Orlando, FL · Member since 2011 · 176 posts · 23 votes
Greetings, I come from Southern California where section 8 housing is in high demand. However, I plan on moving to a cheaper area of the country where $30,000 houses in working-class areas can be found.
I'm not sure if I should be concerned about narrowing my list of choices by "section 8 demand" or not.
Is the section 8 program in high demand virtually everywhere in the country, or is it something I need to dig into before I consider an area?
I can't speak for the other cities, but in Dayton, there is high demand for section 8 housing. I got a lot of those calls when I have a unit available.
Additionally, Every time section 8 announces additional vouchers available, the line far exceeds the availability of vouchers.
We looked into secion 8 on 2 of our SFR rentals. They asked what our minimum rent we would take was and all of that. We got an approval. Then we find out they only approved 400.00 of the 650.00 we required. Not worth the time in my book. If I was desperate to rent a unit I could list it at 250 below market rent and rent it myself. We found some of the applicants as well were unwilling to do security deposits etc. So we moved on.
@Colleen F. For the large majority of areas, @David P. 's experience is spot on. They'll just pass on the additional rent to the tenant if the unit is already at the maximum subsidy, and the tenant obviously has an option to move if they feel the unit is no longer affordable, but almost no one does, especially when the increases are small and logical.
I would caution that that process isn't universal, some PHAs (almost entirely big cities) will have either a yearly process/offer to increase rents by a fixed amount, and/or will reserve the option to deny your rent increase. The first option is so paperwork for existing tenants is kept to a minimum and processed quickly, the second is so landlords don't just eat a few months of lower rents and then jack up rates to take advantage of the tenant not having money to move, and placing the family well above the 40% of income on housing cap the PHA uses at move-in.
A word about using FMRs as an indication of rents for your area, they are designed to give you the 40%ile of rents+out of pocket utilities for a family in an area, so if you're attracting a top 1/3rd or even middle 1/3rd tenant, they may be skewed lower than what you could actually command. They're also calculated on a three year rolling average of data for the area, so if you've had a big swing in market rents, the formula is slow to react, giving you areas like NYC and SF where the continued escalation of rents leaves the FMR formula lagging the market.
@Bradley Bogdan we use the Section 8 rent as one of the indicators of what the market is. It is part of several items we use when evaluating market rent. The section 8 rents seemed low for the market last year and now depending on unit size they are comparable. I think they may just lag based on what you have said. @David P. it was just my understanding of section 8 that they could not pay extra above FMV that was why I asked. I was reading their site in our area and I would have to go back to see if that impression was correct or misinformed. We've received inquires for section 8 but never great potential. i agree if your costs go up you have to have leeway to raise rent. We do. I have looked at some properties with more bedrooms where there is potential for section 8 but we haven't made that leap.
@David P. If you find your tenants not paying attention to utilities that you pay for you might want to consider paying up to $X amount and then invoking them for the difference on the next months rent.
Check out "The Section 8 Bible" for some great examples of how other people have done this.
@Ryan D. I am not sure how you/them determined the "minimum" you would take. I have always seen charts that refer to a family status - # children vs how many they think should be allowed in each bedroom etc. I cannot remember ever being asked how much I would accept as the minimum so this could be reflective to the state/county your property is located. You may want to search for Section 8 allowance and then determine your fair market rent for the property. As @Bradley Bogdan indicates for larger cities they typically pass the additional rent onto the tenant but they often don't set the amount based your your decision - at least what I have seen. I think this would be up to interpretation and most agencies don't allow this due to favoritism.
There are other factors such as annual inspections that Section 8 does on an annual basis that you the landlord need to abide by and to provide safe housing. Again this is a business and you must run your business to satisfy your bottom-line not Section 8.
By all means, this is not for everyone and understanding the risk is critical to your success. I am by no means the expert; but after testing the waters and learning as much as I can about the system, I am veryy happy with the outcome!
@Colleen F. I think this maybe up to each program. I know when I raised the rent, the tenant said that was above what Section 8 would pay and the absorbed the difference as it was their choice. I would recommend that you get in touch with one of the case workers to ask questions. Every case worker I have dealt with has really explained the program and answered all my questions.
@Bob E. you are absolutely right! After the tenants moved out I wrote into the leases that they will receive a $100 (non refundable) credit towards the water each month. It is a duplex and budgeted $200 per month. When the last tenants were there I don't think I ever received a water bill below that amount. Both leases now have this statement contained in the lease and I have yet to receive the water bill over $100 per month. It is probably the 1 most important thing I did to help reduce the cost. Additionally, each unit has two toilets - and these were replaced with low-flow toilets, and has helped reduce over-flows issues. Not that I had ever received any, but unless the tenant keeps flushing a clogged toilet then it is their responsible for cleaning up the mess (unless the toilet failed for some reason).
Unless this one 4 bedroom comes vacant we will likely not go to section 8. It is more trouble for no real reward on the smaller units. For water we consider it excessive if they go above a $100 a quarter on a 3 bedroom. I think water may be cheaper here. Our town is targeting 65 gallon/per person /per day.
The book "The Section * Bible" has some awesome stories about tenants that went over the amount allowed for water usage. You will defiantly want to protect yourself. One guy was running a car wash out of his front yard, there were some other great stories but I don't want to ruin the book.