Landlording & Rental Properties

Mapped: Best Markets for Section 8 Housing—2020’s Top Recession-Resistant Strategy

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
139 Articles Written
House with "For Rent" sign in front

The United States officially entered a recession in February 2020.

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Traditionally, a recession is defined as two adjacent quarters of economic contraction, as measured by shrinking gross domestic product (GDP). The recession ends when GDP hits bottom and starts growing again, kicking off a period of recovery.

But that doesn’t mean the recovery is swift or even. Often it takes years to recover the economic gains lost in just a few months of technical recession. For example, the unemployment rate sat at a healthy 4.7% in November 2007 before the Great Recession hit, and while the Great Recession technically ended in June 2009, the unemployment rate didn’t claw its way back down to 4.7% until May 2016.

This means the U.S. could be in for a long, slow, painful economic recovery, lasting years after public health crisis of COVID-19 passes.

In the face of skyrocketing unemployment, I’ve heard many landlords express renewed interest in Section 8. Should you reconsider accepting Section 8 tenants in your properties? Here are a few pros and cons to consider, as we wade into a possibly prolonged period of economic pain.

Pros of Section 8 in Recessions

Section 8 unquestionably has its advantages, especially during recessions and periods of high unemployment. Keep these perks in mind as you mull over Section 8 renters to fill your next vacancy.

Note that some states and cities require all landlords to accept Section 8 renters, so make sure you know your local laws before setting a policy.

Row of colorful, red, yellow, blue, white, green painted residential townhouses, homes, houses with brick patio gardens in summer

Guaranteed Rent—or Most of It, Anyway

Section 8 typically pays the majority of participating tenants’ rent. So while they don’t normally pay every penny, you can bank on receiving most of the rent from the government every month like clockwork.

In a recession, that rental income reliability comes as a huge relief for most landlords, as rent default rates soar among unemployed cash tenants.

Section 8 Tenants Rarely Default

To begin with, Section 8 tenants just don’t have to come up with much money for rent each month. It’s a lot easier to come up with $200 than $1,500 each month, even if you take a pay cut or lose your job.

Beyond the tenant’s rent obligation being tiny compared to cash renters, voucher holders don’t want to jeopardize their vouchers by defaulting and getting evicted. That means Section 8 tenants typically do everything in their power to avoid defaults and eviction.

Lower Turnover Rates

Turnovers are cash flow killers. The overwhelming majority of landlord expenses—in both money and time—come from turnovers. This is precisely why landlords should focus on tenant retention as a tactic to boost their returns.

As it turns out, a frightening number of renters are currently planning to non-renew their lease agreements over the next year. Only 26.1% of renters plan to renew, and the numbers are even uglier among tenants paying higher rents.

In my experience, Section 8 tenants move less often than cash tenants. To begin with, they have a harder time finding new landlords who accept Section 8 vouchers. But they also fear losing the good thing they have going by kicking the bureaucratic hornet’s nest.

To change homes, they have to muddle through a swath of red tape and potentially undergo renewed scrutiny from the bureaucratic machinery. We should all harbor a healthy fear of such governmental machinery and its power to impact our finances with the wave of a pen.

Larger Pool of Eligible Tenants to Fill Vacant Units

If you don’t accept Section 8 tenants, you instantly eliminate a percentage of your prospective applicants. That can make it harder to fill vacant units.

Which, in turn, can mean longer vacancies, particularly during recessions when fewer renters can bring the financial stability that landlords screen for among their applications.

Cons of Section 8 Tenants

Section 8 renters come with plenty of downsides, as well. Make sure you fully understand them, before courting Section 8 tenants.

Initial & Annual Inspections

Section 8 requires an initial inspection, before greenlighting voucher holders to move into your property. And they can be… meticulous. They may require a series of additional updates or repairs before signing off on the lease.

Then you have to go through it every single year for lease renewal.

I’ve had particularly bad experiences with these. Like clockwork, inspectors would come up with $1,500-$2,000 worth of repairs every year—although that was the only consistency in their inspections.

home-inspector

I eventually learned that inspectors would find items to write up at every property they inspected. They did this for three reasons:

  1. First, it proved to their supervisor that they were hitting every home on their rounds.
  2. Second, it kept them in work, because they would have to go out and re-inspect the unit to verify the repairs were completed.
  3. Third, it kept them out of the office and the eyes of those same supervisors.

