According to the National Low Income Housing Coalition (NLIHC) approximately 4.8 million American households rely on housing assistance programs in order to have a decent roof over their heads. One of the most widely used is the Section 8 Housing program which connects people with Section 8 landlords who can provide them with a safe and sufficient place to live.
Section 8 landlords play a pivotal role in the housing market for low-income workers. If you’ve been considering different avenues of real estate investing, purchasing low-income rental units has lots of advantages—like, for example, a reliable stream of income.
If I’ve piqued your interest, here’s what you need to know.
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Defining What It Means To Be A Section 8 Landlord
The Housing Act of 1937, also known as Section 8, created and approved the Section 8 Housing program. Its purpose is to help low-income earners and disenfranchised citizens—namely senior citizens and those with disabilities—to get access to fair housing.
Of the 4.8 million residents utilizing Section 8 housing, approximately half of them are classified as “Exceptionally Low Pay”, which means they make less than half of the national median income.
The Section 8 Housing program connects these individuals to suitable properties using HUD’s Section 8 Housing Choice Voucher (HCV) program. These vouchers are used through local public housing agencies that receive money from HUD and is used to pay private Section 8 landlords. In order to operate effectively, the program depends on landlords who offer much-need, subsidized housing.
The Section 8 Housing Rental Process
Public Housing Agencies (PHAs) give Section 8 applicants the vouchers they need in order to pay for rent. It can take some time to obtain the voucher, but once the tenant has it in hand, they are able to immediately begin their search for applicable housing.
The process consists of seven steps, which of course, I break down below.
Step 1: Tenant with A Voucher Finds Housing
Once a tenant’s application has been approved and they’ve received a voucher from HUD, it’s up to them to find somewhere they can live. With that being said, PHAs encourage program participants to explore several options, and guide them on when making their final choice.
Once someone finds a Section 8 landlord they’re interested in renting from, they’ll produce the voucher. Next, they dictate exactly what they’ll be charged for lodging.
Step 2: Landlord Fills Out A Request For Tenancy Approval Form
Landlords are required to fill out a request for tenancy approval (RTA/RFTA) form. It is where you can find detailed information about the property, like address, rent charges, and utility costs. Typically, you can find the form on your local PHA website. For example, here’s one from the Detroit Housing Commission.
Step 3: Applicant Is Screened By The Landlord Like Usual
Even though renting to Section 8 families does require a little more effort, they’re still renters like anyone else and landlords have the same responsibilities regardless. Yes, the PHA screens participants, but you should still undergo all regular screening checks too.
Step 4: Local Public Housing Agency Reviews Rent Charges
After completing the request for tenancy approval form and being granted the right to rent from the chosen landlord, the voucher holder then goes back to their PHA. The agency looks over everything to make sure it’s all kosher.
Step 5: Schedule A Housing Inspection
Local PHAs are required by law to inspect properties before they let a voucher owner move in. This is done to guarantee that the rental meets or exceeds HUD’s Housing
Step 6: Agree On Rent With Local PHA
In addition to approving the property, the PHA must also approve the cost of rent. Above all, they need to make sure the tenant can afford it, since the voucher holder has to pay approximately 30% of their own income towards rent and bills.
Step 7: Sign The Lease Agreement
After everything’s been looked over and approved, all the involved parties sign the rental agreement, including your local PHA. Additionally, the landlord also has to sign a document called a Housing Assistance Payments Contract, that certifies they directly receive the Section 8 funding. In return, the landlord promises to maintain a reasonable rent and property up-keep.
Section 8 Landlord Responsibilities
Section 8 Housing requires landlords to maintain the property like they would any other rental or tenant. That means it needs to meet certain safety and sanitation conditions that are required for decent housing.
Being A Section 8 Landlord: The Pros and Cons
Like most things in life, there are advantages and disadvantages to owning low-income rental units. I find that most Section 8 landlords benefit from great profits and reliable payments. However, it can be a little more challenging working with PHAs. Here are some things to think about when weighing your options.
- Consistent Income: Under Section 8, rent is generally guaranteed since the involved public housing agency pays the approved voucher amount directly.
- Yearly Rent Increases: Landlords can ask for a rent increase once each year.
- Low Vacancy: The demand for low-income housing usually exceeds supply, so rental properties aren’t vacant for long. Renters also tend to stay longer.
- Nice Profit Margins: Even though it doesn’t necessarily hold true in every state, Section 8 Housing rents typically outpace average or less than average neighborhoods. When coupled with regular rent payments, it’s a very reliable source of income.
- Prescreened Tenants: Since the local PHA already screens applicants, landlords have the added peace of mind that tenants meet certain requirements and standards.
- Dealing With PHA Bureaucracy: Section 8 landlords are required to have more communication than typical landlords, which comes with extra work and sometimes, red tape.
- Yearly Inspections: The local PHA oversees annual rental property inspections to ensure everything is up to the standards of HUD.
- Renter Issues: When dealing with low-income tenants, they can sometimes struggle to finance even the most basic of necessities, not excluding their rent. This is something that landlords try to remedy during the initial screening process.
- Initial Rent Payments: Section 8 landlords can sometimes find it difficult to get the ball rolling on rent payments since they can’t collect the first month’s rent until the tenants have moved into the property.
How To Become A Landlord Of Section 8 Properties
At the end of the day, the best way to understand and appreciate the role of a Section 8 landlord is to directly contact your local PHA. They’ll be able to provide a detailed explanation of the expectations as well as the ins and outs of their program.
If you’ve been thinking about landlording low-income rental units, it’s time to talk to an expert. Contact my team today to get started!
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