Mandatory Section 8 for All Owners? That Can’t Be Good, Can It?
There is a move afoot to require landlords to accept Section 8 applicants. As written, SB-329 would eliminate “source of income” as a reason to deny an applicant. What does that mean and what does it have to do with Section 8? First let’s discuss Section 8.
Section 8, a federally funded program, helps almost 4 million households with a portion of their rent and utilities and is a 33-billion-dollar program. A household must apply and pay 30% of the income towards rent. The government (or the local government Housing Authority) pays the balance. The landlord must charge a “reasonable” rent and that figure must be agreed upon by the Housing Authority.
Although an owner may not receive market rent, they accept a tenant who may stay in the unit for a longer period because there is a shortage of Section 8 housing units and they are guaranteed the portion of the rent paid by the government. If a tenant doesn’t pay the portion of the rent they are required, they can be evicted like any other non-Section 8 tenant. So, if you could obtain market rent and be guaranteed payment by the government, why not accept Section 8 tenants?
Like any other government program, there are a few negatives associated with participating in the Section 8 program:
- Before tenants can sign a lease or move in, the property must be approved by the Section 8 Housing Authority. This can take from a few days to a few weeks. During this period, your property sits vacant losing money. If Section 8 is not involved, a tenant can move right in after the previous tenant leaves and there is no delay. Also, it may take weeks, or even months before you receive your first check from the government. Since the tenant is on Section 8, usually they do not have funds for a security deposit and that is not provided by the government.
- The Housing Authority decides on the monthly rent and any rent increases. A tenant may be willing to pay $1,800 for your rent and contribute $600 to the monthly lease, but Section 8 may not. They will compare your rent to comparable rentals in their system and may only agree to a lower amount. The same holds true for rent increases. The market may bear a 5% increase, but the Housing Authority may only allow a 3% increase.
- All time frames take longer. For a non-Section 8 rental, if we want to increase the rent 5%, we give the tenant 30-day notice and either they accept, or move. For Section 8, any increase requires a 90-day notice and must be approved by the Housing Authority.
- All Section 8 housing is subject to an interior inspection of the property every year. Some tenants take this opportunity to ask for improvements or have the owner correct wear and tear issues created by the tenant. If called out by the inspector, they must be corrected regardless.
As you can see, Section 8 is not for everybody; unless the government requires it. Some owners love Section 8 and buy properties specifically to attract and keep Section 8 Tenants: but that is by choice. It has been our experience, whenever a governmental third party is involved, such as the Public Housing Authority, life is made better for tenants but more difficult for owners and property management companies.