Why aren't Section 8 funds paid directly to the tenant?

Why aren't Section 8 funds paid directly to the tenant?

Greg WeikBusiness Member
Property Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes

I posted this on FB also, but I think it was a TL;DR situation, and/or no one really wanted to "go there."  :) 

If housing assistance, such as Section 8 is designed to help tenants, why not give them the funds directly? I'm open to the possibility that I'm missing something, please set me straight if that's the case. 

The current law in Colorado is such that landlords or property management companies are required to accept Section 8 tenants if the applicants are otherwise approvable. What this actually means is a lot more than just simply "guaranteed rent" for the landlord, as some might think. 

We have to complete an 8-page document and jump through all sorts of hoops to "get the money." 

For example:

-We have to accept direct deposit directly from Section 8. We manage over 500 doors and having rogue deposits into our rental account is a nightmare from accounting, bookkeeping, and efficiency perspectives. 

-We have to tell Section 8 Big Brother if we post an "eviction notice." Again, more work for us, and not part of our standard process, which leaves room for human error and more expense.

-We have to tell Section 8 if the unit becomes vacant. Not part of our standard process, more opportunity for error/non-compliance, more expense.

-We have to include Section 8 language in my lease. Our people are trained on our standard lease clauses, more error potential and potential for contradictory clauses. More expense.

-We have to have Section 8 inspect the unit prior to rental (despite other existing laws protecting the public, such as the Warranty of Habitability) - again, more headache for us, as we have to send an agent to babysit the inspector. Recently, the inspector was over 20 minutes late, we had to pull our Team Member to a different property, and the government agent could not comprehend why we could not afford to have an agent camped at a property indefinitely. More expense.

If you want to take my tax dollars and re-distribute them to others, fine. But don't take my money via taxes to redistribute it and then double-dip by also requiring my private company to jump through all of the above hoops. 

If you've ever run a business or had to make payroll, you understand what I'm saying. If you don't have this background, you may not understand why this is such a big deal to me. 

Keep in mind that this kind of red-tape actually prevents me from adding more jobs, which would, ironically, lead to fewer people needing assistance in the first place. 

If you're trying to help people, then simply help THEM- give them the money directly for rental assistance. Don't make it my problem too. 

There's more to this rant if you can believe it. Some context to what is going on in Colorado in the rental housing world -

Real Estate Solutions4.3378 Reviews
4Reply
191 views

Most Popular Reply

Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y

Simple answer.  It guarantees the landlord gets paid, and they won't spend it on something else.

See this reply in the discussion

48 Replies

Jump to latestLatest
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    5y

    Simple answer.  It guarantees the landlord gets paid, and they won't spend it on something else.

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    5y

    Simply, because the tenant may spend it on something else. 

    I've never found it onerous dealing with Sec8.  I was happy to have them when Covid hit. 

    Just train one person to deal with HUD maybe. Maybe they can track down the 'rogue deposits' grouped but itemized per tenant in an e-mail ahead of time. LOL

  • Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    Is this the TLDR option lol.  Not sure how it is done in your state but in our state there are not rouge deposits as you put it. We get paperwork and/or it is all listed online in a portal, each payment made and a breakdown of the tenant or address so the bookkeepers know how to apply the rent.  

    No clue how/why you think giving money directly to the tenants would help them more or less then having it go direct to the landlord.  As @Joe Villeneuve said this is one way to guarantee that their clients (your tenant) housing is paid for.  

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Greg Weik how do you manage 500 doors and yet don't know enough about human nature to answer this question? I am generalizing when I say this, but it is a fairly accurate generalization. Poor people are poor because they make bad choices and have poor money management skills. I used to manage low income tenants and (with some of them) if I didn't pick up rent on their pay day, it was gone. It is the same reason that SNAP (food assistance) can only be used on food. It is disgusting to think about, but there are people who would rather buy alcohol than feed their children. So the bottom line is when people have shown they make bad decisions, the government needs to step in and make their decisions for them.

