section 8

Renting with HUD’s Section 8 Program

Stable rental income is essential for residential real estate investor success. Providing housing to low-income households using government subsidy programs such as Section 8 presents an opportunity to serve a large subset of within the overall population. These programs pay landlords directly on behalf of the resident.

Accepting residents on the section 8 voucher program is not only a form of public service but also can provide as a secure form of passive income. In our experience, there are both pros and cons to renting to both market rate tenants and section 8 voucher holders. As an investor you must determine which tenant and demographic aligns with your real estate investing business plan.

How would it feel to receive a guaranteed payment every month? Click To Tweet

  • Never worry if the rent will be late or only a partial payment.
  • Never be concerned of excuses from tenants.
  • Never fear reliance on tenant money management skills.

This would be wonderful, we know!

This is the reality of being a landlord that accepts residents using the section 8 voucher program. The local public housing authority (PHA) insurers that you as a landlord receive the full portion of the rent that they have agreed and are responsible for paying.

There are no location restrictions on where residents may use a section 8 voucher. It is solely up for the landlord’s discretion. If the landlord is willing to participate in the program and allow the resident an opportunity to reside in their rental unit, then they can participate.

How the Section 8 Voucher Program Works

Often known simply as Section 8, in reference to the Section 8 of the Housing Act of 1937, approves or authorizes rental housing assistance payment to private landlords.

This piece of legislation benefits millions of low-income families and households in the United States. As of 2008, the number of these low-income households was about 4.8 million.

The Housing Choice Voucher program is the largest portion of the section, and pays a significant fraction of the rent and utility payments for approximately 2 million households. This program offers ‘tenant-based’ rental assistance. The amount that the government will pay is based on the resident income (if there is any). The federal government guarantees to shoulder the difference between the amount the resident can comfortably contribute towards the rent and the market rental rate of the property.

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Criteria for a Section 8 Tenant and Landlord

Tenant’s Obligations: When a prospective resident obtains a voucher, it denotes an approved rental amount that a family can use their funds towards. The family views and selects a housing unit and notifies the housing authority. Next, the Public Housing Authority conducts an inspection and approves or denies the unit and lease. The family must complete the landlord leasing process and upon approval, sign a lease with the landlord for at least one year. The family may be required to pay a security deposit to the landlord out-of-pocket to reserve the rental unit. After the first year the landlord may initiate a new lease or allow the family to remain in the unit on a month-to-month lease.

When the family is settled in a new home, the family is expected to comply with the lease and the program requirements, pay their share of rent on time, maintain the unit in good condition and notify the public housing authority of any changes in income or family composition.

Landlord’s Obligations: The role of the landlord in the voucher program is to provide clean, safe, and sanitary housing to a tenant at a reasonable rent. The housing unit must pass the program’s housing quality standards and be maintained up to those standards as long as the owner receives housing assistance payments. In addition, the landlord is expected to provide the services agreed to as part of the lease signed with the tenant and the contract signed with the public housing authority.

Rental Income and the Big Picture

We caution you to not stigmatize these residents for their lifestyle or living habits. Keep in mind, they are not real estate investors. They do not have enough income to pay for their family’s home and someone else’s. This means that you may not be as familiar with the lifestyle habits people who come from a lower socio-economic status. Keep in mind that we are all people, and we each have the liberty to live life on our own in terms (whether or not we personally agree with them). To put it plainly, mind your business, don’t try to control the details of your resident lifestyles and allow the peace of mind that comes from receiving a secured, consistent payment to keep you motivated. Remember, you can always hire a property manager if you don’t plan to deal directly with tenants.

Obviously, there are great benefits that come with renting investment property with HUD’s Section 8 Housing Programs, both for the landlord and the tenant. In order to learn more about how to use this section for rental purposes, we suggest you contact your local housing authority to learn more about the requirements and qualifications. Be sure to read all the rules and regulations and understand them very well before leveraging this housing program. This way, you can be sure of reaping the benefits that ensue without any form of hassle.

We show you how to get started generating passive income so you can have more personal liberty and financial freedom. We do this by helping you determine which passive income path is right for you and get you started on your journey with our online community, education, books and tools. We talk about personal finance, building a business and living life on purpose.

4 thoughts on “Renting with HUD’s Section 8 Program

  1. I don’t accept Section 8 in my rentals, but I’m curious about how this works. Do you have an example with numbers to show based on the contracted rent, how much do Section 8 tenants typically pay and how much is covered by their voucher? Is there not also a limit on what the landlord can charge for rent based on the income of the Section 8 tenant? I could be wrong, but I thought the rent the tenant pays can’t exceed like 30% or some fraction of their income.

    1. Hi OB
      The total monthly rent amount that the landlord asks is at the landlord’s discretion. Section 8/HUD then does a market assessment to validate fair market rate. If the rent the landlord asks for is equal to or less than fair market rate, then the “asking price” for rent is accepted.

      Now, you are correct that the tenant’s portion of the rent is not to exceed 30% of their monthly income. However that is determined by HUD and not the landlord. It completely depends on the tenant circumstance. We have tenants that pay $0/mo towards their rent and others pay the majority. Numbers are not helpful because the ratio of tenant pay: HUD pay is based on the tenants individual situation and the monthly rent of that property.

      From a landlord prospective, we only care about
      1. If the asking price for the rent accepted or will HUD as you to reduce the rent.
      2. What the tenant portion is. You can typically get an idea based if the person is working or not, and the persons income (which you verify just like any other tenant).

      Hope that helps and thanks for stopping by LLP!

  2. I was always hesitant about section 8. I’m not sure if I’m for it against it now. I went through 1 eviction with a section 8 tenant and I must say the section 8 people actually were 100% on my side and paid me all the way through eviction. Security deposit covered all the costs, and I actually lost nothing on it.

    Now I’m thinking about moving a portion of my rentals to section 8. Not sure yet though.

    Plus section 8 pays way higher than market rents.

    1. Hi Eric
      Agreed, Section 8 can be a mixed bag, depending on the resident. The staff for Section 8 have always been fair in our experiences though. Despite the programs flaws, it is really hard to argue with rent guaranteed to be paid on time and in full every month.

      For us it’s all about the market dynamics. Sometimes there are plenty of self-paying residents to choose from and at other times it’s like housing is going out of style. It is really nice to be able to go to Section 8 and literally open the floodgates of people that really need housing. Like anything else, Section 8 is a resource for residents and landlords.

      Thanks for stopping by!

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