Section 8 laws? ......

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I have an applicant asking if we accept Section 8? I have never dealt with it. Pros? Cons? Do I legally have to accept it? They want to apply to our newly built , high quality rentals...

Love Section 8. I have 3 of them. They pay 110% of market rents in my area. They also stay a long time.

If they tenant loses their job due to let's say a pandemic, section 8 will make up the rest of the rent to keep you whole. 

Legally have to accept a Sec 8 tenant?  I don't know of any state that makes it a legal requirement to accept a Sec 8 tenant but some regions and states do require landlords to not discriminate against the source of rent payments.  Meaning, as long as you treat them as you would any other tenant and not reject out of hand simply because they are Sec 8 you are good.  And given the political leanings of Idaho I would doubt this is a state that has any regulation, but always good to check just in case.  To be safe, consider everyone, qualify everyone and don't reject simply because they are Sec 8 and you are always good.   

Some here love Sec 8 some hate it.  Some have very strong opinions even though they have no direct experience with it.  We have found portfolio wide coving 2 decades that there is little to no difference in the important factors to most investors.  Eviction rate, tenant turn costs, problem tenants etc...  I have often said it isn't the source of the rental payment that determines these things it is the individual tenant.  

The main differences are the inspections.  Locally (SE Michigan) the Sec 8 offices are not good at charging tenants for damages they cause.  An example is a smoke detector.  When the unit passes the initial or a yearly and they come back for the next yearly if they say the owner must put in smokes, the question is why.  You passed it a year ago with smokes in it, clearly the tenant removed them.  Should be a tenant cost but locally they charge the owner.  You can charge the tenant (check your local laws) back but generally you have to pay for the upfront.  That gets a bit annoying.

Other than that, you have a yearly inspection from an outside agency and with a market rate tenant you likely don't.  

That is really the only con we have seen.  Guaranteed rent is worth it for some and not for others, your call.  

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@Amanda Thompson I would get very familiar with the Idaho landlord tenant laws because you may be required to accept section 8. I know here in CO we cannot discriminate against income source so by default we have to accept section 8. There are also fair housing testers who contact landlords and PM's checking on these very types of issues. That being said, we have had good section 8 tenants and not so good ones. Follow the same screening process you would for any other applicant and it should work out. The government always pays on time so that is a benefit to taking it. 

@Amanda Thompson I love SEC 8, especially in a market like today where renters income can be unstable. It’s basically rent insurance for the landlord - for free. If you search BP for SEC 8 you will find hundreds of thousands of posts. The topic comes up ALOT. My poor fingers got tired of typing the same thing over and over, so I put my tips and tricks in a blog post. Here’s a link if you want to check it out.

https://www.biggerpockets.com/blogs/9232/55313-intro-to-section-8---your-perceptions-vs-my-realities

#1 screening challeng with S8 applicants:

Their voucher usually includes rent + all utilities - meaning utilities are included with rent at owner's expense.

We don't recommend this as it leads to tenants jacking up the heat or a/c and letting toilets run - all resulting in huge bills the owner has to pay.

So, you'll need to work with the S8 caseworker to determine the max rent the tenant's vouceher allows WITHOUT utilities included.

Nobody can MAKE you rent to a Section 8 Applicant. If someone asks if you take Section 8 you should handle as follows......

(If your property has not been inspected by Section 8 yet)

We are  happy to show you the property, you should know that the property has not been Section 8 approved by an inspector nor have we ever made arrangements for this. As an FYI the deposit amount is $$$$, we are not flexible on that at all and we would conduct the same background checks for any Section 8 applicant as we would for a non Section 8 tenant.   SIDE NOTE: If they say they still want to see the property....arrange a time to show it to them. If they like the property then they will be the one who needs to contact the Section 8 office locally and help arrange a time for the inspection to take place at a time that is convenient for you, the inspector and the prospective tenant. There is a 99.9% chance that when the inspector comes to the property he or she will find something about your rental that they will say you need to correct before it will be eligible to be rented out to a Section 8 tenant. If you choose not to spend the money to correct it then your rental will not be Section 8 approved and that prospective tenant will not be able to rent your property. Also, in the future when people call and ask if you take Section 8 you will then be able to truthfully say, "We've already had a Section 8 inspector out here and it was determined by the inspector that the property does not meet the requirements to have a Section 8 renter here."  You will not need to say anything more than that.

I know that's a lot of information and with that being said, let me say this.......

I LOVE having Section 8 tenants. All of my portfolio here in the Bay Area is nothing but Section 8, and most of my portfolio in Ohio has Section 8 tenants. I will unequivocably say that I have actually fired two separate PMs in Ohio specifically because they would not rent out my units to Section 8. To me the advantages of rentong out to Section 8 tenants far outweigh renting out to a cash tenant.

Hope this helps. 