    As far as the other red tape associated with Section 8, that is to protect tenants and tax payer money from dishonest landlords. Arguably the process could be improved, but totally taking away protections is a mistake. Inspections and other legal protections insure that vulnerable people (tenants) are not taken advantage of. 

  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    5y
    Originally posted by @Joe Splitrock:

    @Greg Weik how do you manage 500 doors and yet don't know enough about human nature to answer this question? I am generalizing when I say this, but it is a fairly accurate generalization. Poor people are poor because they make bad choices and have poor money management skills. I used to manage low income tenants and (with some of them) if I didn't pick up rent on their pay day, it was gone. It is the same reason that SNAP (food assistance) can only be used on food. It is disgusting to think about, but there are people who would rather buy alcohol than feed their children. So the bottom line is when people have shown they make bad decisions, the government needs to step in and make their decisions for them.

    As far as the other red tape associated with Section 8, that is to protect tenants and tax payer money from dishonest landlords. Arguably the process could be improved, but totally taking away protections is a mistake. Inspections and other legal protections insure that vulnerable people (tenants) are not taken advantage of. 

     That pretty much covers it.  (I was pretty amazed at the question...and the rant, myself).

  • Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    @Joe Splitrock clearly you have never run a business or have had to make payroll if you don't understand

    /s

  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    5y

    It sounds like the problem isn't Section 8, it's your lack of organization.  None of the "problems" say are problems, should be problems.  I could go over each one and say why they shouldn't be problems, but after thinking about it, it isn't "worth my time".

  • Greg WeikBusiness Member
    OP
    Property Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes
    5y

    @Joe Splitrock How have I gotten to over 500 doors without understanding human nature?  Maybe I understand it better than you think - maybe I'm just too much of a hard-*** to care if people get money from the government for housing but still end up on the street.  Maybe I don't think other people should make their problems, my problems.  Just like I don't make my problems other people's problems (other than this post, but participation is voluntary lol.) 

    Also, I guess we have always managed properties nice enough to not have to deal with Section 8, so it's somewhat foreign to me.  We are now being forced to interact with this world a lot more, and I'm not a fan. 

    I get the concept behind "poor people are poor because they make bad choices" but the point of my post is that it's fairly draconian for the government to come in and force private companies to play babysitter and administrator for programs such as these.  Why not simply make the tenant prove they are renting a property and then provide the benefits?  I.e., lease, utility bill as proof of residence.  In most cases, from what I'm seeing, the Section 8 applicant already has to come up with the app fees and initial deposit anyway. 

    It's interesting to me that the vibe of responses so far is that this is all totally ok.  I'd personally love to see something more along the lines of UBI and not all the piecemeal programs such as Section 8, unemployment, etc.  It would eliminate so much red tape. Just give the money to the people, and if they really can't figure out how to keep a roof over their heads, so be it.  

    I guess my major gripe is that my operation is run on brutal efficiency.  We make money by being fast and not having anyone or anything in our way to slow us down.  Section 8 pumps the brakes on that to a point where it's hard to even put a dollar amount on the time-suck we face when dealing with it.  

    The tone of our legislature in CO is such that people who make bad decisions are increasingly not being held accountable. 7 Day notices became 10 day notices, became 30 day notices.  Late fees are now only after a week has passed from the date of default.

    In any case, it is what it is.  I appreciate the responses. 

    Real Estate Solutions4.3378 Reviews
  • Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    5y

    Maybe bump up your ownership to more expensive areas.

    Maybe more out side of Denver Proper.

  • Eric GoldmanBusiness Member
    Lender · PA · Member since 2019 · 359 posts · 192 votes
    5y

    @Joe Villeneuve summed it up nicely. I would love guaranteed rents deposited directly into my account.

