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Section 8 Housing: Pros and Cons for Your Rental Property

11031 Exchange | Layman & Nichols LawSection 8 is a federal program that provides rent and utilities assistance to low income families. Currently, these families pay no more than 30% of their adjusted monthly income for rent and utilities.

If a rental property owner meets thirteen (13) federal housing (HUD) quality standards, which are in most cases reasonable to meet, that owner may choose to accept tenants with a Section 8 voucher. Apartments, townhouses, single-family homes, condominiums, or duplexes can be considered for Section 8 rental.

There is much demand for Section 8 properties, but there is no requirement that an owner must participate. As a property owner, you should consider the pros and cons to decide what is best for your investment. There are no additional federal tax incentives beyond the ordinary ones for rental property.

Some of the advantages to a rental property owner are:

  • Higher rental rates. Usually the Fair Market Rent as determined by HUD is higher than a landlord can normally get for these properties.
  • Broader market. The Section 8 voucher increases the number of tenants who can pay. Demand usually exceeds supply, producing Section 8 waiting lists leading to higher occupancy for these properties as well as lower marketing costs.
  • Easier rent collection. HUD deposits the substantial portion of rent directly to your account
  • Tenant incentive to pay on time and minimize damage. Risk of losing assistance usually provides tenants who want to pay rent on time and not damage the property. Owners and property managers can charge the tenant for any damages as they occur, the nonpayment of which result is lost assistance and lost housing.

The following disadvantages should also be considered:

  • Annual inspections by local Public Housing Authority. Annually a PHA inspector and landlord or property manager will visit the property, inspect the original thirteen (13) qualifying inspection points and list items needing repair. Once they are repaired, there is a re-inspection. (An opportunity for the landlord or property manager to note any damage by the tenant and keep apartment in overall good repair can be an offsetting advantage.)
  • No security deposits. Because Section 8 only provides vouchers for rent, a security deposit must be collected from the tenant who may be able to get that assistance from another agency.
  • Property wear and tear. Though not necessarily true, Section 8 tenants are often thought to cause more wear and damages. Statistics show they are more likely than other tenants to allow extra people to move in requiring intense property management to maintain lease compliance.
  • No compensation for damages. Though the risk of losing Section 8 status serves as a tenant incentive to not damage, or let guests damage the property, the program provides no payment for such damages. A low-income tenant usually does not have the money to pay for more than minor damages even if you get a judgment.

Due to factors of location, age, etc., some rental property properties command lower than prime rents. Owners of such properties, after studying the Section 8 arena and considering adequate property management systems and safeguards, may deem Section 8 to be a beneficial strategy.

 

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