The Problem with Section 8…


I bet you think that someone on Section 8 simply gets their rent paid for them – do you think that?  That’s what I thought.  Ha!

From what I understand, this works slightly differently in each municipality, but let me tell you of my recent experience Lima, Ohio.  If you have read my article from a few weeks back entitled Why Real Estate Investing May Not Be a Good Business in 10 Years, then you know that I recently approved a rental application of someone who receives housing assistance (I’ve since signed a lease with this tenant). 

As I told you in the previous article this woman works full-time and earns $1,300/month.  She had been living in, for lack of a better word, a dump, but had recently qualified for assistance which enabled her to apply for a unit that she deems more conducive to raising her daughter in – my unit.

When she called and told me she is qualified for housing assistance in the amount of up to $635, I assumed that they would pay her entire rent up to that amount.  It sort of made sense to me because if you add her income of $1,300/month to this subsidy you end up with an amount which is roughly 3 x the rent.  My rental guidelines stipulate gross income of at least 3 x rent so I erroneously made an assumption that this is how the government structures this program…

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Not Even Close

In actuality, the requirement as part of this program is that the tenant spend 30% of their gross income toward their housing, which means that somebody grossing $1,300/month is held responsible for $390/month of rent.  Now, I suppose that if someone does not work at all and has no income then the subsidy covers their entire rent – I am not sure how that would work.  But, if that were the case, then it “almost” seems disadvantageous to work, especially if you are only going to earn $1,300/month gross.  Thoughts?

On The Other Hand

I guess that if you do work, then you could go out and find the most posh apartment in Lima at $1,200/month rental, pay $390 based on your income of $1,300 and expect the subsidy to cover the rest – right?  Not quite…

The housing authority in my town has designated the maximum valuation for a 2-bedroom rental unit and they will not subsidize rent over and above this number.  So – if the maximum qualified rent is $615, then any rent over and above that is 100% on the tenant.

So, it’s not like being subsidized opens the door to undeservingly posh life style; on a unit that the government deems to be “reasonable”.  And yet, if someone qualifies into the program but their income is such that the first $390/month of rent is on them, then the two choices they have are:

  1. Rent an apartment for $390
  2. Rent an apartment for more, which is nicer and in a nicer area; still pay $390 and be subsidized on the rest

There is Another Option

Of course there is an other option – get a higher paying job, a second job, or work overtime.  Let’s talk about that:

Let us say that this person chooses to work overtime and earns an extra $300/month, which at the Ohio minimum wage would require an extra 20 hours per week, or more.  The break-down in this case would be as follows:

RENT:  $615

Tenant (30% of Gross Income): $480

Housing Subsidy: $135

As you can see, working 60 hours per week would result in this person’s housing costs going up from $390 to $480.  I ask you – is it worth it?  I ask you – does the system introduce a disincentive to productivity?

But, you may say, now that this person makes more money they can afford a more expensive apartment…  Not so, since the housing authority determines the limits as to how much rent is “subsidisable”, and anything over and above that becomes tenant’s responsibility.  Can they really afford that?

Under the current system, people are encouraged to work less not more because they are penalized for making extra income, while at the same time they are not able to work enough hours to make so much more money that they won’t care about the subsidy.  I concur that if someone making $1,300/month had viable option to double their income, they likely would because the quality of life afforded to them by $2,600 would be so much higher.  But, let’s face it, people earning minimum wage are not likely to have either the education or entrepreneurialism to allow for this.  And thus, they remain in the system and earn just enough…

We have some problems here, ladies and gentlemen.


About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily residential real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben is a licensed Realtor with YOCUM Realty in Lima, Ohio. He is also the author of Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.


  1. Well put and unfortunately another option for her to get more rent “subsidized” housing is to have more kids.

    I used to own a lot of SFR rentals and multi unit rentals and because the area was poor I had to accept Section 8 tenants. One woman with three children and not working qualified for about $1,250 a month rent subsidy. About six months into the Lease the State (Wyoming in this case) tells me it has had recent budget cutbacks and the maximum rent subsidy is now $1,050. I ask where am I going to get the remaining $200 due each month and the State told me to get it from her or simply lower my rent. Needless to say when the Lease expired I had no interest in renewing it.

