Section 8, also known as the Housing Choice Voucher Program, is a rental-assistance program run by the U.S. Department of Housing and Urban Development (HUD) for low-income families, people with disabilities, or the elderly.
Renting to Section 8 tenants has a number of benefits, including guaranteed monthly rent payments from the government and a large pool of prospective tenants. But it also has potential downsides, such as additional rules and regulations you need to follow. Consider these risks of the Section 8 program for landlords before deciding if it’s right for you.
Key Takeaways
- Funded by the HUD and administered by local public housing agencies (PHAs), the Section 8 program provides rental assistance to low-income Americans.
- Landlords who rent to Section 8 tenants must pass inspections every one to two years and set rental prices in accordance with the Fair Market Rent (FMR) calculated by HUD.
- The Section 8 program does not cover security deposits, so a landlord who charges one will have to collect it directly from tenants.
Security Deposits Are Not Paid by Section 8
The Section 8 program provides housing vouchers that subsidize tenants’ monthly rent. Tenants typically pay up to 30% of their monthly adjusted income, while the government covers the rest. However, the program does not cover a security deposit. It may be tricky to collect one from a Section 8 tenant who has low income and may not be able to afford it on their own.
Note
Security deposits can protect landlords from damage to property or unpaid rent. The amount you can collect is determined by your state’s security deposit limit.
Frequent Section 8 Inspections
Another potential disadvantage of renting under Section 8 is the program’s required inspections. Your local public housing authority will send an inspector to your property before a tenant moves in and every one to two years after that, even if there’s been no tenant turnover.
Your unit must meet HUD’s Housing Quality Standards for safety and health. Some of the 13 areas an inspector will look at are the unit’s sanitary system, lead-based paint, water supply, electrical, and smoke detectors.
Note
The inspection might not present an issue if your property is in good shape. Plus, if you don’t pass, you can make fixes and schedule another inspection.
However, it may be a stressful part of Section 8 that’s worth considering before you participate in the program.
Tenant Moves in Before You Collect Rent
When you invite full-paying tenants into your building, they often pay first and last month’s rent upfront, along with a security deposit. With the Section 8 program, the tenant moves in before you receive your first rent payment. You also may have to wait for some time before receiving that initial rent payment as your local PHA processes paperwork and completes your property inspection.
Note
Delayed rent payments could present a problem if you’re unable to afford your mortgage without collecting rent immediately.
If you can wait a couple of months though, you’ll start getting HUD rent payments reliably every month for the duration of the tenant’s stay.
Non-Section 8 Tenants May Not Want To Live at the Property
If you open your property to Section 8 tenants, you may find that full-paying tenants are hesitant to move in. Some renters may associate Section 8 housing with run-down properties or have negative stereotypes about their low-income neighbors.
Note
In some areas, such as the state of New Jersey, it may be illegal for landlords to turn away tenants just because they are paying with Section 8 assistance.
While you can’t help other peoples’ opinions, you can put effort into maintaining your property. Stay up-to-date with maintenance, make public areas aesthetically pleasing, and invest in landscaping and gardening.
Keeping your property in good shape will encourage other renters to move in.
Section 8 Sets Rent Amount
Another potential disadvantage of renting to Section 8 tenants has to do with the price of rent. The program will only pay 90% to 110% of the fair market rent for your property and area, as determined by HUD.
When a Section 8 tenant submits a rental application, HUD approves a voucher amount based on family size and number of bedrooms. If HUD determines that the fair market value of a two-bedroom unit in your building is $800 per month, for example, you’ll need to rent it at that amount or less.
Depending on your area, you might find that you can collect higher rents from non-Section 8 tenants.
More Restrictions Around Evicting Tenants
If a rental arrangement is not working out, you may have more trouble evicting a Section 8 tenant compared to a full-paying tenant due to regulations from your local housing authority. While eviction procedures must always abide by state and local laws, they require additional documentation for Section 8 tenants.
You’ll need to send paperwork throughout the process to your local housing authority office, including copies of notices you sent to the tenant explaining the violations and corrections they needed to make. If you want to bring the tenant to court, you may need permission from the housing authority, as well.
That said, Section 8 tenants know they will lose their voucher if they get evicted. Chances are, they’ll make efforts to resolve any problems to avoid this scenario.
Frequently Asked Questions (FAQs)
Does Section 8 pay the first month’s rent?
The Section 8 program pays monthly rent payments, but the first payment is only sent after the tenant has moved in. Once the first payment has been sent, landlords can expect consistent monthly payments to follow.
Can Section 8 tenants pay more than their voucher amount?
Section 8 tenants can pay a greater proportion of their income if the rent exceeds their voucher amount. Typically, renters don’t have to pay more than 30% of their adjusted income. In the case of a pricier housing unit, renters may pay up to 40% of their adjusted income.
What is the Section 8 program?
The Section 8 program, also known as the Housing Choice Voucher Program, is a rental-assistance program funded by the U.S. Department of Housing and Urban Development (HUD). It provides vouchers to low-income Americans, people with disabilities, and elederly people to subsidize the cost of rent at approved properties.
