New to Real Estate · Brick, NJ · Member since 2020 · 115 posts · 39 votes
Good morning BP
I have been online looking for over 2 hours for specific information on house to determine how much properties can be rented for under section 8. I have found countless articles online, but none of them are directly from the hud's website (from what I found). The info I'm finding on non govt websites is a bit conflicting and want to make sure I am pulling my info directly from the govt websites. Is anyone aware of any direct sources to this information for NJ specifically? Where can I find how much rent I should be expecting on a property through the house choice voucher program?
@Jake Drappi, hang on here - there's a lot that goes into determining rent.
Generally, Section 8 rents strive to be even with market rents.
There are some rules and guidelines:
1. HUD sets "fair market rents" for an area. You can find these online. They basically set up a range and more importantly, a ceiling for rents in that area. What these mean in reality is that you can usually get market rate rents in B C and D areas. You will get under market rents from Section 8 in A areas.
2. Then, your local PHA looks at "rent reasonableness" meaning they are trying to keep Section 8 rents comparable to market rents (up to the FMRs).
3. Then, a tenant can't pay more than 40% of their income to housing expenses (the intent for Section 8 recipients is actually 30% but that number can go to 40% if local rents require it). So sometimes this can limit your rent amounts.
In practice, every PHA works slightly differently though in how they set rents. They follow the guides above but they will vary in who determines rents (here for instance we have a "market analyst who does this, in other areas, it's the inspectors).
Also, there will sometimes be pockets of higher and lower rents that require local knowledge.
The bottom line in my experience is that you need someone who is doing Section 8 successfully in your market who can tell you the ins and outs of rents there. Anybody else responding, like me, can give you general but not nitty gritty specifics for your area.
You can call the local PHA but they may or may not give you answers that bear out in real life or that give you enough info.
And I have the exact opposite opinion of @Carl Mathis - I think Section 8 is the only way to go right now, especially in C and D areas. I also follow this model for B areas (I don't own in A areas).
@Jake Drappi - I once made it onto a HUD website that had HUD (Section 8) allowable payouts by county and bedroom size. I think this is it here. This amount CAN includes utilities so you may have to charge less. If the links don't work, it is titled " It says a 3 Bedroom Property in Trenton is worth $1914/mo in 2021 as "Fair Market Rent". Check it for your area. You can also call the HUD local office to you.
FY2021 Final Fair Market Rents Documentation System"
HUD sets a FMR (fair market rent) max by county by unit type (eg 1 beds) and income (eg 60% AMI) for stuff with a LURA (ie requirement you screen for income of tenants being below a threshold). Do you have a LURA?
If not, I'd treat everyone with a Sec 8 voucher equally for screening/income (its good fair housing practice) and set your rent at what it takes to rent out. Don't think there's any major advantage/disadvantage with Sec 8 voucher holders (well maybe getting the voucher on the 1st via EFT, but you still need to get the co-pay).
All the local HA (housing auth) seem to do this differently (they get the checks from HUD to divvy up), but realize that the Sec 8 + tenant copay needs to be close to market, otherwise, market-rent guys like you won't take them.
If you do accept a Sec 8 voucher, get the contact info of the caseworker to set up EFT and in case you get a lousy tenant you need the caseworker to use the death penalty (ie pulling the voucher).
@Steve Morris I am not sure what a LURA is, so I am assuming I do not have one. Thanks, I will get in touch with the local office and find out.
Sorry, LURA = Land Use Restriction Agreement. On Tax Credit sales for LIH, it'll get recorded and is usually something like: "For 30 years you agree to only verify and accept tenants that earn <60% Area Median Income (AMI)" Numbers change, something like that would be recorded against title.
If you don't screen for income, then you're market rate. I'd treat a Sec 8 voucher holder like any other tenant when it comes to qualifying.
@Jake Drappi, hang on here - there's a lot that goes into determining rent.
Generally, Section 8 rents strive to be even with market rents.
There are some rules and guidelines:
1. HUD sets "fair market rents" for an area. You can find these online. They basically set up a range and more importantly, a ceiling for rents in that area. What these mean in reality is that you can usually get market rate rents in B C and D areas. You will get under market rents from Section 8 in A areas.
2. Then, your local PHA looks at "rent reasonableness" meaning they are trying to keep Section 8 rents comparable to market rents (up to the FMRs).
3. Then, a tenant can't pay more than 40% of their income to housing expenses (the intent for Section 8 recipients is actually 30% but that number can go to 40% if local rents require it). So sometimes this can limit your rent amounts.
In practice, every PHA works slightly differently though in how they set rents. They follow the guides above but they will vary in who determines rents (here for instance we have a "market analyst who does this, in other areas, it's the inspectors).
Also, there will sometimes be pockets of higher and lower rents that require local knowledge.
The bottom line in my experience is that you need someone who is doing Section 8 successfully in your market who can tell you the ins and outs of rents there. Anybody else responding, like me, can give you general but not nitty gritty specifics for your area.
You can call the local PHA but they may or may not give you answers that bear out in real life or that give you enough info.
And I have the exact opposite opinion of @Carl Mathis - I think Section 8 is the only way to go right now, especially in C and D areas. I also follow this model for B areas (I don't own in A areas).
@Jake Drappi, hang on here - there's a lot that goes into determining rent.
Generally, Section 8 rents strive to be even with market rents.
I'm assuming there is NO LURA requiring him to verify income, so he can ask whatever he wants as long as he tells all applicants the same.
Whether the H/A can reach or not is their decision to say Y/N, but they know they need to be close to market so that may mean fewer vouchers they give out to be able to reach market.
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, which sounds pretty good in the middle of an eviction moritorium. I have a blog post with tons of SEC 8 Tips, including how to maximize your rent. Check it out here...