    • Thanks Tom – and exactly. This was the point of both articles. The level of government involvement we currently have is unsustainable. At the same time, the government is plugin up real whole that really exist in our economy. We’ve got to get some serious people in the room to solve some issues…

      Thanks so much for commenting Tom!

  2. …”We have some problems here…” I love that. Yes, when a Gov’t system punishes productivity through any means, we have a big problem. Unfortunately this is happening in many other areas of our society as well. I’ll stick to real estate rather than go down that road. I have seen a big increase in potential renters that include a man and a woman with kids. They are not married. I didn’t think too much of it at first, but as I saw the trend continue I asked myself why. Eventually it became clear that the mothers are receiving gov’t benefits for their kids and are not claiming that there is another parent in the picture. So, not only do we have a system that limits productivity, we have a system potentially influencing the out of wedlock birth rate. I say potentially because many may learn of the benefits after the child is born, and the benefits then become an encouragement to not get married later.

    • Steve – you are hitting on something. I don’t have the details in front of me and no time to research. But, the law that allows mothers to collect for each child – here is how it happened…

      The Dems proposed the law – Republicans said OK, but only if there’s no father in the home!

      BOOM – we’ve just created an incentive for women to have children and remain single. 2 ways to solve this:

      1. Discontinue the subsidy
      2. Allow the subsidy for married people. A lot of the problems in our society are a function of kids growing up without a cohesive family structure. Thoughts Steve?

  3. Ben,

    In the section you labeled “On The Other Hand”, you wrote:

    “The housing authority in my town has designated the maximum valuation for a 2-bedroom rental unit and they will not subsidize rent over and above this number. So – if the maximum qualified rent is $615, then any rent over and above that is 100% on the tenant.”

    Actually, the Housing Authority caps the tenant’s maximum contribution toward rent at 40% of income. So the tenant really can’t go too much higher in rent – they will have to stick to a range that will be approved by the Housing Authority. So in your example there, the tenant could go to a place that was over $615 by only 10% of income (since 30% of income is already built into the $615 in the first place).

  4. “I ask you – does the system introduce a disincentive to productivity?”

    You hit the nail on the head. I haven’t seen a welfare-oriented system yet that doesn’t have that net effect.

    Regarding Section 8, I’ve never done it. But I take the advice of my father-in-law who has managed rentals for 20 years and took Section 8 at one point in time. I simply haven’t the time nor the energy to keep up with such regulations, tenants, repairs, or any of that. I instead prefer buying top notch property that will draw top notch tenants, and thusly won’t turn into buy-and-mold down the road.

    • So you are not taking Section 8 tenants because you politically disagree with the system. Section 8 is in place to help families. My experience with this … do my homework.Vet the tenant applicant. Consider, during the recession, many home owners lost their properties. Simultaneously, the government had many safety net programs in place – the recession was a good time to consider Section 8 — programs were funded to the hilt, while simultaneously many employed persons with good credit suddenly found themselves in default. My point – the risk of a politically motivated strategy is that when times change strategies need to change to be best positioned.

      • Bob – agreed. There are good tenants in Section 8 and there are bad; there are good tenants outside Section 8 and there are bad. I’ve excepted Section 8 tenant because I liked the person – life will show if I am right…

        Thanks so much for your thoughts!

      • That’s and interesting look at section 8 “It is there to help families”. Not let’s add something to the mix, would these families exist if not for the government (tax payers) helping?

        The answer is no, these mothers would either not have children or not as many, and believe me the man would be supporting the children.

        So really since no one in Washington really cares about anyone, except themselves (witnessed by the shear opulence that surrounds the folks on the top of the Federal government food chain).
        Section 8 is for all intensive purposes welfare for landlords.
        Now the question from atop my pedestal “Would I take a section 8 tenant?”

        So far I have resisted doing so, but other landlords surrounding my multi’s have embraced the program as most are from out of town and do not what to deal with chasing tenants for rent. What this has spawned is a large group of loiters (the entitled crowd that has no intention of ever working), which in turn makes it harder to get good tenants. If the trend continues I might be forced to take the “blue pill” as all of my competitors have done.

        So when I am forced to swallow the blue pill, I will make myself feel better about it by claiming to be help families. When I really know I am managing a voter storage facility.

        • “A voter storage facility” – that is a classic and accurate way to describe it….. Unfortunately. I am a firm believer in the cliche “teach a man to fish…” ideology and do feel it harms society to turn the “safety net” into a hammock.