Bureaucratic machinery is not driven by market forces and efficiencies. They come with their own internal logic—one which typically serves to build evermore bureaucracy.

These inspections and subsequent mandated repairs can sap your returns for the entire year, defeating the entire purpose of owning rental properties.

Related: 5 Reasons Why I Plan to Rent to Section 8 Tenants Indefinitely

Eviction Delays

Expect more red tape in trying to evict Section 8 tenants than cash tenants. Often landlords have to jump through additional hoops like submitting additional paperwork to the local Public Housing Authority before being allowed to file in court for eviction. This means longer periods of unpaid rent or other lease violations.

But rent defaults aren’t the only way that tenants can violate their lease. From damage and abuse to your property to hassling your neighboring tenants, from criminal activity to noise problems, you may need to evict bad apples even if the rent keeps flowing.

Non-Renewal Restrictions

In some jurisdictions, landlords can’t easily non-renew Section 8 tenants either. They may have to prove “just cause” if they don’t want to renew the lease agreement on their own property.

That can mean that it’s just as hard to get out of your arrangement with Section 8 as it is to get into it.

Less Investment Among Renters

People value items based on their own investment in them. A couple who works hard and saves for years for a down payment on a home will treat that home with tender care and respect, because they had to invest so much of themselves in order to achieve it.

Renters inherently have less financial investment in their homes, and as a group cause far more wear and tear on them than homeowners do. And Section 8 renters have the least investment of all in their homes, putting very little of their own money into rents each month.

In my experience, they’re harder on properties than cash tenants. With less skin in the game, it’s all too easy to take for granted the home you’re given.

When Section 8 Tenants Make the Most Sense

Should you rent to Section 8 tenants? Beyond your personal inclinations, it depends on your market conditions.

In areas with high vacancy rates and high turnover rates, it makes sense to embrace stable applicants, regardless of where their rent money comes from. And if you secure a Section 8 tenant who’s less likely to move in the next year or two than cash tenants, all the better.

The same logic applies to cities with declining populations and/or declining rents. This includes many of America’s largest cities in the wake of the recent de-urbanization trend.

Similarly, it makes sense to woo Section 8 renters who can bring guaranteed rent payments in areas suffering high unemployment. For a scary glimpse into the geography of unemployment during the pandemic, take a look at this map of unemployment rates by county:


The reasons outlined above are precisely why investors need to be careful about investing in low-income neighborhoods. It’s a niche, and some investors flourish in it, but it requires harder work than B-class properties and often comes with hidden expenses, such as high turnover rates and high crime rates.

On the other hand, times of high unemployment see movement out of higher-rent properties and more demand for lower-rent properties. For a breakdown of the impact of high unemployment rates on lower-rent properties, see Damian Bergamaschi’s mathematical analysis.

Final Thoughts

Some investors swear by Section 8. They love the predictable rental income and lower turnover rates.

In speaking with these landlords, I’ve noticed a common theme. When I raise the drawbacks outlined above, they all respond the same way: You can prevent most of those problems with aggressive tenant screening. They know the difference between spoiled, entitled Section 8 tenants and those with deep gratitude and humility. And as they screen Section 8 tenants, they look closely into that divide to determine which camp an applicant falls into.

Section 8 tenants with profound gratitude make outstanding long-term renters. Entitled brats make terrible tenants. Know how to spot the difference, and you can find great success with Section 8 tenants—especially during recessions and other periods of economic upheaval.

Recession-Proof Real Estate book blog ad

Have you ever rented to Section 8 tenants? What were your experiences? Do you plan to try Section 8 tenants in the future?

Leave a comment below.

