Section 8 rent increase

General Real Estate Investing
1yFollow

Section 8 rent increase

Andrew SlezakPro Member
Rental Property Investor · Gadsden, AL · Member since 2019 · 22 posts · 8 votes

Hey team,


I’ve put an offer on a property that has had a section 8 tenant for the last 8 years. The numbers with my offer will yield excellent returns. Current rent is  $797. After checking the local housing authority the SAFMR though the zipcode maximum is $1300. The house is currently under management so I’d think they’d take care of getting top market rent but I think we all know that management companies can be hit or miss. Does anybody have insight on how we can reach higher rents or how the rent value is determined? This is my first section 8, but been doing other long terms for awhile but starting to see a real opportunity in voucher housing with the back log of qualified people waiting for housing. 

0Reply
250 views

Most Popular Reply

Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
1y

@Andrew Slezak we're pretty aggressive about rent increases for our clients, but some of them won't approve us to pursue.

So, don't automatically blame the PMC!

You should find out what percentage of the rent is being paid by S8 and by the tenant.

Tenants have to sign the rent increase and some won't because they don't want their payment portion increasing.

It's also highly unlikely a S8 office will approve the huge increase from $797 to $1300.
- BTW: the $1300 includes all utilities being paid by the landlord. Going to guess the $797 is rent only, with tenant paying utilities. So, the actual increase to market rent will be much lower.

[email protected]248-209-6824
Logical Property Management4.9469 Reviews
WebsiteView Page
3Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Aristotle Kumpis
    Specialist · Long Beach, CA · Member since 2011 · 888 posts · 401 votes
    1y

    I have a few rentals with section 8, and they are professionally managed. And each year when the lease comes up for renewal, I ask them to contact the housing authority and ask for a rent increase. I do it each year. So you would need to have your PM reach out and have them deal with it.

    0Reply
  • Alan Lacey
    Lender · Grand Rapids, MI · Member since 2019 · 175 posts · 82 votes
    1y

    Rent value is based on the county and number of bedrooms. I can’t r ember where the link is to lists but if you google it it should come up on hud.gov somewhere

    0Reply
  • Andrew SlezakPro Member
    OP
    Rental Property Investor · Gadsden, AL · Member since 2019 · 22 posts · 8 votes
    1y
    Quote from @Alan Lacey:

    Rent value is based on the county and number of bedrooms. I can’t r ember where the link is to lists but if you google it it should come up on hud.gov somewhere

    That’s correct. That’s why I was shocked to see it’s only generating half of what the maximum rent is. Typical market rent for the area is 800-1000 for the zipcode, housing authority has max at $1300. It can be found on the municipality’s housing authority web page. Thank you!
    0Reply
  • Bryan HartlenPro Member
    Investor · Phoenix, AZ · Member since 2018 · 317 posts · 159 votes
    1y

    We have Sec8 in Birmingham, AL. We have yet to find a PM that knows exactly how to drive top $$ rents. There are general guidelines but nothing formulaic. In our area we have 3 different HUD agencies that provide vouchers to qualifying tenants. Each agency has slightly different criteria and limits but the process for setting rents is roughly the same and has 2 components. 1) The tenant voucher is based on the tenant's specific finances and number of people within the family unit. The voucher is the most that Sec8 will pay for that person's rent regardless of where they rent. 2) The second part of the Sec8 equation is the market rates for specific neighborhood's and property types (SFR vs apartment, # bedrooms, # baths, utilities included vs paid by tenant, etc). This is the max that Sec8 will pay for any property and is the information that you can find online. This means that a tenant may have a voucher that says they qualify for say $1500 but Sec8 may only be willing to pay $1200 for that tenant in a specific property. All sec8 rentals are subject to review and approval by the housing authority issuing the vouched. So once you've approved a tenant at an agreed rent, it goes to the authority…. This is where the voucher cap and specific property limits get looked at. We've also found that at least one of the authorities (Jefferson county) started to run some kind of property specific rental comps which can also affect the max they're willing to pay.

    Back to your question on maximizing rent: In general, the better the neighborhood the higher possible rent. The more people in the tenant’s approved household the higher the possible rent. Rent increases need to be requested with supporting rental comps annually. 

