Section 8 Housing - What Landlords won't say publicly

[Carl Mcknight]

This post is geared toward the newbie investor, or the investor that is exploring using the Section 8 voucher program.

I've owned and managed 50+ units across single family rentals and small apartment buildings in California with over 90% of those being Section 8 rentals. I've been through the inspections, the paperwork, the good tenants, the nightmare tenants, and everything in between.

Most articles about Section 8 give you a sanitized version and sell you some dream about “guaranteed payments”. This isn't that.

Here's what I've actually experienced — the good, the bad, and the things nobody tells you when you're just getting started.

The Money — Does Section 8 Actually Pay Better?

In my experience, yes — slightly. Section 8 typically pays at or just above market rent in my market. I've recently seen in my market though (withing the past few years) where Section 8 is actually paying a lot more than open market rent, due to California having a view that lower income tenants should live in A+ communities (safer neighborhoods, better school districts, less crime), I know it sounds weird, but they are doing it. 

With Section 8, the  government sets payment standards based on local fair market rents, and if you know what you're doing, you can position your unit to capture the higher end of that range.

If you want to see what a prospective house you are thinking about turning into a Section 8 rental rents for, go to www.affordablehousing.com. Open the page and go to the section that says Owners (usually a drop down screen), click Rental Estimate, enter the address of the property and how many bedrooms. A graph will show up showing what the average rental price is usually within a short distance of the address you entered, it will also show the average rent in that zip code for similar properties. This will give you an idea of what your property will rent for to a Section 8 tenant.

Here's a trick most new landlords don't know: amenities matter on the paperwork you are submitting.

Add a ceiling fan. Add a microwave. Include a stove and refrigerator. Each amenity you list on the Housing Assistance Payment (HAP) contract can push your unit into a higher payment tier. Experienced Section 8 landlords know this and price their units accordingly. New landlords leave money on the table every single time because nobody told them this stuff. Also, this has been told to be directly from the Section 8 Inspectors that I have gotten to know over the years, basically they’ve said, “Carl, you want to make more money, then do this and this, and we will pay you more.”

The other advantage on the money side — a portion of your rent is guaranteed by the government every month. In my market, Section 8 typically covers 70-80% of the rent directly, sometimes even 100%. That government portion hits your account like clockwork. You're not chasing the full rent from one tenant — you're only chasing a fraction of it if something goes wrong. Another thing, Section 8 even paid during the Covid lockdowns in CA when the State of California put in eviction moratoriums. It’s always better to make some money, than making zero money when it comes to rents.

The Paperwork — Where New Landlords Get Tripped Up

This is where most first-time Section 8 landlords get confused, and it's completely understandable because the process has more moving parts than a standard rental.

First, you’ll need to understand the voucher system. In my market (CA), before a first time Section 8 tenant can rent from you, they must attend a Voucher Holder class run by their local Housing Authority. After completing that class, they're issued a Housing Choice Voucher — a physical packet that authorizes them to find a unit in the private market, and what type of unit: 1 bed, 2 bed, 3 bed, 4 bed, etc.

Here's the critical part: do not accept an application from a Section 8 prospect unless they physically have their voucher in hand.

I've seen new landlords make this mistake repeatedly. A prospective tenant tells them they're enrolled in the program and the voucher is coming. The landlord holds the unit for them. Weeks go by. The voucher never arrives, or it's delayed (Section 8 is a bureaucracy), or the tenant was confused about where they were in the process. Meanwhile the landlord has lost 2-3 weeks of potential rent.

The rule is simple: no voucher, no application. Period.

The HAP (Housing Assistance Payment)  Contract — Your Secret Leverage

This is the part of Section 8 that most landlords don't fully appreciate until they've been through it a few times.

When you rent to a Section 8 tenant, you're actually dealing with two separate contracts:

1. A standard lease between you and the tenant

2. A Housing Assistance Payment (HAP) contract between you, the tenant, and the Housing Authority

That second contract is where your leverage lives, this is what you use to really straighten out or tune up a problem tenant.

The HAP contract lays out specific rules of conduct the tenant must follow in order to keep their voucher. This isn't just your lease talking — this is the federal government saying "if you violate these rules, you lose your housing assistance." For a tenant who depends on that voucher to afford housing, losing it is a serious consequence.

In practice, this means you have an extra layer of enforcement that market rate landlords don't have. When a Section 8 tenant knows that a lease violation could cost them their voucher — not just their current unit, but their ability to participate in the program — many of them take that very seriously. Not all of them. But many.

The Inspections — Prepare for Frustration

I'll be straight with you: the inspections can be frustrating.

The Housing Authority requires an inspection of your unit before move-in and typically on an annual basis. The inspector is checking that the unit meets HUD's Housing Quality Standards (HQS). Most of what they check is reasonable — working smoke detectors, no peeling paint, functioning appliances, no safety hazards, keyed locks on entry / exit doors, windows that open and close and lock, no pests, outlets are grounded, place is clean.

For first time Section 8 landlords, some Cities participating in the program will offer pre-lease inspections. This is where a Section 8 Housing Inspector will come out, inspect your property, and tell you exactly what you need to do to make it Section 8 compatible. If your city offers this type of service, go with it, if not, you risk the unit failing when the inspection is done on the the move in day, and you will need to make noted repairs and then re-schedule the inspection and this delays you getting paid. 

After a tenant moves in, your unit will then be inspected about once a year. Where it gets aggravating is when the inspector holds the owner responsible for things that are clearly tenant-caused damage or tenant responsibilities. A broken outlet cover that the tenant knocked off., a hole in the wall or door, roach infestation, a dripping faucet that the tenant was supposed to report. Damage that didn't exist at move-in but is now your problem to fix before the inspection passes. I’ve debated Failed Inspection notices multiple times, sometimes Section 8 sees it your way and sometimes they don’t, just be prepared for that.