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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    Marcus Robert Investor from Worcester, Massachusetts
    Replied 7 months ago
    It’s sad to say, but in my experience, there is just too much risk. Damage to the apartment, disruptive behavior, drugs etc.. the hype of “the check is directly deposited in your account”, Doesn’t weigh with the associated cost.
    Jaden Reynoso
    Replied 7 months ago
    Yeah I get you Worcester ain’t one of the best spots but there’s probably a real small percent that wants better and are good. Watch this and how this guy has a 20 page application https://www.youtube.com/watch?v=Bh5jL0NWL10
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    I hear you Marcus! I've had similarly bad experiences. It takes extremely thorough screening in my experience to weed out the bad apples.
    John Underwood Investor from Greer, South Carolina
    Replied 7 months ago
    Section 8 has worked out great for. I just raided the rent by $100/month just by filling out a one page form. My tenants have been with me for a long time and take care of my properties. They also know I take care of them and fix problems fast.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Glad to hear you've had such a positive experience John!
    Brian Ploszay Investor from Chicago, ILLINOIS
    Replied 7 months ago
    Covid affects section 8 tenants ability to pay their portion. But on the whole, it's been good. Also I found that I've had a record amount of people staying put. People simply are not moving under these conditions. I love the program. The inspections are a minor challenge. But I find that some of the "fails" are items that should be fixed. It keeps me on my toes. Section 8 is run through different local housing authorities. Each of these are very different administrative bodies, so we all have some uniqueness to our experiences. I'd say the biggest challenge to section 8 is the slowness of the process. You will lose a month more in rent, compared to pursuing a market rate tenant. It is worth it for me, because evictions are super challenging and expensive in my local market. (Lots of tenant rights). I've had close to zero impact from this recession, from a cash flow perspective.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Wow, very glad to hear you've had almost no impact on your cash flow from the recession Brian!
    John Lamb Rental Property Investor from Phoenix, AZ
    Replied 7 months ago
    One of my Section 8 tenants lost her job during the Covid-19 pandemic and the housing authority now pays 100% of her rent. If she were not on Section 8 and this same thing were to have happened, I would have months of no rent while going through the eviction process.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Yeah there's definitely something to be said for guaranteed on-time rents :-)
    Avril Ann
    Replied 7 months ago
    I think that accepting Section 8 tenants at this time is a good move. 25% of my units are Section 8, and I plan to raise that to 50% as quickly as possible.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Sounds like you've had good experiences with your local housing authority and Section 8 tenants, glad to hear it Avril!
    Ynez Wells Real Estate Investor from Stafford, Virginia
    Replied 7 months ago
    With the new criteria that Section 8 tenants have to adhere to, having them as tenants have been one of the best moves we have made. Since Section 8 tenants don't want to loose their voucher, and also want to recoup their security deposit when they move out, they tend to be good tenants. They almost always pay their rent portion on time, but if not, the housing authority's portion at least covers the mortgage payment so there is no need to worry. During the COVID-19 pandemic, having them as tenants left us no worries regarding covering the mortgage payments.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Glad you're seeing success with your Section 8 tenants during the pandemic Ynez!
    Robert Perry
    Replied 7 months ago
    No yearly inspections for me, tenant pays difference in cash and keep the place looking great. Sometimes I need to chase down cash portion and a water bill. Those points are still better than frequent tenant turnover.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Your local housing authority doesn't require annual inspections? That definitely removes a huge downside to Section 8 tenants.
    Ken Wilson from Charlotte, North Carolina
    Replied 7 months ago
    Did I miss the map part of this article?
    Nina Granberry Rental Property Investor from Brooklyn, NY
    Replied 7 months ago
    No. It’s just tiny and you have to zoom into it to see the data.
    Nina Granberry Rental Property Investor from Brooklyn, NY
    Replied 7 months ago
    Thank you for the information in this article! I just closed on a duplex last week that has inherited tenants. In Cass County in Belton, MO. One unit is section 8 and the tenants have lived there since around 2006. The rent is way below market rate ($300+) and the unit needs repair and rehab. There are more people living there than stated on the tenant verification form my buyers agent had them complete. I am wondering what the best plan of action is that I can take with this tenant and this unit. I’ve heard lots of advice to leave these tenants where they are and ride out their agreements. But this tenant is month to month and has been there for over a decade. It doesn’t look like they’ll ever leave. In one sense, I am not in a huge rush to move the tenant out because I am building my cash reserves to be able to do big ticket repairs and rehab. But also, I am not trying to stay in this position for long-term, receiving way less than market rate rent. Especially when I know that once value add upgrades are made, it would not be challenging to rent the unit to qualified tenants. What are some ways I can play out this situation to come out on top? Any advice is greatly appreciated. Thank you!
