Section 8 - is rent negotiable

13 Replies

My question is: will the section 8 authority turn down a lease altogether if they think the rent is to high? 

I ask this because I really don't want to lose a tenant that I have.  She has been there 8 years and is paying less rent than what any of the other units are paying.  If I bring the rent up to market on her unit, is section 8 flat out going to say no? Will she have to pay the difference? Or will it be a negotiation.  I would sooner leave the rent where it is at than cause her move out.  Any help is appreciated.

Thanks,

J

@Jordan S.  In my area they will send a letter with the maximum amount they will allow the tenant to spend in rent. I had one where we turned in the lease for $900, but the housing authority sent a letter back saying she could only pay $870, so we reduced it. Our only other option was to reject her as a tenant. They take into account the tenant's income, other housing costs like utility bills and market rent for the area. 

@Jordan S.  It depends partially on your local PHA, but mostly on whether she is currently on a Section 8 voucher (and her rent has just stagnated) or has she just received one she is intending to use on her current unit?

The short answer if she has just received her voucher is no, they won't budge on their cap for what they will allow the initial rent to be, at least not without extra hoops. They will tell you how much you'd need to come down however, and give you/the tenant an opportunity to resubmit if it indeed it too high.

The short answer if she has had a voucher all this time is they will probably allow the rent increase, but will cap out their subsidy amount and expect her to pay everything over that. Depending on what their FMR rate for your area is v. what you'd like to raise her rent to, that could be significant. A few PHAs will deny rent increases when they're submitted if they feel they are unreasonable for the area, so YMMV. I'm not familiar with your local PHA to say for sure.

In either case, if you call the employee listed on her voucher or annual renewal notice, they're usually happy to run the numbers ahead of time and let you know exactly what will happen, though they obviously wont encourage you to raise the rent over the limit even if they wont actually reject the increase. 

I'm in Maryland and I just had to send comps of rentals in the area to them after showing them my asking rent price. Then they offered what they could (which I was more than happy with) and we agreed upon that price.


I don't think they'd just turn you down. They will most likely negotiate something fair for all parties involved.

FMR is determined by HUD to each MSA (metro area) according to size and amenities, all PHAs receive FMR directives as well as Section 8 administrators as Sec 8 is separate from PHA activities. The tenant guideline is 1/3 the tenant's gross qualifying income, which is subsidized and they may pay for higher rents not to exceed the FMR mean of comparable housing in that MSA.

There is no obligation of a Sec 8 administrator to approve rent levels above the FMR formula or even below it, they may consider housing inventories and the property being appropriate for the family. Landlords may be looking at totally different market rates as the market will bear, administrators here are looking at thousands of inspected and qualified units which may give a different inventory assumption.

You may not include income earned that is not on a tax return, an administrator or PHA may consider additional income in that household, a teenager may mow lawns or receive child support that may influence funds available to that household. They and you may not be on the same page as to qualifying income.

You can get the data, but you may not get the formula used by that administrator/PHA, best thing is to post your desired rents, it will be reviewed and if countered with a different amount go with the flow, agree or say next. You are not obligated to accept the rent established. :) 

@Jordan S. I live in South Florida and have been working with different section 8 programs from Miami Dade County, Broward, Tampa Bay Area, Orlando, Jacksonville, etc... And even though they work a little different they all share a page within the section 8 voucher that you receive from the tenant in order to request an inspection where it ask you for comparable rental properties in the area. Usually section 8 department does not have enough data to know exactly what kind of rent is being charge in a particular area so believe it or not landlords are sometime their best source of information for them. Usually what I do is either list other rental properties I may have in the area already rented by section 8 tenants or go to the MLS and print out recent rental (closed) properties with similar amenities. Last but not least, my business partner Chris just mentioned to me this website which it seems to be pretty accurate in terms of market rent. https://www.rentometer.com

To add to what @Bill Gulley posted, up to 40% of tenant's income may go toward housing expense / rent, but that means that you only can get rent above HUD's FMR of like 10% of the tenant's income.

Originally posted by @Miguel Maria:

... Usually section 8 department does not have enough data to know exactly what kind of rent is being charge in a particular area so believe it or not landlords are sometime their best source of information for them. ...

That would surprise me, to hear that HUD lacks data, when you can check the link that was just posted by Jim B.

Originally posted by @Jordan S.:

My question is: will the section 8 authority turn down a lease altogether if they think the rent is to high? 