My advice: do a thorough move-in inspection yourself, or a pre-inspection mentioned above, document everything with photos and video, and make sure your lease clearly spells out tenant maintenance responsibilities. It won't prevent every headache, but it gives you documentation if a dispute arises. If you are going to go with a property management company, make sure they manage Section 8 units already and have experience with the program.

The Tenants — The Honest Truth

I'll give you the same answer I give everyone who asks me this: it's 50/50.

I've had Section 8 tenants who were model renters. Paid their portion on time every month, kept the unit in great shape, renewed year after year, and caused zero problems. Exactly what you want in any tenant.

I've also had Section 8 tenants who were literal nightmares — unit damage, late payments on their portion, major lease violations, and eventually eviction. Section 8 in CA used to automatically kick a tenant off the program if they were evicted, now they longer do that, check with your local market to see if they do (more leverage over the tenant when they violate the lease).

The honest truth is that Section 8 tenants are not categorically better or worse than market rate tenants. They're people. Some are great. Some aren't. The voucher doesn't tell you which one you're getting. Also, do your own background check! Just because a tenant has a Section 8 voucher does not mean they have a great background, and great rental history. Section 8 still gives vouchers to tenants with prior evictions, they usually deny them a voucher based upon certain criminal convictions (drug dealing, drug manufacturing, rape, child molestation, murder etc.)

My screening process for Section 8 tenants is the same as for anyone else — credit check, background check, rental history, references, social media search and local court records checks. The social media search is usually a gold mine, if they are acting or posting straight up ghetto stuff, they will be acting ghetto in your property (loud music complaints, heavy foot traffic, arguing, fighting and disturbance calls for service from the police department. The voucher is not a substitute for due diligence. It's a supplement to it. If their social media account is set to private, have it listed in your application that you will need access to all their social media (that alone will scare off the tenant you do not want in the first place).

The Bottom Line

Section 8 gets a bad reputation in a lot of landlord circles, and some of it is earned. But a lot of it comes from landlords who went in without understanding the process, got burned by one bad tenant, and wrote off the entire program.

Done right, Section 8 can be a solid part of your rental portfolio strategy. Guaranteed government-backed income on a portion of your rent, slightly above-market rates if you know how to position your unit, and a built-in lever for tenant accountability that market rate rentals don't have.

Is it for everyone? No. Is it worth understanding before you dismiss it? Absolutely.

What's your experience with Section 8 — are you in the program, considering it, or staying away? Drop your questions below.

[Richard F.]

@Carl Mcknight, you have left out some important details that newbies (and seasoned investors) need to include in their evaluation of the value of the program. While Cali IS it's own special case, and there can be minor variations between different Agencies within the same State or County, the following info and documentation will be found to be accurate in most cases.

With regard to market rates, the actual rates are available from HUD here.

The actual HAP contract, Tenancy Addendum, and numerous other "Housing Choice Voucher Program" docs are available here. Please note, the actual "Inspection Form" WITH the Inspection Criteria, is available here. This provides details on what the requirements are to pass the inspection. The "inspection Checklist" on the HC Voucher Program link does not include that critical info.

You fail to mention an important fact when talking about the "leverage" provided by the HAP contracts. In my experience, once you report any violations to the Caseworker, or send a written Notice of Violation to the Tenant, and assuming you have been responsive and provided decent, safe housing, Caseworkers will often remove them from the Program immediately. BUT, it is YOUR problem to actually get the Tenants out, via the lengthy and costly Eviction process. And Good Luck collecting any back rent or damages above the Security Deposit. Most S8 Tenants are well aware of these facts.

Along those lines, you also did not mention that IF, at a S8 Annual re-inspection, it fails, they typically stop Rent payments until and unless the unit passes a follow up inspection. And you do no get to charge "Late Fees" for the withheld payment(s). Depending on the locale, follow up inspections may take weeks to reschedule. There is no guarantee that you will be reimbursed at a later time for withheld rent.

Another issue, which some view differently than others, is the fact that as you mentioned, Tenants often have a portion of the rent that they are supposed to pay. What if they do not? Are you going to file an eviction over a $100 shortage? Or hope to collect it out of the Security Deposit when they vacate? Or just accept the lower rent? Many S8 Tenants are well aware of these facts as well.

 There was a time when we were collecting $60K monthly from S8 Tenants. But, a lot of them were not paying their portion. We decided at one point to go ahead and file evictions on them. All of them. Twice a year...in March, with "tax refund" season just around the corner, and again in mid September, before serious thought was being given to the upcoming Holiday spending sprees. It was amazing how many came through with the money owed once they were actually served their subpoenas. Especially Tenants in properties with multiple slow payers that all received them. 

You mentioned the fact that often, the LL is held responsible for damages obviously caused by the Tenant. Every S8 Inspector is different, and has their own "pet peeves" with LL's and Tenants, so their inspections are not strictly by the book. However, if you attend the inspection (many investors or PM's do not), armed with your records and photos of the move in condition, and possibly a copy of your Rental Agreement if it has specific terms addressing condition/damage issues, or an email from the Tenant that morning about the leaking faucet, you have the possibility of  "making your case" before the Inspector writes "FAIL".

Lastly, I am going to disagree somewhat on your 50/50 assessment of S8 Tenants. It still comes down to your initial screening process and approval requirements. Bad Habits are Bad Habits, if you don't look for them in every area of life during screening, it will cost you eventually.