Section 8/HUD rents higher than market-rents

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Section 8/HUD rents higher than market-rents

Mark Vella
Member since 2022 · 2 posts · 2 votes

Good morning. I'm wondering how people go about leasing their section 8 properties when max rent allowance for a zip code is significantly higher than market-rate (non-subsidized). I've spoken with the local housing authority, but I am noticing some inconsistencies between guidelines and what the people at the authority told me. So... Can I market and receive the rent amount HUD says is the FMR?

For example: In a zip code I have in mind, the market rate rent is about $1,350 for a 3 bedroom apartment. The maximum rent allowed for section 8 in the zip code, according to HUD, is $1,860. Can I reasonably expect to get the $1,860 rent if I lease to a section 8 tenant?

To note, it seems the only zip codes where the big rent disparities exist is middle and upper class neighborhoods (this makes me think HUD is trying to incentivize section 8 in better neighborhoods/school districts). The max HUD rent in your "typical section 8 neighborhoods" is right in line with market rent. Am I missing something here? Is my thinking flawed? Am I missing some information?

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y

Yes you can get higher rents with section 8.

It depends on the applicant and sometimes they don't qualify for the max HUD rent.

I have 4 section 8 properties and it has been good to me. When someone loses their job, gets divorced etc, section 8 will pay up to 100% (if not already at 100%) of the rent and can adjust it pretty quickly.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y

    Yes you can get higher rents with section 8.

    It depends on the applicant and sometimes they don't qualify for the max HUD rent.

    I have 4 section 8 properties and it has been good to me. When someone loses their job, gets divorced etc, section 8 will pay up to 100% (if not already at 100%) of the rent and can adjust it pretty quickly.

    2Reply
  • Mark Vella
    OP
    Member since 2022 · 2 posts · 2 votes
    3y

    @John Underwood Would you just reduce the HUD rent amount by utilities to determine listed rent rate? Do you typically upgrade the apartment(s) to get the highest section 8 rent possible?

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    3y
    Quote from @Mark Vella:

    @John Underwood Would you just reduce the HUD rent amount by utilities to determine listed rent rate? Do you typically upgrade the apartment(s) to get the highest section 8 rent possible?


     Utilities are separate and paid to the tenant.

    Upgrades have no bearing on section 8 rent amount. You just have to pass the basic inspection.

    Rentable amount is based on bedrooms and bathrooms do not matter for the rent amount.

    1Reply
  • Phillip AustinPro Member
    Property Manager · Denver, CO · Member since 2023 · 236 posts · 204 votes
    3y

    @Mark Vella Irregardless of HUD, you should run a comparative market analysis on your property and list it accordingly. DO NOT use HUD's maximum rent allowance as a metric for determining your own market rent.

    Moreover, when a section 8 tenant applies for rental assistance, the housing provider will essentially underwrite their application to determine their voucher amount. If they're only approved for a $1,000/mo voucher and the tenants wants to apply for your $1,350 unit, the tenant will be required to pay the difference themselves. So, you'll get a $1,000 check from HUD and $350 from the tenant each month.

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  • Thomas Santella
    Real Estate Agent · NJ & NY · Member since 2022 · 98 posts · 53 votes
    2y

    @John Underwood, @Phillip Austin.. So from my understanding from your responses, it is possible to achieve market rates on properties without having to make necessary improvements and additions since units just need to meet minimum quality standard for section 8. You can list at market rent rates and there is a good chance of applying tenants to qualify for the entire amount because the HUD FMR is even higher. Can I please have both of your insight? I am considering doing this for my next property.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    Yes, I don't make them flip ready but I make nice for a rental property.

    2Reply
  • Crystal Townley
    Lender · United States · Member since 2018 · 10 posts · 17 votes
    2y

    Hey Mark. Did you end up converting your rentals to Section 8? How did it go? I am going through the same process of getting some of my rentals into Section 8 now, but also seeing the disparity between market rents and the FMRs for Section 8. 

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