I ask this because I really don't want to lose a tenant that I have.  She has been there 8 years and is paying less rent than what any of the other units are paying.  If I bring the rent up to market on her unit, is section 8 flat out going to say no? Will she have to pay the difference? Or will it be a negotiation.  I would sooner leave the rent where it is at than cause her move out.  Any help is appreciated.

Thanks,

J

In my experience, NO.  In the Bay Area in CA, I have an existing Sec 8 tenant, and did inspections for a new building I bought recently. For the existing, they said due to budget cuts, they aren't raising ANY rents. For the new building, they flat out told me what they were willing to pay, and not a dime more. It was about 10% below market, so I told them that was unfortunate and I couldn't rent to Sec 8. They said fine, don't. I rented to non-Sec 8 at market, more than 10% above what Sec 8 quoted me. I think its only really beneficial when the Sec 8 rents are significantly higher than market, or if you live in an area where you couldn't otherwise get rent collected..

Budget cuts have been hitting Sec 8 for years, allocations are of course based on budgets, this area has not had any new voucher authorizations for years, as others come into the area they bring their voucher with them and is then adjusted to local markets, you also lose those moving away.

As pointed out by our new member, welcome BTW, there can be differences in operational administration, not to financial limitations or authorizations.

PHA's administer Sec 8 in many areas, here out PHA is in an inner agency relationship with a non-profit that administers about 1/4th of the state. Other areas have county administrators, these admins are non-profits and they are usually engaged in other social activities, housing assistance, utility bill assistance, health and welfare matters, education, credit counseling, etc.

PHAs administer "owned housing" these are usually multi-family complexes but may have technically SFDs as 1-4 units but usually in a complex of similar units. PHAs are broken down by HUD under various aspects in two categories, a large PHA and a small PHA. The PHA of Spfg has over 1200 units of owned project units. Small PHAs are more rural and may managed owned and non-owned housing, non-owned being Sec 8. Large PHAs may sub-out non-owned housing oversight so long as such administrators have experience in HUD activities. Another sub-manager type are private companies, usually overseeing tax credit rentals similar to Sec 8 but more involved. These tax credit servicer/admins are more specialized and they are working with specific projects so investors will have little interaction with them.

I was a Commissioner of our large PHA here in Springfield, so that's the reason for my background on the topic, being an administrator/commissioner is an appointed position by the local government entity that "sponsors" the PHA, in my case appointed by the Mayor of Springfield.

You'll find operational differences due to political aspects of the local government, at the municipal or county type level. HUD guidelines remain the same and authorizations to deviate from guidelines may be obtained at the regional level.

A PHA Executive Director is the chief executive officer who answers to commissioners and regional HUD directors as to compliance and all operations. The ED has a lot of leeway in what operational activities are adopted or used, he's much like a city manager of a small city within a city under a mayor or city council. This is the guy or gal you need to know as a landlord if the PHA manages Sec 8. If it is a non-profit, they may have an executive position of the administration section/dept, they will have an Executive Director as well who oversees the business of the agency or non-profit. These are the folks you need to know.

The formula for entitlements may vary by region, what California does will be different than Missouri. I'm in the Kansas City Region of HUD.

I did some extensive work within Sec 8 and the HUD Lease Option program, at the national level, attended in connection with NAHRO, the National Association of Housing and Redevelopment Officials. You can go to their site and learn a lot about multi family housing administration, development, redevelopment, Sec 8 and other programs that can be of interest to investors. To be a member you'd need to be serving in some official capacity, but there are affiliate memberships I'm sure. The national conferences are always outstanding with more topics than I could mention. I had the opportunity to speak on non-profit housing affiliates as a conduit for PHA activities in San Antonio years back. That is a good source for RE news. :)

I manage properties in the Kansas City area. In my experience, if they can't give you asking rent they will inform you before they will schedule the inspection. If you approve the rent they offer they will move forward with the process. We can usually request a rent increase on a yearly basis, but it won't exceed the HUD allowable. The tenant is not allowed to pay the land lord additional rent that exceeds the contract rent.

@Jordan S.  The housing authorities that administer the Section 8 program will vary from state to state and also from municipality to municipality. The answer to your question lies with your local housing authority. Ask them. You may be pleasantly surprised to learn they can and will compensate you fairly. The way to do a rent raise will be covered in your contract with the housing authority or may even be outlined on their website. 

We send a rent raise letter within the 60 day window required by ours. The housing authority will do a review of the tenant's financial situation and HUD guidelines. They will let us know what they are willing to do. Sometimes they pay the increase, sometimes they have the tenant pay the increase, sometimes they split the difference. The key is to stay within the fair market value and not charge a Section 8 tenant more than you would charge other tenants.

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