We are often asked for our opinion on section 8 tenants and how section 8 works by our investors who buy property from us. This article will briefly explain how section 8 works, the pros and cons, as well as how to attract section 8 tenants. section 8.
Brief Summary of Section 8
First let me give a brief description of what section 8 is and how it works. Section 8 is government assistance to help low-income families obtain safe, decent, and affordable housing. A prospective section 8 tenant must apply to a local public housing agency (PHA). When an eligible tenant reaches the top of the PHA’s housing choice voucher waiting list, the PHA issues a housing choice voucher to the tenant. Tenants who receive Section 8 vouchers are responsible for finding their own rental housing. The vouchers they receive from their housing agency are to help pay their rent.
Basically, the bond means that the Federal Government will pay a specific amount of rent. The amount varies depending on the qualifications of the coupon holder. Once a coupon holder locates a property and the property manager approves it, there are a series of events that take place. The bond holder fills out a form that is signed by the property manager. The voucher holder submits this form to their caseworker at the PHA. The caseworker executes a contract with the property manager (PM). This contract authorizes the PHA to make subsidy payments on behalf of the tenant. If the tenant moves out of the unit, the lease ends and the tenant can move with ongoing assistance to another property. In addition, the PHA must perform a physical inspection of the property to ensure it is in compliance with section 8 code and safety standards. After the inspection passes and the paperwork is in order, the tenant can move out.
Section 8 Pros
On Time Payments: The best benefit of all is that the government pays on time, every time! Don’t chase your money every month. It arrives in the mail on the first day of the month every month. In our opinion, this alone outweighs all other negatives. With our investors out of state, the PM has the section 8 funds being sent to him. Once he receives it, he deducts the administration fee from him and any other fees and sends the balance to the owners. If the tenant is responsible for a portion of the rent, then the PM treats the collection of rent similarly to a non-section 8 tenant.
Longer Leases – Section 8 leases are typically 1-year leases and sometimes 2-year leases. Although the tenant can try to break the lease and move out, they must first locate the new property and go through the whole process again with section 8. The general rule is that if the investor keeps up with the property, the tenants tend to to stay for the duration of the contract and will often renew to avoid having to go through the hassles of section 8 again.
Good Tenants: Generally speaking, Section 8 tenants tend to be good tenants. Most tenants waited and worked hard to qualify for their vouchers, and complaints to the PHA against the tenant could result in the tenant losing their voucher.
Cons of Section 8:
Difficult to move out – Many times, it is a long process of paperwork and inspections before the tenant can move in and start paying. Some housing authorities are better than others and it depends on how quickly paperwork is submitted, inspections pass, and how well the PHA stands behind the orders. Our recommended PMs understand the process well and have a good relationship with caseworkers and inspectors, and delays are often on the part of the tenant or PHA, not the PM.
Attrition: Most section 8 renters have large families and limited work, which means they are around more often than a working family with fewer children. As a result, the property experiences more wear and tear on the carpet, paint, etc.
The pros outweigh the cons:
Overall, when comparing the pros and cons, in our opinion the pros far outweigh the cons. I have a section 8 tenant who has been in the same property for 3 years. I don’t have to worry about not being able to pay my rent due to job loss, unexpected expenses, inadequate budget, or anything else. They have been happy with the property, so they have not sought rental rates or considered leaving. I get my check every month like clockwork. In fact, I think I can count on one hand how many times I’ve interacted with this tenant (once was from a falling tree in the yard)! Although such a positive experience can and does happen with non-section 8 tenants, the consistency of the payment is enough to make the investor comfortable and willing to deal with the downsides.
Attract Section 8:
There are a few methods of attracting section 8 tenants, all of which we encourage our investor project managers to do. The first is to inform the local PHA of the availability of properties. Our PMs do this by posting flyers at PHA offices where section 8 voucher holders frequent. Our PMs also include in their advertising; “section 8 welcome”. That alone is usually enough to attract a section 8 voucher.