Section 8 during a recession?

Question

Hi all,With a recession looming over us, I wanted to ask about public housing. For those of you who rent to low income tenants, and have been in the real estate game for a period of time (specifically through the 08 crash), do public housing authorities still continue to pay out during a downturn? Is there any decrease in the rents that are paid out?Thanks!

Bruce Woodruff · Answer

They continue to pay, but be aware that only the Govt part of the rent is guaranteed. If your tenant goes belly up, you're screwed.

Patrick Drury · Answer

@John Anderson It depends on the Tenant's payment portion. Some tenants may be full pay section 8 tenants where section 8 will pay everything and others have to pay more. I have seen no decrease in CMHA.

Scott Trench · Answer

@Joseph Asamoah is an expert on this subject, and I believe he has been through 2008 with Section 8 housing. I think that the argument for Section 8 is that the gov't backed rents are MORE secure than your average tenant. There is certainly a protocol to doing Section 8 right, but done correctly it can offer great downside protection, all but guarantee market rents, and allow you to offer housing to vulnerable people in society and therefore better local communities.

Evan Polaski · Answer

@John Anderson, I started buying rentals in 2010 with section 8 in mind.  That being said, I was buying with a known assumption in mind.  Hopefully someone here bought section 8 in 2005-2007, and can weigh in if rents dropped.

From my experiences, when I was buying in 2010, Cincinnati was one of the few housing authorities still issuing new vouchers.  I had heard many jurisdictions had stopped issuing new, which might make it harder to fill up vacancies, if no new vouchers are being issued.  But I always took the position of: if you offer a nicer place than others, you will never be at a loss for tenants.

And as Bruce noted, I never missed the government portion of my rent.  My tenants were late, pretty consistently, but they paid.  How much each tenant paid was contingent on their income.  I had one tenant for over 6 yrs: sometimes she paid 70% of the rent, and there was a time she went back to school and was paying 0%.  CMHA did annual income audits of their voucher holders and set the tenant portion of the total rent based on their income for that year.

I also never had my total rent decrease, but as noted, I also have only owned these rentals in a growing rent era.

Section 8 during a recession?

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