    0Reply
  • Andrew SlezakPro Member
    OP
    Rental Property Investor · Gadsden, AL · Member since 2019 · 22 posts · 8 votes
    1y
    Quote from @Bryan Hartlen:

    We have Sec8 in Birmingham, AL. We have yet to find a PM that knows exactly how to drive top $$ rents. There are general guidelines but nothing formulaic. In our area we have 3 different HUD agencies that provide vouchers to qualifying tenants. Each agency has slightly different criteria and limits but the process for setting rents is roughly the same and has 2 components. 1) The tenant voucher is based on the tenant's specific finances and number of people within the family unit. The voucher is the most that Sec8 will pay for that person's rent regardless of where they rent. 2) The second part of the Sec8 equation is the market rates for specific neighborhood's and property types (SFR vs apartment, # bedrooms, # baths, utilities included vs paid by tenant, etc). This is the max that Sec8 will pay for any property and is the information that you can find online. This means that a tenant may have a voucher that says they qualify for say $1500 but Sec8 may only be willing to pay $1200 for that tenant in a specific property. All sec8 rentals are subject to review and approval by the housing authority issuing the vouched. So once you've approved a tenant at an agreed rent, it goes to the authority…. This is where the voucher cap and specific property limits get looked at. We've also found that at least one of the authorities (Jefferson county) started to run some kind of property specific rental comps which can also affect the max they're willing to pay.

    Back to your question on maximizing rent: In general, the better the neighborhood the higher possible rent. The more people in the tenant’s approved household the higher the possible rent. Rent increases need to be requested with supporting rental comps annually. 


     Good to know. HABD SAFMR states that a 2/1 with 2 people in property’s zipcode on voucher maxes out at $1356, current rent is $779, and when I search for comps on multiple platforms I see the low range being $860 and higher end of median $1150. During my due diligence should I call property management and HABD to see why the rent is set to where it’s at?


    again, not a bad deal if they accept my offer. It’ll be a base hit, but if I can bump the rent up just $75-$100 it starts looking like a solid double or triple to stick with baseball references…


    0Reply
  • Bryan HartlenPro Member
    Investor · Phoenix, AZ · Member since 2018 · 317 posts · 159 votes
    1y
    Quote from @Andrew Slezak:

    Call the PM (I don’t think HABD will provide information on a property you don’t own - even if you can get them to answer the phone). Ask when they last requested a rent increase, what the request was and whether or not it was accepted.

    Note that you’re dealing with a true bureaucracy.  There are specific rules on when rent increases can be submitted for review, but there are no guarantees when they will respond. We’ve had increases submitted in Sep that weren’t approved (retroactively) until June the following year. We’ve also had increases submitted in Sep 2023 that still haven’t been processed.  

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    1y

    @Andrew Slezak we're pretty aggressive about rent increases for our clients, but some of them won't approve us to pursue.

    So, don't automatically blame the PMC!

    You should find out what percentage of the rent is being paid by S8 and by the tenant.

    Tenants have to sign the rent increase and some won't because they don't want their payment portion increasing.

    It's also highly unlikely a S8 office will approve the huge increase from $797 to $1300.
    - BTW: the $1300 includes all utilities being paid by the landlord. Going to guess the $797 is rent only, with tenant paying utilities. So, the actual increase to market rent will be much lower.

    [email protected]248-209-6824
    Logical Property Management4.9469 Reviews
    WebsiteView Page
    3Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    1y

    @Andrew Slezak HUD does studies of rent for the whole country and published the MEDIAN rent for every area/county/zipcode in the country. The MEDIAN rent is the middle rent where 50% of the rents are higher and 50% of the rents are lower. This MEDIAN rent is defined by HUD to be FAIR MARKET RENT, FMR. And is the maximum rent the HUD allows fore Section 8 tenants. This figure includes allowances for heat, electric and any other utility that the tenat is required to pay and this is deducted from the FMR. So on a 3br unit where all the utilitites are included in the rent aand paiid by the landlord, you can expect to get up to the FMR as the rent for your unit. HUD does not factor into the rent other amenities that might be included in the rent such as garage, basement, fieplace, central air, pool etc, that might command higher rent in the non-Section 8 market place. Another variable in the amount of rent that a Section 8 tenant can pay is HUD limits their rent payment based on the amount of their income. For many years I was contacted by the housing office to provide input of my rents, both Section 8 and market rented units and participated in their annual surveys. The data posted to the HUD website is update for the Federal fiscal year beginning October 1 of every year.

    1Reply
  • Bob Avery
    Investor · Saint Paul, MN · Member since 2024 · 28 posts · 16 votes
    1y

    @Andrew Slezak I'm working through the Sec8 process for the first time so take this with a grain of salt, but my understanding is they will pay the lesser of the following two prices:

    1) the market rent of your property, determined by comps, and

    2) the FMR minus any utilities you don't include. In my county they post online the utility allowances they use in their calculations.

    0Reply
  • James Anfossi
    Member since 2026 · 4 posts · 1 vote
    2mo

    An easy place to get an idea as to what the rent might be for a given area is here.. https://section8propertyfinder.com/payment-standards 

    0Reply
  • Matthew HeckmanPro Member
    Investor · Member since 2024 · 33 posts · 20 votes
    2w

    Hey Andrew, I'm a new investor to the Birmingham area as well, Looking to do Section 8 and BRRRR, i'd love to connect and share insight and resources and here more about your experience so far.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free