All Forum Posts by: Bradley Bogdan

Wow, I'm surprised folks here seem to be pretty much in agreement that they will consider food stamps as income. I've never seen a landlord that's been willing to consider that before, as its not liquid cash (ie, you couldn't spend it on rent if you wanted to). 

@Dawn Anastasi Remember that some areas do have housing discrimination laws that prevent you from denying someone based on a Section 8 voucher. They are local and not national rules, but they can still get a landlord in hot water if flouted. Also, where did you find that food stamps count as income? In terms of taxes and program eligibility in the US, food stamps are considered a "non-cash" benefit, v. something like Social Security or Unemployment benefits, which are cash and can, in theory, be taxed and count as income when applying for programs like Section 8 or Medicaid. I would assume that that would also free landlords, banks etc. from being obligated to count it as regular income. If I've got it wrong, I would love to read up on it. 

Excellent explanations of reasonable accommodations requirements, I definitely learned a thing or two between them!

@Jordan S. It depends partially on your local PHA, but mostly on whether she is currently on a Section 8 voucher (and her rent has just stagnated) or has she just received one she is intending to use on her current unit?

The short answer if she has just received her voucher is no, they won't budge on their cap for what they will allow the initial rent to be, at least not without extra hoops. They will tell you how much you'd need to come down however, and give you/the tenant an opportunity to resubmit if it indeed it too high.

The short answer if she has had a voucher all this time is they will probably allow the rent increase, but will cap out their subsidy amount and expect her to pay everything over that. Depending on what their FMR rate for your area is v. what you'd like to raise her rent to, that could be significant. A few PHAs will deny rent increases when they're submitted if they feel they are unreasonable for the area, so YMMV. I'm not familiar with your local PHA to say for sure.

In either case, if you call the employee listed on her voucher or annual renewal notice, they're usually happy to run the numbers ahead of time and let you know exactly what will happen, though they obviously wont encourage you to raise the rent over the limit even if they wont actually reject the increase. 

Hey @Heather W. and @Rick Baggenstoss , sorry it took a couple days to have the time to write a response, its been a crazy week! 

To answer Heather's question, the tenants are similar in many ways, but also different. The HUD-VASH program is intended to help the VA house the most chronically homeless and otherwise unserved veterans in each community. On average, this means that the veterans being assisted have poorer rental histories and are more likely to have fixed incomes, on average older, are more likely to be single persons, and have higher physical and mental health needs than the average Section 8 tenant.

Now, all of this sounds like a great recipe for an awful tenant experience. How could a program that takes folks that look, on paper and on average, worse than the group of tenants least loved on BP be anything other than something to run away from? The kicker is the VA support that comes with every HUDVASH voucher. Around 50% of Section 8 vouchers issued in the US expire before the tenant is able to find housing. Less than 10% of HUDVASH vouchers are returned unhoused. More than 20% of Section 8 recipients that do find housing leave the program within the first year, almost entirely for negative reasons. Though it varies by area, usually less than 10% of veterans in HUDVASH leave housing within the first year. As the financial and paperwork parts of the program are the same for the landlord in both programs, the VA support is clearly the difference maker in the program.

To highlight a scenario that seems to play out often in rentals owned by BPers, a tenant will decide its time to move in a dog, shady romantic partner, or acquire a new annoying habit that has any good landlord/PM ready to serve notice that they're violating their lease. The average Section 8 tenant may or may not listen to the notice, and if they don't, then you get to start the long, often messy eviction process. A HUDVASH tenant, on the other hand, has a Social Worker visiting on a regular basis, weekly at first, ready to nip those issues in the bud. If they continue and notice is given, the Social Worker is able to help the landlord transition the tenant out and into other housing or services without a messy eviction process. Often, low income tenants have little understanding of their rights and responsibilities as tenants, as they've rarely or never been in a stable rental situation from a reputable landlord or PM and have little experience with the paperwork and language involved from the local PHA or a lease. Having someone there to translate for the tenant and encourage the tenant to do the right things to live up to their end of the lease makes all the difference. 

The similarities are good to note as well. Section 8 and HUDVASH tenants are subject to the same income caps in each area (though the caps vary based on location). HUDVASH vouchers use the same FMR rates in almost every locale, though a few PHAs ease exemption restrictions to allow for more attractive terms to landlords for HUDVASH tenants. The inspection process is the same for both programs, as is the yearly renewal (and if your area does an automatic offer to raise rents, those as well).