          I recently sold a house, FSBO, for $91000 to a woman with 2 children. She said “I have to have this house and have 10% down but could not tell me how much cash she had when I first talked to her…. I was lost about that. She had her agent send me a qualification packet to me. She was pre-qualified for a “dream home” program where the government GRANTED a 10% down payment, prorated down to zero payback for 10 years. So her purchase price was $82000 which brought her payment to about $700-$725 per month. Further down in the packet, there was a Section 8 portion that stated she was qualified for $650 per month with no sunset that I could find. Needless to say, I was shocked someone was going to BUY a house for $50-$75 on my tax dollars!!! I sold the house but had to hold my nose while doing so.

          Oh and another issue was if her (on the books) income went UP her assistance would go down and if her income went DOWN her assistance would go UP. Way to reward slothfulness….. Just my 2 cents.

  5. Section 8 serves a purpose. I’m annoyed by your “go out and get another job” jibe. Many Section 8 recipients have already done that. Their second better job combined with the government subsidy is allowing them to live a decent life. Section 8 is a payment method, landlords and owners need to still do their homework: credit check, background check, call for references. Even the best non Section 8 tenants occasionally move out or default and require eviction, etc and no one suggests they go get a second better job to pay the landlord. We just deal with it – because it is part of the business of being property owners.

  6. I have had section 8. The whole system is broken.

    What you want to know from a tenant is what is their approved voucher amount before leasing to them?? If the rent you want is 700 but their voucher is for 500 it’s a non-starter. You won’t have a snowballs chance in %ell of collecting that difference. TRUST ME….. : )

    The voucher for the area can change mid stream as HUD reduces payouts or the case worker re-evaluates the tenant and has found out they make more income and mid lease wants to adjust the voucher downward. The section 8 tenant feels punished for trying to do good and break free from the system so many give up or reduce hours (not try to get ahead).

    In a way this is the same thing for social security in that if you make over a certain amount you get penalized so would be working for free when you get older so people just work less days to stay under the minimum income. Also older people do not get married as they would lose benefits from their dead spouses etc. and make less on SS as a couple.The whole system is a cluster F. It’s not hard to see why our deficit is where it’s at with thinking like the government has.

  7. I have a S8 tenant in a duplex I just purchased. The cost of his unit is ~85% of market rate, mostly because I haven’t had a chance to fix the unit yet (purchased Aug 22). Interestingly enough, even though he and I had a lease in place, the county determined that his income had increased (he’s on a fixed income) to the point that I HAD to increase my rent. I had to raise my rent 10% because of his cost of living adjustment.

  8. I’ve been in the low end rental business for over 20 years. I participated in section 8 rentals for a couple of years, but came to the conclusion that life is too darn short for that kind of abuse. –Abuse from bureaucrats telling me some minor item didn’t meet their inspection standard, whilst 500 yards away, an entire complex run by the same bureaucrats never came close to the quality of my units. –Abuse from entitled tenants, threatening me if I didn’t give them what they want. These folks knew the system and they knew how to work it.

    There are lots of good low income working people out there. I’ll take a slightly smaller return and not deal with the abuse….. I’ll leave the rest for others who can serve them up a “decent life”. I’ll work with people who make there own decent life.

    • Thanks so much for your comment James. We are of the same mind when it comes to bureaucrats. In fact, when this woman applied I told her that I will consider Sec.8 so long as they don’t make me jump through hoops. They didn’t so I did 🙂

      Thanks a lot!

  9. This is great. I am learning a lot from this post and all the comments. I have a house in Dallas that has been rented to a sec8 tenant for the past 5 years. Actually 2 different sec8 tenants. I rent the house for the amount of the voucher. It was originally 1208 and they reduced it to 1101. I accepted the new amount because I knew I was not going to collect the extra 100. I’m ok with the amount but mostly I am happy that the rent is paid every month on time.

  10. I have not taken section 8 tenants. I know one guy that owns a duplex (owner occupied and rents out his upstairs) next to mine that has had a couple section 8 tenants. My folks had a section 8 tenant and chose to move out after a year (if that) because she did not want to park in her spot because another was closer (triplex).