@Amanda Thompson one thing if you decide to rent to section 8 tenants is to be sure they have a current voucher and their voucher matches the number of bedrooms in your unit.  

In RI, you can't discriminate they just passed that law a few months ago but my understanding is you may find a paying tenant before section 8 can get an inspection in and approve the property even if it would qualify.  

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I would not hesitate to rent to the right Section 8 tenant for your property. Section 8 gets looked down upon by investors who don't have experience with it but have heard horror stories and by landlords who don't take good care of their property, don't screen tenants well and then have bad experiences because of it. Joe Asamoah has been interviewed by BP several times on his Section 8 model, which specializes in bigger, higher end homes in expensive housing markets - specifically Washington DC area. He provides excellent tactics for recruiting and retaining great tenants so I highly recommend you listen to those episodes before you make up your mind. He also does free zoom webinars on the topic where you can ask questions. In a market such as Boise where housing is relatively expensive, Section 8 is likely high in demand and should pay slightly above market rents and, like Joe will tell you, Section 8 tenants just don't move often so your vacancy and costs for turns is extremely low. They also have a vested interest in remaining in good standing with you because if they violate the terms of your lease or don't take care of your property they can be banned for life from ever receiving Section 8 vouchers again. Yes, Section 8 is a government program and has some bureaucracy involved, but if you do it right it's worth the tradeoff. 

I didn't have a good experience with Section 8 in my market. I had one inherited Section 8 tenant who smoked in the unit despite not being allowed to. A few years ago she overdosed on fentanyl and died. She wasn't a terror or anything - friendly enough to me despite not getting along with the other tenants.

The second Section 8 tenant at a different multi-family was a terror. She wasn't inherited so it's all on me. Not only was she not nice but she didn't take care of the property in that there was garbage in the yard, cigarette butts, etc. I should have dropped the hammer earlier but didn't so again, my fault.

Several times she wouldn't show up to her Housing Authority meetings/inspections and payment was freezed. She almost got evicted several times and paid me the $35 late fee almost every month.

They froze her account yet again and I evicted her. She didn't even show up to the eviction hearing on time (she showed up almost 10 minutes late after the verdict had been issued in my favor). 

So to say Section 8 is guaranteed money and Section 8 tenants are afraid of losing their vouchers may be true in a lot of cases, but certainly not all.

Though my biggest annoyance was with the Section 8 Housing Authority; they were inept. They always seemed to be confused, kept bad records, etc. When I tried to raise rent for the apartment (where the lady later O.D.'d) the inspector claimed $450 for a one bedroom in my area was too high. After the tenant passed away I renovated the unit after it was emptied out and now I get $590 a month from a really nice couple.

Some people on BP claim Section 8 in their area pays more than market rate; do your due diligence to see if this is the case. I'm sure some Housing Authorities are run well but the one in my market is not.

I will add that all my Section 8 tenants paid their own gas and electric. At no point was I ever even asked to cover gas and electric. Had the water been sub metered I could have had the Section 8 tenant pay the water also, but I would have been responsible for the sewer/trash bill. 

@Bonnie Low   I wonder about that banning of tenants and how often it actually happens.   What does it take for Section 8 to actually ban someone and have you seen it happen?  What was the cause?  Not saying it doesn't happen but people talk about what happens in their rentals and not paying their portion I have seen people post as leading to eviction but nothing about what gets people banned. 

@Colleen F. From what I understand, one of the most common abuses that will absolutely get someone kicked out of the program is having someone who is not on the voucher living in the home. Section 8 is needs based. So if there is someone with unreported income living in the home the voucher holder probably doesn't actually need the voucher. So the agency takes this violation very seriously. Typically there are many more voucher holders than there are available properties so they don't have any reason to keep people who abuse the program on the program. That said, I can't say I've actually seen it happen - you may get them to move out of your property, but I don't think the landlord is actually entitled to know if that person was kicked out of the program. In other words, there are probably some privacy issues around that. But that's just my guess. I haven't had this happen.

Logic would dictate that getting "Kicked" out of section 8 is going to take a lot and getting back in is going to be relatively easy. This is 2021, government programs are bloated and the mentality is everybody needs the government to help them out, you show me somebody who has been kicked out permanently from section 8 and I'll reconsider, but I just don't see it. Some reprimands after 32 warnings, a temporary suspension, but kick out to the street making them homeless? Just not going to happen today. Everybody is a victim, nobody is held responsible for their own actions.

Don't forget, government programs are run by human beings in the positions, people in those positions are there for a reason, they have a huge lean toward helping out the unfortunate, and never forget in their eyes landlords are very rich taking advantage of people, they are going to side with the renters as much as they can get away with and there is lots of grey area and interpretation and leaway.

I, personally have a few section 8 tenants.  They do stay with you for a long period of time.  The only down side is the cleanliness of the interior and exterior of the house.  You can tell them and complain all you want, but it doesn't stay clean for long.