Pros and Cons of Section 8 SFRs?

Question

I've had a couple of inquiries about Section 8 on recent rentals I've had available.  Have never had a section 8 tenant, but have stated that I will accept if income criteria (3x rent) and other criteria (rental history, credit/criminal check) are OK.  Even including the Section 8 subsidy in their income, most of these folks still don't qualify.

I have some applicants (they took applications but have not returned them yet) with income not yet verified but supposedly plenty high for the requirement.  It is a couple, and the guy pulled me aside to ask about leaving him off any lease submitted to Section 8 because either he would be forced to move out or his partner (girlfriend/fiance/wife?) would have to give up her benefit.

Even if they otherwise meet income and other criteria, can I reject them because he basically told me they are gaming the system at best, if not committing outright fraud?

I'm sure others have had similar issues come up.  How have you handled them?  What are the general pros/cons of accepting section 8?

Bogdan Cirlig · Answer

I have done a LOT of sect 8 and have seen the good and the ugly of all. Generally the S8 tenants won't qualify on the income, that's why they qualify for S8, however, I listed below few things you should consider:

- a lot will live on disability+child support and allow a BF to live with them (not showing on lease), but that BF brings in the money and has a legit job. You won't know, and will be hard to catch that BF who lives there.

- a lot won't have security deposits. most have pretty dented credit history. you will factor that loss right off the bat when you advertise your lease. They are uncollectable. Any damages to your property, you will pretty much hold the bag for, yes you can report them to S8 for that but you will still be unable to collect :). Make sure you cashflow.

- a lot (not all) will not care for the home properly, hence they leave deposits behind (hence why they never have deposits to move in a new place)

- if S8 has them pay a portion (because they have some minimal income) you will generally have a hard time getting it, though they can lose the S8 voucher for many things they do to your property, however enforcing that is futile

- if you do a great screening and verify past addresses (from utility bills) and check previous REAL landlord (not friend who's picking up the phone pretenting they're the landlord, then you might find some good tenants. I had great tenants who stayed 5+ years and left my property in great shape. But that's rather the exception.

- S8 tend to stay if you care for the property. Yearly S8 inspections are a PITA but not unbearable to meet.

Richard C. · Answer

That is absolutely true.  And a big reason I would frankly not do business with something like 1/3 to 1/2 of BP posters.  Just look at the number of posts asking for various ways to conceal things from tenants/buyers/seller/governments.

One downside of Section 8.  Do not assume that you will always be able to get a Section 8 tenant.  I would happily rent to one, I have not had one yet.  This is very location-specific.

Linda Gomez · Answer

A guy next to one of our rentals had 29 rentals and only did Section 8.  He liked that rent check coming in on time.  He would screen his tenants and only choose those who were immaculate housekeepers.  He found some excuse to show up on their doorstep "for more information" to check out their housekeeping.

Since then, we have had 2.  One came with decent references; the other had been in the same public housing apartment for 7 years...and she got back her entire deposit!

I still require a full security deposit and require them to furnish their own appliances.  If there's a will, there's a way.

When I checked with Section 8, they allow 5 - 7 nights/month for a "visitor".  One lady who applied showed that she owned 2 vehicles.  When I asked about a male visitor, she exclaimed that she was NOT going to deny her baby's daddy access.  2 cars and a king-sized bed?  Hmmm. I knew that second car was for him so that I couldn't drive by and know she had a visitor.  What I have told people is that I'm not comfortable with that extra male or to accept what S8 approves for them and them pay extra on the side.  My contract prohibits it.

I think S8 is great for those women who want to pull themselves out of poverty.  When they go to school or work, they are trying to better themselves.  They are the ones who I like to help.

I sometimes come down $50/month so they can qualify.

Bradley Bogdan · Answer

While I'm a big proponent of Section 8 as a program (though not necessarily of all the tenants), and have issues with the application of the 3x rent income requirement for those with vouchers (which gave rise to the anti income discrimination laws in some localities), I am not a fan of what your applicant is proposing. You are absolutely allowed to deny them if they aren't willing to put all residents on the lease. Here's a couple theories on what they are doing:

1) The gentleman's income would put the couple over income for the program, so they're trying to game the system financially. When the local PHA finds out, they would likely just bring the hammer down on the couple, but depending on their view of the situation, they might come after you for some of their money back, it depends on the details of the fraud by your tenants. It would be a giant headache for you.

2) The gentleman's previous criminal history or history on public housing programs is bad enough where he isn't eligible for assistance, and can't be placed on a voucher. Either way, there's a great chance that there's something in his history you wouldn't approve of in an application if you dug a bit. Again, recipe for a giant headache.

HUD rules mandate that the adults on the lease match the adults on the voucher, so you're in the clear mandating that if they are going to use a voucher on your rental, it needs to include all residents, just as any other applicant would need to.

(Not a lawyer, not legal advice, just a guy who works with voucher programs all the time)

Sam T. · Answer

Doug,

Some of the tenants are zero income so the traditional criteria (3xrent) may have to be tweaked. Its always a touchy subject when talking about the right to deny an applicant. I would say that I need to run a background check on him as well and properly add him to the lease. If they do not provide this information you have an incomplete application. Document every conversation you have with them just in case.

Pros - money comes on time and you wont have many vacancies

Cons - Hard to get rid of a bad tenant and risk of property damage. You can avoid many of these headaches by being as thorough as possible in the screening process and by finding the right tenants. I have had doctors and lawyers rip my rentals up so its always a gamble!

Good Luck-Sam

Account Closed · Answer

Up front disclosure: I don't have any experience with a Section 8 personally...and I don't intend to. Some people seem to like the guaranteed rent, but all I hear is horror story after horror story. In fact, that was the first piece of advice my attorney gave me when I told her I'm buying rental property: steer clear of Section 8, it's NOT worth it. That being said some towns in our area don't allow discrimination against Section 8 so you should be careful about denying them outright if that's the case in your area. And I don't think you have an obligation to report abuse, but that sure is a big enough red flag as grounds for disqualification! Good luck!

Chuck B. · Answer

I believe the rule is that if you require proof of 3x income-to-rent then you would require your section 8 tenant to have 3x THEIR portion of rent in monthly income.

William Baumann · Answer

@Liam Goble Interesting, thank you for sharing that.  I will have to do some research on my local section 8 HA.  Just trying to gather information.

Liam Goble · Answer

@William Baumann I'm not aware of any restriction to the increase in the S8 payment.  I've got a S8 tenant and I found out that the local PHA actually anticipates rent increases, which makes the increase easier...the tenant doesn't care so long as the increase is within the PHA's increase.  For instance, I learned that my PHA anticipated an increase of almost 7.5%.  I didn't increase rent this year, so the PHA decided to pay for part of my tenants water bill.

William Baumann · Answer

Just a question for those of you that have dealt with section 8, how do rental increases work with section 8 tenants?   When I was living in nashville, a girl I was dating was living in section 8 housing, she had to pay something like $25 a month and the rent was $450, but her neighbor, (same size and type of apartment) that wasn't section 8 was paying like $750.  Does section 8 or the HA limit rental increases?

Pros and Cons of Section 8 SFRs?

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