    I do have one tenant that gets government assistance of some sort and doesn’t seem interested in getting a job. He picks them up, pretty decent jobs actually and can’t handle it or doesn’t feel it is worth his time.

    My 2 reasons for not wanting a section 8 tenant. 1. I got into landlording because I like the control of the investment that it offers. Section 8 has enough regulations and time consuming requirements that I don’t want to mess with it. 2. And maybe even more important. I have a hard time relating to those on assistance (long term at least). I can solve problems by actively working on it and finding what I personally can do to bring about a positive outcome. I will ask for help to get the tools required to do this but I would not be happy with a handout because I am aware of all the possibilities and opportunities available out there. If I have my typical tenantspeak of a tough week, we can both speak on how it was worth it to provide for our families and get ahead. We understand that it is our choice to work where we do and for the position in life we are in. I understand that if something goes wrong, I can hit the pavement and make some money with any skills I do possess to provide for my family. When I speak to folks of what I has seen common in the section 8 mentality, I get a look like what I am saying is really out there. These suggestions might include not being drunk every time I see them, taking pride in your home and keeping it clean (if nothing else for your childrens sake), and most insane, working. I know everyone I have met has a talent they can market, babysitting, cutting grass, shoveling snow, painting, cleaning, dog walking, the possibilities are endless. That is a hard part, how do you train an adult to get the advantages of being raised in a family that taught them to value hard work, took the time to discipline, spoke about how money operates, taught and lived manners and respect.

    • Hey Kyle – you seem to think that all people on Section 8 do not work. In fact, my tenant works 40 hours and does the best she can, which unfortunately is not enough to afford a decent place – that’s a problem wouldn’t you say?

      Thanks so much!

      • I definately weighed heavier in one direction. I do think their is definately a difference in those who have long term dependence on one or many government programs and those who use it in times of emergency. I would agree with you in the fact that it does not seem that these programs encourage one to rise out of that dependence. I guess I was focusing on a certain mentality, that does show itself in section 8 tenants and non alike.
        I think at the end of the day poverty is largely a product of upbringing. As I grow older I realize how much “common sense” knowledge I have that I take for granted because I was taught this from little on whereas many others never had this.
        Back on topic, I don’t believe anybody needs to stay in a minimum wage job. Maybe I am in a great area in the Fox Cities in Wisconsin but there are jobs out there if you want to work that hard. This is a personal choice that each person has to weigh. I work in a manufacturing plant as a millwright mechanic on paper machines, my wife is primarily a stay at home mom and part time floral designer. She has worked in a paper plant in the past and easily could get a job like that again and be more than capable to do it. She however doesn’t want to so and I am happy she gets to take care of the household and our son. I have a good friend, who was actually my roommate before I got married. He bought a duplex on land contract and has learned alot doing the work on the lower he lives in while renting out the upper. We met as teens when we both worked at McDonalds. After about about 15 years of working there just last week he left and got a better job at a local foundry. Now during his time at McDonalds he did move up to assistant store manager but also was off of work for nearly a year with major heart problems (had a valve replaced at age 20 and complications at 28) including a good couple months in the hospital, coma, thought we lost him a couple times, brain swelling, you name it. He had a good sized chunk of his skull removed and was out for a couple months. He had to learn his coordination all over again, lots and lots of therapy. I am prettt sure he just hit a year since it started last week and he started his new job last monday. That long winded story just screams to me that this guy had every excuse in the book to not keep fighting for something better but his determination not only saved his life but also his future, and that of his family.

        Lastly Ben, I you are doing alright for yourself and your family. I also would guess that you know for a fact that areas you need to improve on. I would say that about myself. I would nothow ever say I am doing the best I can, and I don’t think you would say that about yourself either truthfully. There is ALWAYS something better we could have done. That 15 minutes spent on facebook this morning could have been put toward something much more productive. That X-box not only wasted $500 but also the vast majority of hours spent infront of it playing games. I know your intent was good in saying that your tenant is “doing the best she can” but I would say at the end of the day it was really an insult. You and I both know she has the capabilities to do better because we all do. I also understand your point that minimum wage is not a livable wage expecially with the standard of living explosion over the last 50 years but individually we can do little about that. Even if minimum wage is risen, realistically it is just going to put more people at the minimum wage. I cannot control federal or state minimum wage rates but I can control my actions every minute of the day to make minimum wage irrelevant and I would rather focus on what I know I can control as opposed to what I would like someone else to do to make my or someone else’s life better.
        Thanks for the response Ben, fantastic topic. If this type of stuff isn’t talked about it becomes even more misunderstood and even more flawed.

