Rent increase for section 8

14 Replies

I have a house in Newark, CA rented to section 8 tenant for nearly 2 years. When I first rented, I was asked to lower the rent even though my asking rent was $200 lower than other houses in the community (same size and plan). Last year I increased the rent by $100 but they asked tenant to pay that increase. This year again my property tax, HOA, insurance all have gone up and I need to increase the rent to make up for the difference. Even now if I check rents on craigslist and from my friends who have already rented to regular tenants, I am below market by $300-$400. Where can I pull data from to show FMV? Does printouts from craigslist count

Ideally you want rent comps of properties that were rented not just listings. The only place I know to get these is the Multiple list system . Unfortunately most rentals never hit the multiple list. Just supply anything you can come up with. 

In my area section 8 properties are listed on GoSection8.com. I don't now if that is local or national.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

We raise our rents for Section 8 properties the same as we do for our other properties, except we need to give 60 days notice instead of 30 days. This allows extra time for the case manager and office staff at the Housing Authority to process the changes. 

Sometimes Section 8 picks up the difference and sometimes they require the tenant pay more to cover the increase. It is all dependent on the tenant's financial situation. The Section 8 program requires the case manager to do periodic reviews of the tenant's income and makes adjustments as necessary in determining how much Section 8 will pay and how much the tenant will pay. 

We don't worry ourselves about it. We just do what we need to do to meet our needs and to abide by our contract with the Housing Authority. Since our mission is affordable housing, we keep our rents at the lower end of the market whether the tenant is participating in the Section 8 program or not. So far, no Section 8 tenant of ours has moved because of a rent raise.

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

I'm about to start researching "How to raise rent on Section 8 tenants in NYC" however I came to BP first to see what others have experienced and maybe get some answers.  I found this post, which was really helpful and thought I would ask if anyone has gone through this process successfully and can offer some helpful tips.

I currently have a two family in Bushwick with two very nice Section 8 tenants.  However, my rent is too low and I need to bring them a bit closer to market value to adjust for rising expenses.

Thank you all for listening, any help would be appreciated. 

Javier- 

This thread confuses me.  In my area, some landlords prefer to utilize section 8 because, in certain neighborhoods, the amount the landlord can viably charge for a house is usually higher for section 8 than without section 8.  It is the higher payment that makes up for the hassle of going through section 8 rules and regulations and dealing with some section 8 tenants.

I can't imagine a single reason (other than being in a city where it's hard to get tenants) why anyone would rent via section 8 to receive less than market rent.  

Originally posted by @Randy E. :

This thread confuses me.  In my area, some landlords prefer to utilize section 8 because, in certain neighborhoods, the amount the landlord can viably charge for a house is usually higher for section 8 than without section 8.  It is the higher payment that makes up for the hassle of going through section 8 rules and regulations and dealing with some section 8 tenants.

I can't imagine a single reason (other than being in a city where it's hard to get tenants) why anyone would rent via section 8 to receive less than market rent.  

 Thats interesting.  I'm just curious though. Why would the tenant and Govt agree to pay more than market if they could just go to someone else who's renting at market or below? 

Originally posted by @Salil Prasad :

I have a house in Newark, CA rented to section 8 tenant for nearly 2 years. When I first rented, I was asked to lower the rent even though my asking rent was $200 lower than other houses in the community (same size and plan). Last year I increased the rent by $100 but they asked tenant to pay that increase. This year again my property tax, HOA, insurance all have gone up and I need to increase the rent to make up for the difference. Even now if I check rents on craigslist and from my friends who have already rented to regular tenants, I am below market by $300-$400. Where can I pull data from to show FMV? Does printouts from craigslist count

 Who asked you to lower the rent? The tenant or the Govt?  What would have happened if you declined, which is your right as the landlord I would think? Especially if  you're lower than market.  If you're really that much lower, is it worth it to rent to Section 8 then, and just rent to regular folks?

@Randy E. It's a good question and the answer really depends on the LL.  I get full market rent for my sec-8 tenants. I only have to justify with reasonable comps.  So I stay full with maybe 2% vacancy year over year in my apartments (I don't take sec-8 in my sfr, and allow about 30% in the apts).  The upside is that I am guaranteed the majority of the rent every month.  Also, The tenant has incentive to pay their share and care for the unit because if they get evicted for cause they lose their sec-8 voucher.  

How you manage your property will determine how your sec-8 tenants respond.  If you set clear expectations and then follow up consistently you will encounter few issues.  But if you treat them like welfare and let things go without addressing them you will forever hate the program.

Curtis Bidwell MBA, Philia Holding Co LLC | http://www.PhiliaHC.com | Podcast Guest on Show #95

Originally posted by @Gary F. :
Originally posted by @Randy E.:

This thread confuses me.  In my area, some landlords prefer to utilize section 8 because, in certain neighborhoods, the amount the landlord can viably charge for a house is usually higher for section 8 than without section 8.  It is the higher payment that makes up for the hassle of going through section 8 rules and regulations and dealing with some section 8 tenants.

I can't imagine a single reason (other than being in a city where it's hard to get tenants) why anyone would rent via section 8 to receive less than market rent.  

 Thats interesting.  I'm just curious though. Why would the tenant and Govt agree to pay more than market if they could just go to someone else who's renting at market or below? 

 Gary, as I understand it, Section 8 in my city has rental guidelines along the lines of: 1BR up to $700, 2BR up to $850, 3BR up to $950, 4BR up to $1050.  I don't think they differentiate between neighborhoods.  (These numbers are not actual Section 8 numbers -- I'm just using them for illustrative purposes.)