If this has inspired anyone to look further into the program, there's one more important distinction between the two programs: ease of recruiting tenants. A phone call to your local HUDVASH program to let them know when an apartment/house is coming available can open a sea of referrals to your units, which can help you keep your occupancy at a minimum. You can usually advertise your units through your local PHA to the general public (including Section 8), but there's no way to market directly to the program, or have the program continue to refer possible tenants to you in the future. 

IMHO, a good deal for any landlord who decides the local FMR numbers work for their rental property.

My local PHA uses the following list to prep landlords for the general expectation of the inspection: 

Windows and Doors

• The windows must not be damaged or missing
• All ground floor windows must have locks
• All doors leading outside must have locks and deadbolts

Flooring, Ceilings and Walls

• The flooring, walls and ceilings must not have any serious defects such as serious bulging, sagging, large cracks, loose surface or other major damages
• The flooring must not have any serious damages and cracks that will cause someone to trip and fall (peeling/lifting linoleum is often what flunks on this point)
• The ceiling and roof must not leak. Stained ceilings are often a tell-tale sign of leakage
• The interior walls of the property must not have chipped or peeling paint

Plumbing and Sanitation

• The property must have a fixed water basin, flushing toilet and shower/bath tub
• There must be no plumbing or water leaks
• There has to be hot and cold running water in both the kitchen and bathroom
• The bathroom must have either a window or exhaust fan
• The water heater must have a discharge tube that drains to a floor pan, outside, sink, or other appropriate place. 

Lighting and Electrical Fixtures

• There must be at least 1 working light each in the kitchen and bathroom
• All electrical outlets must be working and come with cover plates
• There must be a working heating system for the property

Structural and Fire Safety

• There must be a working smoke detector for every rental unit and on every storey of the property (and no non-working ones!)
• All stairs and railings must be secure
• If you own a rental building - The walkways, porches, lifts and other common areas have to be properly maintained to avoid tenant injury.

I added a couple things there (I think my PHA copied the list off of a website), but the last point I would add is if there are things that don't work but you've left because they don't negatively impact a renter (such as an old wall heater, old smoke detectors, etc) pull  those out. Those often cause a unit to fail, but are obviously easy fixes. 

Good Luck!

Some great advice from @Marcia Maynard and @Victor N. ! Just remember, if this was a good investment when you purchased it, it will probably still cashflow well over the course of the first couple years even with the extra investment needed to bring it up to an acceptable standard. Don't be afraid to do whats necessary to save yourself the time, headache, and possible failed inspections (and resulting lost rent) down the road. 

@Corey Demuth That is definitely a regional/municipality rule, not a national one. Oregon isn't the only place to have it though. Folks should definitely know their local fair housing laws to make sure they don't accidentally violate the law in screening tenants. Even in localities with "income discrimination" laws, you can still obviously screen tenants for prior evictions, criminal history, charging a higher deposits, etc. 

Excellent explanation that I'll piggyback off of. That worksheet with the utility costs is used by every PHA, but varies by region (obviously utility costs are different in different areas). I believe the PDF calculator (Called the Happy Assistance Estimator, or something like that) is in the BP downloads section, where you can total up the utility costs from your local worksheet, punch in your local FMR, your tenant's income, and it will spit out all sorts of numbers for you, such as maximum allowable rent. A word of caution, there are a bunch of possible deductions from income for the purposes of calculating a tenant's portion of rent, so just because Jimbob gets a check each month from SSA for $1000, it doesn't mean that thats the number the PHA will use for rent calculations.

Another small tidbit, most, if not all, PHAs will allow a tenant to go up to 40% of their income in calculated rent/utilities for a month at move-in, so you can often get a bit more in rent than you would off of just adding up the utility numbers and deducting that from the FMR. The exact number varies depending on a tenant's income, as its 40% of income and not a flat rate, but if your tenants have income of $800+/mo, its worth running the numbers to see if you can get an extra $50+/mo. Again, the calculator can help.

Ultimately, the reliance on any single segment of the market leaves you at increased risk in any kind of investment. There are government contractors in every sector that specialize in nothing but government contracted work. Every time there is a budget battle, they scream the loudest, because they are entirely committed to a single funding stream. Separate from government programs, your tenants could be mostly employed in the same sector, all your properties could be in the same neighborhood, or laws regarding your rights as a landlord could change. Diversity is the (not so) secret to reliable income from investments. This could be properties in different markets, across different income brackets, or in different areas of REI (notes, properties, etc.).

