Income Requirements for Section 8 Tenants ?

Question

I am new to renting out to section 8 tenants.  My typical requirement and policy for income is 3x rent a month for regular tenants.  My question is, if I start taking applications from tenants that have section 8 vouchers what would my minimum income requirement be if they are getting almost all the rent paid by the government?

Patti Robertson · Answer

@Kyle J. - I currently have over 100 section 8 tenants in 4 different housing authorities, so I’m very familiar with this process. The calculations are all property specific, and the utility expense projection plays a large role in influencing the tenant’s rent portion. Utility budgets vary greatly from property to property, and the tenant’s income is first allocated to cover those, and what is left from their 30% of income budget is determinedly to be their rent portion.

In my experience I find that as long as a tenant has income equal to at least one months rent, I get approved for my rent amount.

In my experience I find that as long as a tenant has income equal to at least one months rent, I get approved for my rent amount.

Kyle J. · Answer

There are actually a number of ways to determine what their portion of the rent is.  Here are a few:

1) Ask the applicant.  After all, they should know what they are currently paying.  This can later be verified during the screening process by asking to see a copy of the annual letter they get from the Housing Authority that breaks down the total rent payment to the owner into the tenant's portion and the Housing Authority's portion.

2) Ask their current landlord.  You will be calling their landlord during the screening process to find out what kind of tenant they are won't you?  Well, while you're on the phone, just ask them how much of the rent is covered by the Housing Authority and how much is the tenant responsible for.  You'll want to know that anyway because a natural follow-up question would be - Has the tenant ever been late paying their portion of the rent?  It's a good way to further help vet their ability to pay.

3) Call the applicant's caseworker at the Housing Authority.  I've actually had caseworkers write directly on the applicant's voucher that they bring to the initial listing appointment the amount of the Housing Authority's rent payment.  Makes it easy for me.  But when it doubt, just call the caseworker.  Whenever I call them, they give me whatever information I need right over the phone.

Obviously if an applicant is brand new to the Section 8 program you won't be able to get information from their previous landlord.  However, you could still call their caseworker.  Additionally, if they're moving to a significantly different priced rent unit (which would not be the norm), then it would be a little more difficult to estimate their rent portion based off their previous rent.  However, again, you could still call their caseworker or - when in doubt - estimate it and get in the ballpark.

The point is, with all the options available to you, you shouldn't have to "have no idea what their rent portion will be".  It might take a little research on your part, but that's what the screening process is for.

Richard Sherman · Answer

@Ryan Mellon Make sure you check your state law regarding subsidized housing.  Another member mentioned avoiding renting to them.  I do not agree with this as in my State (Oregon,) it is ILLEGAL to base a decision on if they have a  voucher or not, so make sure you know the laws in your State.  There are good and bad in every group and at some properties, we have a high proportion of subsidized renters and in others (more expensive places) we have none.  There are pluses and minuses as others have said, you know a portion of the rent is paid every month on time and you have someone that in many cases can help manage a problem renter etc.  There is, of course, more paperwork and hassle though.

Ryan Mellon · Answer

Thanks for the info Patti!

Patti Robertson · Answer

Hi Ryan.  I want to see at least one month's rent in income from a SEC 8 tenant. Anything below that and the rents I want are not likely to be deemed to be "affordable" for the tenant.  I wrote a blog as an intro to SEC 8 if you want to check it out.

https://www.biggerpockets.com/blogs/9232/55313-int...

Ryan Mellon · Answer

Thanks everyone for your feedback.

Nathan Gesner · Answer

1. Try to avoid renting to Section 8 because so many of them are high-risk. In my experience, most of them are scam artists that leave the property damaged when they move out. Your mileage may vary.

2. Their housing voucher should be considered their income qualification.

Patti Robertson · Answer

@Kyle J. - The problem with that plan is that when the tenant applies you have no idea what their rent portion will be. We only know that they will have to use 30% of their income for utilities + rent. When we receive rent approval we don't even know the tenant's portion for sure.  They do give us an estimate at that time, but it isn't until the tenant has been in the property for a few weeks that we get correspondence saying exactly what their portion is.

Kyle J. · Answer

@Ryan Mellon  One option for income screening on Section 8 tenants is to require 3x their portion of the rent.  So for example, if the rent is $1000/month, the Housing Authority pays $700 of that, and the tenant portion is $300/month, then you could require the tenant's income to be $900/month.

Income Requirements for Section 8 Tenants ?

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