Section-8 Negativity - Survivorship Bias, or Accurate?

3 Replies

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?

"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."

Yes, that process exists, but you're at the mercy of the local housing authority and how they want to spend their HUD funds. In Portland, short of burning a place down, I rarely see it happen. About all you can expect is if the tenant gets to be a problem is to tell their caseworker since they can pull vouchers.

The other item are rents.  Sec8 has to stay close to market, otherwise they don't have enough LIH housing available.  Then depending on what you bill back, you need to adjust down for a utility allowance.  If you're going to send them a RUBS bill, odds are after their co-pay, they don't have it.

Depending on the income restriction (HUD project contracts are the best/worst), you need to do a lot more compliance paperwork. Mgmt companies will charge 13% for LIH vs 8% for market-rate.

Other than that, don't know what your point is.  I've owned LIH (lot lower margin vs market-rate) and, since in Portland you cannot refuse an applicant based on source of income, taken Sec8 vouchers.

I don't think there is that much difference personally between a voucher and non-voucher applicant, it's just the cost of compliance.

Hello - I've been burnt with a Section 8 tenant. One thing to note, I did not do a proper screening job, being a one-property landlord with not much experience. Even apart from the issue of a bad tenant, Section 8 makes things more difficult in general. In California, the Section 8 tenant is entitled to a 90-day notice to vacate once the lease is over (60 days for others). The tenant's Section 8 allowance was reduced at some point and she was not paying her increased part of the rent. The Housing Authority was not helpful at all and had really poor communication. The eviction documents have to be sent to the tenant and the Housing Authority. The tenant did care about her voucher but that translated only to her pleas to me and not in any constructive effort. She left the property and appliances in the same condition as on arrival, on the bright side. I was happy beyond measure when she finally vacated the place. I can't even imagine if this had happened with the current eviction ban. No more Section 8. Bureaucracy, extra paperwork, home inspection, extra tenant protection from the state and county, entitled tenant.

I see a lot of section 8 positive posts here..... maybe i missed all the horror stories, but there are many folks here that do really well with the program.