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Hi Nina, it comes down to the non-renewal process prescribed by your local housing authority. Some make it difficult to non-renew Section 8 tenants, others don't. Best of luck!
    Bernie Neyer Investor from Chanute, Kansas
    Replied 7 months ago
    In certain cities, i.e. New York, San Fransisco, LA you have working poor, even firemen, police and teachers, who are unable to afford the rent. Sec. 8 makes sense in these places, but in other places the tenants are incapable of managing their own lives and affairs. In those cities a low end housing catering to Sec. 8 makes sense and can be very profitable. You have to have sterling cash flow as appreciation is unlikely to be much if any. Don't get the idea that you'll have gems to show off to your friends and family, you won't, but for a comparatively low purchase price you can get a good payoff. Meeting or exceeding the 2% rule is common.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    What cities do you invest in Bernie?
    Matthew Terry Rental Property Investor from Mesa, AZ
    Replied 7 months ago
    There is an interesting ethical\moral dilemma with using Section 8 tenants as a way to hedge against a recession. Many investors here describe Section 8 as a product, like selling options against stocks to hedge downturns. However, these are real people, with real problems in society, struggling against the ever-increasing wealth gap that is being magnified by the Federal Reserve printing money to buy the debt of wealthy managers who are bad at their jobs. The double-whammy is the fact that many (maybe most) are minorities who are forced into the center of the most ideological divisive political war I've seen in my lifetime. If the business strategy is to increase Section 8 tenants, what happens when a vaccine comes out, the election is decided, and the economy begins to rebuild? Do you now not renew all the Section 8 tenants when they go MtM, renovate, raise rents, and lease to standard tenants? I just hope all investors, including myself, remember that these are (mainly) struggling people who are at the greatest risk of all American citizens to struggle even more socially and financially because of current events, long after things "settle down".
    Asha Olivia
    Replied 7 months ago
    Thanks for making this ethics-based point!
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Thanks for sharing an additional perspective Matthew!
    Leroy Mitchell from Houston, Texas
    Replied 7 months ago
    A business man with a conscious. You raise some very good points for discussion.
    Aisha Abdus-Saboor Rental Property Investor from Atlanta, GA
    Replied 7 months ago
    I have several Housing Choice Voucher Tenants (Section 8) in the Atlanta, Ga area and it’s been a wonderful ride for me! I wouldn’t want it any other way.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Glad to hear they've worked out so well for you Aisha!
    Jason Snider Investor from Commerce Twp, Michigan
    Replied 7 months ago
    About half of my tenants are section 8 and most of the other half are other subsidized tenants. Definitely harder on the properties but it’s worth it to get rent automatically. We are in a lower end market but we receive the upper end of the rent range with section 8. If you are considering section 8 or already renting to section 8 tenants The Section 8 Bible is a must read. There are 3 books. Make sure to read them all.
    G. Brian Davis from Baltimore, MD
    Replied 7 months ago
    Thanks for sharing your experience Jason, and for the book tip!
    Richelle Valdez
    Replied 6 months ago
    I have worked for the housing authority in my state directly under their asset manager and on their own property. Pbs8 program referral is a great way to access tenants or prospective renters while ensuring the ppl you have interest in already have been involved in supervision of the rental condition and the programs require rigid involvement in ongoing screening types of processes that can allow you to rent to someone who has proven that they can be trusted with your investment. I also work closely And directly with case managers and require them to enforce sec 8 housing rules and report violations and ensure they follow up with the client directly to help them do their job while simultaneously eliminating my own need hold the weight of eviction when removing the subsidy due to legitimate and ongoing procedural violations of their housing authority committment
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    Glad to hear you've had a good experience with it Richelle!
    Joy Allen
    Replied 2 months ago
    I have 3 section 8 tenants in 3 different counties. My experience with the tenants has been positive. I do a check credit and I do a full screening. The housing authorities definitely make you jump through hoops. I am in Hialeah , FL, Contra Costa CA and Sonoma CA. Hialeah had the craziest inspectors but the rent is good. I have been taking Section 8 for 5 years with absolutely 0 turnover. The tenants take care of the places because they know they need to pass inspection to stay. It is not for everyone but I will continue to take section 8.