When Congress passed the Housing Act of 1937, incorporated in the legislation was a program designed to sponsor subsidized housing for low-income families. Officially known as the Housing Choice Voucher Program, but more commonly referred to as Section 8 housing because this is the section of the Housing Act that authorized it, the program provides federal assistance through the U.S. Department of Housing and Urban Development (HUD), but it is actually administered through local housing authorities.
“It [the program] provides rental payments on behalf of the tenant to the landlord,” says Michael Minervini, Founder and President of Multi-Family Specialist, a training organization for real estate agents. Landlords can take part in the program by contacting the local housing authority and notifying the agency that they wish to become a receiving landlord. There is no application process for the landlord. However, a tenant who wishes to qualify must formally apply and show that their income is below 50 percent of the median income of the geograpic area in which they wish to live.
Michael noted that there are several significant advantages for landlords who take part in the program:
• It ensures a steady stream of tenants, which in turn means low vacancy rates.
• It provides guaranteed income.
• The monthly rental stipends are consistent.
• The landlord is assisting with housing placements within the community.
While the benefits are clear cut, the risks aren’t so well defined. As Michael explained, “Section 8 is the mechanism through which the landlord is getting paid. The risks to the landlord who take part in this program are the same as renting to any other tenant. It is still vitally important to screen tenants.”
The amount of rent per month a landlord receives from the housing authority varies from jurisdiction to jurisdiction. Michael says that each agency will pay what it considers to be fair market value based on an assessment of the location of the apartment, its size, the kinds of amenities offered, and the tenant’s income. Once that determination is made, any difference between that amount and the amount the landlord is charging per month is the responsibility of the tenant. Most housing authorities make payment between the first and seventh of each month. The landlord must collect the Section 8 tenant’s portion of the rent in the same manner as for any other tenant.
Any property that will be used for Section 8 housing must be properly inspected to be sure it is in suitable condition to be rented. Once again, the type of inspection required varies based on the local housing authority. In some cases, the agency relies on the municipality’s local code inspection or Certificate of Occupany inspection, whichever is applicable. In other instances, the housing authority will dispatch its own inspector to check for things like functioning utilities and heating/cooling systems, no peeling paint, no leaky roofs, no cracked windows/doors, and the presence of fire extinguishers, smoke alarms, and carbon monoxide dectectors.
An important point to note is that existing properties do not necessarily have to be compliant with the Americans With Disabilities Act (ADA). However, any new housing being built must conform to the guidelines set forth by the ADA if it is to qualify to be used for Section 8 tenants.
Once the unit has been rented, the landlord can usually use a standard lease. But Michael added that there are some housing authorities that require the landlord to use their leases. The terms are generally the same as in any other lease, except for one important difference. While a landlord typically has the option to rent to tenants either annually or month-to-month, with Section 8 tenants, the landlord can only rent on an annual basis.
When it comes to the question of securty deposits, Michael says, “This is a typical rental with a different revenue source, so the landlord can absolutely ask for a security deposit. In my experience, the tenant generally pays it.”
Rent increases are somewhat trickier. It depends on the amount determined by economic and geographic data, such as the location of the rental, the number of people in the unit, area wages, and the types of amenities offered. Even when the landlord builds the increase into the lease, the local housing authority may not approve it, making the tenant responsible for paying it. Of course, if the unit is subject to rent control, than the question of rent increases is subject to those guidelines.
Just as in any rental situation, you are going to find tenants that need to be evicted for non-payment of rent, or other lease violations. Michael says that not only is the eviction process the same, the court doesn’t give any special weight to the fact that it is a Section 8 tenant that is being evicted.
On a final note, Michael offered an insider’s tip as to how to successfully rent under the Section 8 program. He said that a landlord should make every effort to build a relationship with the local housing authority. If the representative knows your name, they will remember you when they have a good tenant looking for a rental. Maintaining a cordial relationship with the housing authority is a sure fire way of ensuring you receive a steady stream of tenants.