Chicago - Section 8 rentals.

[Warren Edward]

Hi BP, I am considering investing in the Southside. For those investing in section 8 rentals , does the new political environment in Washington pose a threat to any of the vouchers programs? What would happen if vouchers were cut drastically?

[Mark Ainley]

@Warren Edward There is a huge negative social & economic impact to reducing HUD funding(especially subsidized housing) in large cities. In CHA (Chicago Housing Authority) if there are "drastic" changes it would still take years to implement or have trickle down effects to landlords like you and me. Keep in mind how slow things move in government ran organizations.

For example, a drastic change that has happened in the past was they reduced voucher sizes for thousands of participants.  if a participant had 2 kids(boy and girl) the participant can qualify for a 3 bedroom voucher(bedroom per person) but if they had 2 kids (boy and boy) the participant would qualify for 2 bedroom(bedroom for parent and one for kids to share.)  Around 2008 they changed the rules where it just became two kids per bedroom(they call it two heart beats per bedroom on the street-weird I know) no matter the gender.  This reduced thousands of vouchers from 3 bedrooms to 2 bedrooms the next time they moved.  It took years to really set in across the program because it took a participant to move to change and the landlord didn't get less rent.  Some cases participants portions went up and they paid an extra $100-$200 per month but gross monthly rent wasn't changed to an existing landlord.  That change didn't put any landlords out of business and I bet many landlords in Chicago never knew it even happened.  The purpose of CHA making the move was to take the money they saved from reducing bedroom sizes of thousands of participants and turned around and handed out many more vouchers to new participants.  

The concern of government making drastic changes to HUD should hardly affect your decision to invest.