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Alexander V.
  • United States
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Section-8 Negativity - Survivorship Bias, or Accurate?

Alexander V.
  • United States
Posted Aug 29 2020, 12:01

Hello all,

I'm playing devil's advocate in this post. I'd like to hear some experienced landlords who have actually worked with Section-8 and/or know the details of the program guidelines.

We all see Section-8 horror stories constantly here. Many experienced landlords frequently advocate staying away from Section-8 altogether, and I think its fair to say that the overwhelming majority of landlords here are, to say the least, very skeptical of the program. I'm wondering if this represents an accurate picture of Section-8 tenants, or if it is more of a combination of Section-8 housing and survivorship bias.

For those who don't know, survivorship bias is a common type of selection bias in statistics that refers to the fallacy of believing that a select group of people who have passed certain unintentional qualifications are an accurate representation of the entire population. In the context of Section-8, we frequently see flamboyant horror stories that stick in our minds about bad section-8 tenants. The posters are often new, and desperate for advice after having their property severely damaged. But landlords who are successfully using the section-8 program are not rushing to make such highly salient, attention grabbing posts. I've never seen anyone attempt to actually research the percentage of section-8 tenants who inflict damages or commit some sort of fraud--all we have are anecdotal horror stories. How do we know that the horror stories are not just a tiny portion of Section-8 that are over-represented on the forums precisely because of how horrible they are? So horrible that it's worth talking about--the quiet tenant who pays his bills and never makes a scene doesn't spark a discussion.  

This may be compounded by the fact that a "section-8 tenant" is not the same thing as "section-8 housing." The former is an individual voucher holder, and landlords may still screen them. The latter is an entire property that is essentially leased to the government, and the government then places whoever they want in the units.

What made me think of this is an exchange that happened recently between myself and an agent who works with a company that also engages in wholesaling, buy and holds, etc. He said something to the extent of "what people don't understand about section-8 is that it's very rare for a section-8 tenant to do any property damage, because the can lose their voucher. It's guaranteed income with almost no risk." My immediate reaction was to roll my eyes. "Right, I've heard this before. They're just like any other tenant, they've gotten a bad wrap, they just need a chance, etc. etc. I read daily about these 'normal' tenants tearing apart the properties of unsuspecting landlords on BiggerPockets every day. You can't fool me!" I didn't actually say that, but it's what I was thinking.

But then I started thinking about it more. In my locale, the subsidized housing program has a waiting list of multiple years. They just don't have the funding to go around. There is a long line of people eligible for a voucher, and the people who hold the vouchers now are on thin ice... If they do something horrible, their voucher can be given to someone who has been waiting years to get it.

Moreover, HUD allows landlords to submit a special claim for tenant damages, so in the event that the tenant does damage the property, so long as it is well documented, HUD reimburses the landlord. It's like having a free insurance policy from HUD so that they're liable for damages that their tenants cause.

My personal views about the program are irrelevant, and I'm playing devil's advocate to try to learn something. So can anyone argue against the above with facts and evidence rather than just citing anecdotes and common sense?

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