        • Hey Kyle,

          You, me, and everyone else on this forum are made of the same stuff; we get up in the morning and go get it done. You nailed the thing when you spoke of the environment – I’ll just stop there…

          Look – in every society there are wealthy and there are poor. This is fine but this is not what we have, since the middle is slowly disappearing. All that I am saying is while I do not have the answers, I am aware that something needs to give. This tenant of mine actually has some type of college degree – the society told her that if she goes to college she’ll do better and she was foolish enough to listen. 50% of population it seems like are receiving subsidy of some type. We can’t keep at it like that. Something has to give…

  11. Ben

    Here we have the NB Housing “Rent Supplement Assistance Program (RSAP)” which operates similarly – inclusive of the disincentive for someone to take {part time} minimum wage work. Another quirk in our system is if two recipients – say two single moms – decide to pool their resources to afford a nicer apartment, one or both will have their supplement docked as the programme has a maximum supplement per rental unit.

  12. Ben, you’re talking about built-in disincentives when the program is operating as designed. But in my experience (which is in a high-cost metro area), without fail, every Section 8 inquiry after a conversation or two with the potential tenant always comes around to some scam they are pulling and want me to participate in. Whether it’s keeping an extra relative who lives with them and that the Section 8 powers that be don’t and cannot know about (or the household income would be too high to qualify, or to qualify for the same level benefits, presumably) off the lease, doing a side lease with this person, or having an “official Section 8” lease specifying one monthly rental rate and a side “real” lease with the actual rental rate. Clearly, the program is chock full of abuse and should be aboloshed or drastically reformed on this basis alone, if not for your disincentive reasons, as well. Needless to say, I declined the “opportunities” to participate in government assistance fraud and have the tenants have this to hold over my head.

  13. As others have said the issue is the idiotic government imposed regulations that give people incentives to do irresponsible things (Not work, reduce your hours, have more kids when you are already living off the dole…) while penalizing people for trying to better themselves.

    If I was getting a free ride it would be pretty damn hard to justify working 40+ hours a week doing some crappy job (Since I would not have the skills to get a cushy one) and after taking into account the added expenses needed to have the job maybe not even have as much as before. It is a broken system (as are pretty much every single one the government is involved in) but nobody does anything to fix it.

    • Shaun – I hear you. But, can we include into those “idiotic” regulations the monetary policy which drives the Daw more than 18% to the upside annually in the middle of the worst economic environment in 3 decades? Repeat after me Shaun – transfer of wealth!

      If we are to be intellectually honest, we have to admit that the government does much more to incentivize abuse at the top than the bottom. Thoughts Shaun?

      • I agree that most of the abuse of the system is at the top.
        They have the power and if they want to be greedy and corrupt they can do more damage.
        I am generally of the opinion that the wealthy are generally good people that want to do good things. You generally aren’t going to be successful if you lie, cheat and steal and screw people along the way. At some point that stuff will catch up with you.
        Politicians I feel less convinced about this though…

        I tend to think that on the bottom you clearly have straight up criminals that are gaming the system to get a tons of benefits they aren’t at all eligible for but for the most part I think people are following the rules of a stupid system that makes it more advantageous to do less and contribute less to society.

  14. I spent 5 years working for a property management company in Kansas City, KS. The Section 8 rules there were a little different from your experience. They set the maximum rent rate, but the tenant was not allowed to pay more than that. A landlord could be in a lot of trouble for asking a tenant to pay more. It was also our experience that the best Section 8 cash flow came from tenants who were fully subsidized. People who qualify for Section 8 are living on the edge, and sometimes trying to get even $125 from them was difficult. If they didn’t pay their portion, they would lose their voucher and then you would have an eviction on your hands. I agree that the system does not encourage people getting off, but asking a single mother to find a second job isn’t really a good option either. The long term consequences for the children and the juvenile justice system are not good.

  15. Sharon Klein on

    I just want to add, that in Kansas, if a single parent is receiving any kind of government support, he/she has to provide name and last known address of the missing parent so the state can then go after that parent for child support.

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