I would like to point out that FMRs aren't something that are fixed in stone. PHAs are tasked with using the initial number and tweaking it to best suit the needs of the program in their area. This could mean lowering it for certain neighborhoods, raising it for others, or lowering/raising it across the board to allow more tenants find suitable housing. They have a wiggle room of about 10% over the calculated FMR. The instance of the Raleigh PHA lowering HAP (the subsidy portion of the monthly rent) across the board by 10% is a crazy rare occurrence, despite the fact that its brought up on this site almost every time the subject of Section 8 comes up. I can only find one other instance of this ever happening, even during sequestration, so needless to say, this shouldn't be a prominent fear.

Most PHAs, when faced with a budget shortfall in their voucher program, do one of two things. First, they reduce the number of vouchers they issue locally. Second, they lay off staff. Over the past decade, HUD funding for Section 8 vouchers has been reduced to about 73% of what HUD calculates each area needs to fund and administer its vouchers. Most PHAs had found work arounds to fund additional vouchers, but HUD severely restricted those work arounds with rule changes during sequestration. I can't imagine most PHA heads/boards would think such a move would be a good idea, nor can I imagine more regional HUD supervisors would give it the OK. I can only imagine that there was a severe breakdown in judgement at the Raleigh PHA or a severe budget shortage, or both, during sequestration to bring such a move around.

Ultimately, your decision to work with the Section 8 program should be based on your local PHA. They have wide latitude to administer the program how they see fit in their area to produce the best results. Some are great, some are pretty mediocre. I don't blame a single person in the Raleigh area for not wanting to work with the program, but ultimately the program's issues in that area aren't very reflective of the program in just about any other area. 

@Wilson Churchill Just noticed you posted about the appliances, I would highly recommend you change that arrangement if it includes the stove, oven or refrigerator. Those things clearly fall into the category of basic utilities/appliances and would be illegal to rent around the rental agreement/lease for a Section 8 tenant. If its for things like washer/dryer, that's a creative solution! Just be careful of the PHA on those things.

@Brandon Turner I've not been listening to the podcast/been a part of the site long enough to have heard about the Kurt Cobain house, but it sounds like there's an awesome story there. As for your tenant, you have a few options. Whether they work depends entirely on how your local PHA interprets the rules and views the needs of your area. 

#1 Ask for a "Reasonable Accommodation". Perhaps this little old lady is disabled, perhaps she's next door to family who helps caregive for her, perhaps she's mobility impaired and is next door to her doctor, or perhaps there's another aspect to the unit that makes it uniquely appropriate for her that wouldn't be easily replicable elsewhere, or at the traditional market rent. You can speak to your PHA about their Reasonable Accommodation process and find out how to make your case in writing. Asking for 10% or less above FMR is the easiest for them to approve, more than that requires extra work/approvals on the PHA end, thus are harder to win.

#2 Play with the Happy Assistance Estimator (which I believe is in the downloads section of BP) with the FMR and values for local utility allowances to see if including some or all utilities will up your total cashflow. Since she's an older lady, in my experience single old folks tend to sip utilities, rather than hog them, so there might be a margin you can gain there. Its a generalization on usage, YMMV, but its an option. If you'd like help figuring out how to use the estimator, PM me. Its not incredibly intuitive.

#3 A borderline legal option is for when you redo the lease, take out an amenity such as use of the laundry room or parking space, and charge separately outside of the lease agreement for that service. Federal law prohibits charging extra for rent/utilities outside of the lease agreement approved by the PHA, but there is grey area about extras like laundry or a parking space if its outside of the unit. A word of caution though, the PHA will likely take a dim view of such an arrangement if they find out, so make sure everyone is on the same page. 

#4 File an appeal. PHAs have some flexibility with FMRs to ensure tenants are able to stay mixed into broad sections of their PHA area, rather than just congregate in low income neighborhoods. Not all PHAs have an appeal system to work on this issue, as its not an issue in all areas (for instance, more rural PHAs tend to have a much more homogeneous rents across their coverage area), but it could be an option in your area. Again, the 10% and under = easier approval rule usually applies here as well. 

#5 Take the lower rent. She sounds about as rock solid as a tenant can be, so giving up 10% each month instead of perhaps an average of 10% over the next ten years in vacancies/unpaid rent would be fine in my book. 

#6 Raise the rent after 1 year. Most PHAs won't require someone to leave their unit even if a rent increase pushes them over the FMR for their area, they will simply offer the option to the tenant to pay the difference or move to a more affordable unit. This is another tactic that PHAs take a dim view of when done repeatedly, and has encouraged a few to institute rules/policies where they will not continue to allow someone to use their voucher in such a circumstance unless approved. This is something you should ask another local landlord that's tried it about, as asking the PHA how to best circumvent their rules is probably not the best option, haha.

Hope this helps, good luck!

(edited for typos)