Future of Section 8
Birmingham, AL · Member since 2012 · 108 posts · 10 votes
Hello
I own a few rental properties in B and C class neighborhoods. I've purchased the properties at low price points so they have minimal debt service. My dilemma is that a good number of them are section 8 rentals. Most section 8 pays a portion of rent and the tenant the other portion.
I'm concerned with what is the future of section 8? If the U.S. decides to cut its budget and eliminate these programs I would be exposed a bit, but I'm priced well enough to where I could significantly reduce rents and still stabilize property for minimal cash flow.
If U.S does keep these programs in place and increase the benefits, because more people would depend on the program then all of our taxes will continue to go up, but I would be on the receiving end of the government subsidy for providing the housing.
Please Advise?
Section 8 is already being cut. I have Section 8 tenants that are being told they need two people per bedroom. Even if that means a 40 year old woman and her 16 year old son.
I don't have a problem with it. I think that this gravy train has gone on long enough. I think there will be cuts to Section 8 and I also think it will make the neighborhoods better. I have already noticed in the are of my rentals that I now have higher quality neighbors in some areas. Rents are currently going up. If Section 8 lowers the voucher amounts, the welfare people will just have to go rent in the war zone.
I wondered if and when RE investors would realize how their bread was buttered. No one here will ever rent or sell a home to anyone knocking down 200 million a year.
Section 8 has been under the gun for cuts for 30 years that I know of and has been cut but has always come back. Not sure I would bank on benefits increasing significantly since housing subsidies lag in the economy working from historic costs.
Sec. 8 is too big to fail. If it were eliminated it would trickle through to vacancies, reduce cash flow, bring foreclosures up, lower prices and slow new starts. I don't see them going near that.
I also don't buy the thinking that keeping Sec 8 is the reason to raise taxes on those earning less than 250K a year and any increase above 250K, as a total to % of income would be minimal. If you had 250 rentals with subsidies your income would be far greater than you tax increase.
Cuts will be administered by HUD, most likely jobs would be cut, maintenance of owned housing would be reduced, grants would be drastically cut, rehab project loans would be reduced and economic development funding/grants with matching funds would go away before the holly grail of rent subsidies would get hit. IMO, I've seen it before.
There is a catch 22, but RE types run off the middle class and lower income persons, not even the top 10%. I've made more from the middle than I ever did from the top end. I tend to protect my source of income even if more is taken after I earn more. Paying taxes means you're making money and not any paying taxes is as much about being a freeloader as someone who doesn't work at all.
Hopefully a balanced approach will be taken to reduce spending and increase revenues so that no one area of the economy is drastically disadvantaged. :)
Thanks for the response. So im under the impression that it is your belief that section 8 is here to stay as is? Anybody else with an opinion especially some of the more seasoned investors? Im only 26 so I have not lived through multiple cycles as many of you have. I just start investing in last 2-3 years. All I keep hearing is that the world is going to end and the financial apocalypse is coming.
Thanks everyone
Personally, I do not see Section 8 ending any time in the near (or distant) future. There's just too many people/families/generations that are completely dependent upon it. Right or wrong, our society is not just going to cut those people off.
There will always be people out there who choose not to work and would rather just have a handout, and our government will always be there to provide it to them.
So, if I were you, I would sleep soundly at night knowing that your Section 8 payments are safe.
Just my two cents.
you know, everyone speaks of the fiscal cliff - & with good reason. however, the govt has laid off. are they trillions in debt? yes.
however, there was a show recently detailing the precious commodities/food/natural resources in the U.S.A.
The value of these alone came to well above the trillion mark (whatever number you call that after a trillion).
the US is fine; we just don't like to advertise it. :)
Another thing people fail to mention (in us competing w/ China & India now) is our ability to entreprenuer.
There's quite a few awesome entreprenuers on this website alone...
My doom and gloom theory on this.... if our country keeps on its current track with spenders like obama, there will be huge cuts to section 8. The only ones who will care at first are the landlords who will be forced to accept section 8 type vouchers even if that means they are bankrupting landlords.
Eventually the ink will run out of the printers that print our money and that will be the day section 8 and welfare type programs come to an end, and by then, I hope you have a nice dry place for your food and ammo.
Thanks for the replies.... I feel better my situation now. I just want to seek as many different viewpoints as I can so i can decide whats best for me.
John H
Thanks for your comment... May I ask why do you feel the program would be cut? I'm very concerned with the debt situation, just because I feel that the government wastes so much of the money it collects. I dont really identify with a political party by the way.
I do believe we differ a bit from Greek or Eurozone countries bc we issue our own currency and have the reserve status. Those other countries dont. So I would think that cutting those programs would be suicide. But I do hear people such as you who seem to think that the government will.
Which is why I'm very interested in all viewpoints, bc I just dont have enough life experience, knowledge, or wisdom to make the best decision myself. (Not Yet) Could you or anybody explain why you feel this way?
Section 8 is already being cut. I have Section 8 tenants that are being told they need two people per bedroom. Even if that means a 40 year old woman and her 16 year old son.
I don't have a problem with it. I think that this gravy train has gone on long enough. I think there will be cuts to Section 8 and I also think it will make the neighborhoods better. I have already noticed in the are of my rentals that I now have higher quality neighbors in some areas. Rents are currently going up. If Section 8 lowers the voucher amounts, the welfare people will just have to go rent in the war zone.
I had a job interview once at a boutique accounting firm that dealt almost solely with the Low Income Housing Tax Credits and I asked... "What happens to this position if the government eliminates this credit?" I still remember the reply... paraphrased as follows. If we ever see a government official that was willing to take the polical heat associated with throwing the poor single moms of the world out on the streets... then we will start to worry. I can imagine the political ads, can't you? The industry and media would likely be able to blackball any politician who proposed it. It would be VERY easy to "humanize" this issue and talking about throwing the poor out on the street (as it would be construed) generally would be hard to get any elected official to sign their name to... and certainly not a majority of politicians.
Entitlements are sticky in this manner as the recipient becomes somewhat reliant upon the benefit (for example a 80 y/o who didn't save anything to rely on SS). Although I am conservative, I am also a realist and think that we will see this program in some form or another as long as we have a lower class. I do see some potential that it is scaled back, leaving only the lowest earners in the program. This may impact the ultra-low rent segment of the rental market.