    G2loans- Investor and Commercial Mortgages531 Reviews
  • Port Chester, NY · Member since 2016 · 210 posts · 157 votes
    5y

    If you do not like the rules of the game, then you do not have to play.

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y
    Originally posted by @Mike A.:

    If you do not like the rules of the game, then you do not have to play.

     I think what he is saying is that he *does* have to play because state rules require it. If that's the case the only way around Section 8 is to only rent out properties that are too expensive for Section 8.

    Back to the original post: everyone else pretty much nailed it. Successful businesses just roll with the punches and figure out opportunities whenever a new obstacle appears. Instead of ruing the extra work that Section 8 now entails, you might instead train one or two employees (if you have employees) to specialize in Section 8, then market that service to other LLs in Colorado that have the same gripes as you but don't want to put in the legwork to make it work. This could be a real marketing niche for you ("We are the Section 8 experts!") instead of a page-long rant.

    I personally don't take Section 8 (I don't have to participate in my state) but those are for my own reasons (a, I don't have to, b, I cater to a different clientele) rather than any issue with the program. I know LLs in my area that love Section 8. 

    Skyline Properties
    View Page
  • Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    5y

    If you don't want to accept S8, then don't. There are a bunch of ways not to accept it. Unless Denver is different that most places that have source of income as a protected class, you have to accept S8 vouchers if the tenant has one, but you do not have to comply with the S8 program.

    Where I am, I'm forced to accept a tenant that has a S8 voucher, but because I can refuse to fill out the S8 paperwork, refuse to allow S8 to inspect the unit, and refuse to fix any issues any S8 inspection found, they will never actually issue a voucher for that unit. Therefore, I comply with the law and accept S8 vouchers, but no potential tenant could ever possibly have one. 

  • Greg WeikBusiness Member
    OP
    Property Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes
    5y

    @JD - "Ruing the extra work" and "rolling with the punches" are not mutually exclusive. 

    Rolling, we are.  Using the new legislative changes to our advantage, we are.  I linked an article above from our company site/blog post that was scrubbed, but in it I spell out that the value add based on our knowledge of the laws is a huge reason to hire our firm.  And we've seen a significant uptick in new clients who are intimidated by all the rules coming down from on high and who trust us to navigate the landscape. 

    This is an online forum, I see no problem with communicating real estate laws in my state and how they impact my business and venting from time to time.  

    Real Estate Solutions4.3378 Reviews
  • Greg WeikBusiness Member
    OP
    Property Manager · Denver, CO · Member since 2020 · 263 posts · 327 votes
    5y

    @Greg M. That's very interesting, thanks for sharing that approach.  I would never do that, but I'm sure you can probably get away with it.  

    Real Estate Solutions4.3378 Reviews
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y

    Yeah, I totally hate getting paid as soon as rents due, in the most efficient manner, putting it right into my bank account.

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    5y
    Originally posted by @Greg Weik:

    @JD - "Ruing the extra work" and "rolling with the punches" are not mutually exclusive. 

    Rolling, we are.  Using the new legislative changes to our advantage, we are.  Had you read my linked article above, you'd see exactly that. I spell out that the value add based on our knowledge of the laws is a huge reason to hire our firm.  And we've seen a significant uptick in new clients who are intimidated by all the rules coming down from on high and who trust us to navigate the landscape. 

    This is an online forum, I see no problem with communicating real estate laws in my state and how they impact my business. 

     LOL. I missed it but thanks for bringing it to my attention; unfortunately it had to be removed because it's against BP rules (under "V"). In any case, they really seem mutually exclusive to me - in essence, if you are doing as you say, then you're complaining about making money and exploiting opportunities. That's bizarre to me.

    You are right about communicating real estate laws in your state - that's useful to lots of people and I appreciate you bringing up the subject. 

    Skyline Properties
    View Page
  • Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes
    5y
    Originally posted by @Russell Brazil:

    Yeah, I totally hate getting paid as soon as rents due, in the most efficient manner, putting it right into my bank account.