So, if a landlord has a rental in C- neighborhood where the market supports 3BR rents up to only $700-$800, that landlord can list with Section 8 and collect $950 for rent.  And many landlords with updated clean properties in the break even neighborhoods would prefer to not rent to Section 8 tenants for whatever reasons they might have.

This effectively locks Section 8 tenants out of higher end neighborhoods.  If landlords in an B+ to A+ neighborhood can command market rents of $1500-$2000 a month for a 3-4BR, section 8 can't come close to matching that amount in said area.  And few Section 8 tenants could afford to pay the difference out of their own pocket.  

Originally posted by @Randy E. :
Originally posted by @Gary F.:
Originally posted by @Randy E.:

This thread confuses me.  In my area, some landlords prefer to utilize section 8 because, in certain neighborhoods, the amount the landlord can viably charge for a house is usually higher for section 8 than without section 8.  It is the higher payment that makes up for the hassle of going through section 8 rules and regulations and dealing with some section 8 tenants.

I can't imagine a single reason (other than being in a city where it's hard to get tenants) why anyone would rent via section 8 to receive less than market rent.  

 Thats interesting.  I'm just curious though. Why would the tenant and Govt agree to pay more than market if they could just go to someone else who's renting at market or below? 

 Gary, as I understand it, Section 8 in my city has rental guidelines along the lines of: 1BR up to $700, 2BR up to $850, 3BR up to $950, 4BR up to $1050.  I don't think they differentiate between neighborhoods.  (These numbers are not actual Section 8 numbers -- I'm just using them for illustrative purposes.)

So, if a landlord has a rental in C- neighborhood where the market supports 3BR rents up to only $700-$800, that landlord can list with Section 8 and collect $950 for rent.  And many landlords with updated clean properties in the break even neighborhoods would prefer to not rent to Section 8 tenants for whatever reasons they might have.

This effectively locks Section 8 tenants out of higher end neighborhoods.  If landlords in an B+ to A+ neighborhood can command market rents of $1500-$2000 a month for a 3-4BR, section 8 can't come close to matching that amount in said area.  And few Section 8 tenants could afford to pay the difference out of their own pocket.  

 @Randy E.:

OH, now that makes sense. The section 8 tenants get a flat rate reimbursement regardless of what neighborhood they're in of the city.  Hmmm. "Light bulb".  Ding ding. That means then the best way to invest if you're thinking of potentially renting to Section 8 is to:

1) Find out what that flat rate is for the city.

2) Find a property in a neighborhood with lower rental rates than the flat rate.

How does one find what this flat rate reimbursement is? Section 8 admin I suppose.

@Curtis Bidwell , I don't utilize Section 8 yet, but I'm not philosophically opposed to it.

However, here, Section 8 doesn't always pay 90%+ of the tenant's rent.  A friend signed up for Section 8 tenants assuming most or all of the rent would be guaranteed by Section 8.  As it turned out, the tenant's income was such that the tenant qualified for less than half her rent to be paid via the government.  The tenant soon fell behind on the rent, but the landlord waited a long time before filing for eviction because 1) she was still collecting partial rent via S-8,  2) the tenant had initiated a series of S-8 violations and inspections, and 3) the landlord erroneously assumed the tenant would not risk being cut from the S-8 program and would "soon" catch up on her missed rent.

But, that doesn't turn me off the program in general.  My friend did a poor job of screening because she had a false sense of security that S-8 rentals were foolproof. 

Still, I would probably only seek S-8 tenants if I felt I could make more rent than otherwise.  

Originally posted by @Gary F. :
  Hmmm. "Light bulb".  Ding ding. That means then the best way to invest if you're thinking of potentially renting to Section 8 is to:

1) Find out what that flat rate is for the city.

2) Find a property in a neighborhood with lower rental rates than the flat rate.

How does one find what this flat rate reimbursement is? Section 8 admin I suppose.

 That's exactly what some Landlords do.

To find out what the S-8 rates are in your area, you could just call your local office.  Or, try www.gosection8.com.  Just click on your state to narrow in on specific cities.  It will show you active listings that accept S-8 vouchers, and that might give you an idea of the amount S-8 pays for various BRs.

@Randy E.:

Excellent excellent advice and info. 

That's good to hear the realities of the pros and cons of Section 8. I didn't know it was a sliding scale reimbursement for tenants on the program. That makes a world of difference. 

@Randy E. You are correct in that sec-8 may pay all or a small portion depending on tenants resources.  I have one tenant paying $8 of an $885 rent. (And she had to pay a $50 late fee!)  I have others who pay over $600 of the $885.  

I mentioned earlier about how you manage your property.  I assume nothing and hold each tenant to the same standard.  When they know I am serious they respond accordingly.  In April I had a tenant not pay her share, about $400. After I served her notice and got ready to file with the court she got outside assistance and came up with what was needed. She also paid late fees and other amounts due on the 1st of May ...and used her mid-month paycheck to get ahead for June! 

Key lesson is, don't EVER let them get behind ...even a little!  At that socio-economic level getting a little behind quickly becomes an insurmountable mountain they can never overcome.

Curtis Bidwell MBA, Philia Holding Co LLC | http://www.PhiliaHC.com | Podcast Guest on Show #95

@Curtis Bidwell , I agree on all points.  When (no if, but when) I move to accepting S-8 tenants, that's exactly how I hope to manage the process.