As we look back on 2020, rental investors may remember it as the biggest disaster of their entire career. Or some may be wiping their brow and pleased with themselves that they dodged a bullet no Hollywood writer could have conceived. The difference? The investor wiping their brow may have participated in the Housing Choice program commonly called Section 8. Eviction moratoriums have not been a factor for this investor. As long as they maintained their properties, the rent has continued to be received timely, each and every month.
Due to the pandemic tenant protections reached a new level. In our new future world, it is not hard to anticipate protections growing. Even if the world returns to pre-COVID status, Section 8 landlords found peace this year where so many others have found financial pain.
Simply, Section 8 is a locally administered federal government housing assistance program. It is aimed at low-income families, the elderly, and disabled. The goal of the program is to provide these groups safe and clean housing in the private marketplace. Section 8 allows people to move out of subsidized housing projects into neighborhoods and communities that offer hope, growth and opportunity.
The Housing Choice program issues vouchers for eligible participants to use to pay a portion or all of the rent of a privately owned apartment or home. These vouchers are funded by the federal government and distributed through the local public housing agencies. An individual or family applies for the program and if approved, will begin a search for housing that accepts Housing Choice (Section 8) vouchers. The amount of this voucher is largely dependent on the size of the family.
The federal government has created standards of habitability, health, and safety that a property must meet to be eligible. Similar to WILMOTH Group's Standards of Habitability, these are very basic standards that most rental owners would agree are important in the housing they offer. Eligible properties include apartments, townhomes/duplexes/triplexes and single family residences.
The local housing authority will inspect the property to ensure it meets these standards. Upon approval, the property will be eligible to be marketed and leased to a tenant with a Section 8 housing voucher.
The vouchers offered are calculated with a formula that takes into consideration family size and income. The rental owner is paid a housing subsidy monthly that often covers all the rent. Tenants are expected to pay 30% of their income (before tax) on rent and utilities. So the common lease we develop requires the tenant to pay utilities and the voucher will cover the rent.
Every local area has a payment standard set by the housing agency for how much a voucher may be for a certain size rental. This payment standard is considered what is needed to rent moderately priced housing in an area serviced by the housing agency. Understanding what your type and size property can receive in your location may be an important part of making the Section 8 housing decision.
Many owners have already decided they do not want to participate in Section 8. Their reasons are numerous but one consideration comes out time and again. The reputation that the repairs requested to maintain the federal habitability standards are unreasonable. Also, that a repair could be to blame on the Section 8 tenant but there is no ability to charge the tenant back the costs.
Through the years we have increasingly been adding Section 8 rentals and tenants. It didn't happen because we set an objective to become more involved in the program. The more Section 8 tenants and rentals, the more we understood the system. Then this year (the year of the 2020 pandemic for those reading this in the future) we have witnessed some of our biggest client success stories be with Section 8 rentals.
Why? The guaranteed rent payment shielded owners from the non-paying, eviction moratorium hiding tenants that their non-Section 8 landlords found in significant numbers.
Not really true. They do have some specific rules and some antiquated systems that can make it more painful than usual. But, overall they are not impossible. We have found many of the people who state this generally object to the federal housing standards making every other part of the process something to also criticize.
Absolutely not true! Advertise your rental as eligible for a housing voucher and people will come knocking down your door. Learn what your rental's average property standard is and keep priced at or below it. It is true it can take longer from acceptance to lease signing due to the inspections and paperwork. But that is still less time than the average non-Section 8 rental in a normal demand market.
Our experience is a Section 8 tenant is very appreciative of the opportunity the program provides. They take very good care of the property as it can be difficult to be approved for a voucher. Once a tenant qualifies they do not want to lose their eligibility due to a claim of misbehavior. Also remember those inspections? They work the other way too! While the inspector is reviewing the habitability standards they are also reviewing how the tenant is caring for the rental.
Don't forget the extra screening the voucher approval process provides. The housing agency has also screened your tenant. Sure some bad apples may slip through. But that risk exists in all rentals. In this case the benefit of being approved for a voucher is a significant factor to the tenants.
Eviction moratoriums may have changed your opinion of using Section 8. Also keep in mind that a landlord is permitted to use their standard procedures on Section 8 tenants. This means the Section 8 tenant will:
Finally there are no agreements that prohibit a landlord from evicting a Section 8 tenant. This rarely occurs but our experience is that the agency will actually support the landlord's decision to evict if it is due to repeated rules violations.
Are you are having a hard time renting or you are waiting for when you are permitted to remove your existing non-paying tenant? Possibly ask yourself if next time you should consider becoming Section 8 eligible.
Ready to rent your home or property? Let's schedule a time to talk. The experts at WILMOTH Group have more than 25 years of experience in property management in the Indianapolis area.