    LMAO. Exactly! It would be so much better if they gave it directly to these folks who would undoubtedly immediately transfer every cent due to their landlords. After all, they've demonstrated incredible fiscal responsibility in order to get admitted to this program.

  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    5y

    @Greg Weik  there are people out there selling their SNAP benefits could you imaging if you let them have all their rent money?  And frankly it is the children you protect when you don't pay the parents the rent money directly.  

    You can avoid section 8 if you rent more quickly to a self pay tenant.  The government is slow.

  • Port Chester, NY · Member since 2016 · 210 posts · 157 votes
    5y
    Originally posted by @JD Martin:
    Originally posted by @Mike A.:

    If you do not like the rules of the game, then you do not have to play.

     I think what he is saying is that he *does* have to play because state rules require it. If that's the case the only way around Section 8 is to only rent out properties that are too expensive for Section 8.

    Back to the original post: everyone else pretty much nailed it. Successful businesses just roll with the punches and figure out opportunities whenever a new obstacle appears. Instead of ruing the extra work that Section 8 now entails, you might instead train one or two employees (if you have employees) to specialize in Section 8, then market that service to other LLs in Colorado that have the same gripes as you but don't want to put in the legwork to make it work. This could be a real marketing niche for you ("We are the Section 8 experts!") instead of a page-long rant.

    I personally don't take Section 8 (I don't have to participate in my state) but those are for my own reasons (a, I don't have to, b, I cater to a different clientele) rather than any issue with the program. I know LLs in my area that love Section 8. 

    Correct, that was what I was expressing. He has to play the game, but complaining about it. Fine, don't play. 

  • Warsaw, IN · Member since 2017 · 229 posts · 270 votes
    5y

    @Greg Weik I understand your frustration with the slowing of the process that section 8 entails. The part that really disappoints me is that legislatures are deciding they are elected to dictate terms to landlords on private property, especially when zoning laws and red tape from other bureaucratic hurdles creates the scarcity that is causing the unaffordable housing crisis in the first place.

  • Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    5y

    I am reminded of the "Mo' Money Seminar" on In Living Color.

  • Joshua ViksmanPro Member
    Investor · Los Angeles, CA · Member since 2019 · 42 posts · 22 votes
    5y

    @Greg M. exactly... If you don't like working with them, there are many ways to avoid it, even if it is required to accept it in your state (same as mine). Especially during the lockdown, s8 would take weeks to actually complete the inspection and then would try to negotiate the rental price down at the last minute. If my client (the property owner) is unwilling to wait weeks for an inspection and everything else, meanwhile we have non s8 tenants ready to move forward immediately.. That's why we require a signed lease agreement and cashiers checks within 48 hours of approval. That said, s8 tenants have been great tenants and we are happy to take them.

  • Real Estate Investor · Chandler, AZ · Member since 2009 · 111 posts · 114 votes
    5y

    @Greg Weik  I think, in this case, you're only looking at it from the business owner perspective, but the comments that many have made include the taxpayer perspective too.  I AM a business owner (8 businesses) and hundreds of rental doors and do have experience with payroll, taxes, accounting, etc.  I hear your frustration and your rant from a business owner perspective, but put on your landlord hat and you would likely be grateful rents come direct to you with Sect 8 tenants because, as someone else mentioned, these are often people who have not proven smart decision making from a financial perspective.  Then, put on your taxpayer hat and imagine that the IRS takes your money and redistributes it but does NO due diligence, follow through, record keeping, etc. and just says something like, "well we wanted to make it easy so we don't know where the money is."  That wouldn't fly with your taxpayer self (or any of the rest of us). 

  • Investor · NorCal · Member since 2015 · 282 posts · 240 votes
    5y

    Of course Ialways accept Section8 but by the time the Section8 inspector shows up the unit is long rented to a non-Section8 tenant.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.