspection. Section 8 will pay the subsidy once the inspection passes, but they won't pay anything until then. You may have some items to address.

The actual rent will depend on the current lease. You are locked into whatever the lease specifies. It's probably a good idea to get your tenant to sign your new lease rather than rely on the old lease if you can. It's good timing since you both are signing a new Section 8 lease anyway. That's the vehicle to increase the rent. You can ask for more, then Section 8 will tell you what you can get.

Steve Morris · Answer

Well, go back to your county and see what the HUD FMVs are for your type of unit.  Then depending on charges, see what the utility allowances are since the UA will get backed out.  After that it's up to your local H/A (housing authority) to figure how much they want to pay.

Ask your voucher person and his caseworker what they can afford.  Sec 8 will get close to market rent since they kinda have to, but you probably have some limit on re-ups if local govt limits those.

How do you raise section 8 rents?

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