The Pros and Cons of Accepting Section 8 Housing

by | BiggerPockets.com

Section 8 is a rental subsidy program funded by The Department of Urban Housing and Development (HUD) and run by local public housing agencies. In other words, Section 8 will help pay all or some of a tenant’s rent. Section 8 is available to low-income, elderly, and disabled tenants to help pay their rent and utilities. According to the HUD’s website, in order to qualify for Section 8, the applicant’s combined total family income cannot exceed 50 percent of the average income for the area, and over 75 percent of vouchers go to applicants whose income is 30 percent below the average income for the area.

Additionally, Section 8 requires that properties be held to certain HUD-approved standards, and all Section 8 rentals must be inspected before the landlord can receive money from the Section 8 program. Most of these requirements are common sense things that you shouldn’t have a problem making sure your properties have, such as windows that open, heat, ventilation in the bathroom, and more. Furthermore, Section 8 defines the maximum amount of rent they will pay based on bedroom, which can be both good and bad, depending on what they define for your area. In our area, Section 8 pays almost $100 more per month over what we can get from other non-Section 8 tenants, which provides added incentive to take the Section 8 Program.

So should you accept Section 8? Let’s look at some of the pros and cons to help you decide.

Related: Should I Accept Section 8 Tenants — Or Run the Other Way?

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Pros of Section 8

  1. You’ll generally not need to worry about the Section 8 paid portion of the rent being late, as it comes directly from the local public housing agency every month.
  2. Tenants must meet and adhere to certain requirements of the Section 8 program or potentially be faced with being dropped from the program. For example, one of the expectations is that the tenant complies with the terms in their lease.
  3. Housing Authority will conduct annual inspections of the unit, making sure the tenant is not destroying the property.

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Cons of Section 8

  1. In order for the rental to qualify for Section 8 tenants, the unit must be inspected by the local public housing agency and meet the program’s standards for habitability on an annual basis. We listed this as a “con” since it requires that the landlord adhere to the government’s standard of habitability, not their own. It’s not necessarily a bad thing, just something to keep in mind.
  2. If the landlord presents a nice, clean, habitable home that meets all Section 8 requirements, then the tenant allows the home to fall into disrepair by not caring for it properly or failing to report maintenance issues, not only is that a problem in and of itself for the landlord, but it can also lead to the tenant being dropped from the program. This means no income, no rent, and no reimbursement for forthcoming damages.
  3. Even though the tenant must meet the Section 8 program’s guidelines to keep their Section 8 status, there is no guarantee they will, once again resulting in being dropped from the program and leaving the landlord with a tenant who can’t afford the rent.
  4. Finally, in our experience, Section 8 tenants can be more difficult to manage than their unsubsidized counterparts. We’ve typically found that Section 8 tenants cause more damage to the property and often allow more garbage and junk to pile up than our other tenants. Perhaps this is due to the fact that (in their mind) they aren’t financially responsible for what happens, or perhaps it’s simply a correlation between low-income tenants and cleanliness. But whatever the reasons, whether financial or socio-economic, Section 8 tenants are often harder on a property, which is the number one reason why we don’t jump to rent to Section 8 unless a weak rental market makes it advantageous.

Related: 8 Myths About Section 8, Corrected: Here’s the Profitable Truth

We have had both good and bad experiences with Section 8 tenants. One bad experience we had with Section 8 involved an inherited tenant (they were in the rental when we purchased it), and it was really bad. We’ll spare you all the dirty details, but it went from bad to worse very quickly and ended in a long, drawn out eviction, a house full of cockroaches, a death threat, and a few thousand dollars in rehab costs—plus months of lost rent!

This situation could probably have been avoided altogether had the property manager who placed the tenant screened correctly, but that’s one of the risks you take when buying properties with existing tenants.

Just because a tenant is on Section 8 doesn’t automatically make them a good or bad tenant. It’s up to the landlord to screen every applicant correctly and thoroughly and only accept those who meet their minimum standards. If you do decide to accept Section 8 in your rentals, you will need to be sure all applicants meet all your other criteria, including rental references (do they abide by the terms of the lease, do they have good housekeeping habits, are they all-around good tenants?), credit (do they pay their bills?), background (do they obey the law?), and any other criteria you have for your rental.

[This article is an excerpt from Brandon Turner’s The Book on Managing Rental Properties.]

Do you invest in Section 8 housing? Why or why not?

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About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

12 Comments

  1. One of the issues with Section 8 is the list of allowed occupants. Should you rent to a woman with two kids and find that her boyfriend has moved in, then she no longer qualifies for the subsidy. If the agency finds out that you were aware of this additional tenant, they can consider you a co-conspirator and demand rent paid back.

  2. John Underwood

    I have 2 section 8 properties in Greenville, SC.
    There are hundreds of people waiting in line for a section 8 house here.
    I screen my tenants and have declined to rent to some based on their background check.
    So far things have been fantastic and my tenants take great care of my houses.
    I get a direct deposit from the Government for all or most of the rent on each house.
    I’m looking for more 3 bedroom houses to buy and add to the section 8 program.

  3. Matthew T.

    I have 500 units in Western Mass and have approx. 60% on subsidy and in Western Mass typically market rents are higher than Section 8. I also have found that a big problem with subsidy is that even though the rules are that they will loose their subsidy if they do not pay and get evicted it is far too easy for them to contest and just get reinstated. Not a single subsidized tenant that we have evicted has lost their subsidy. It is very discouraging to see our tax dollars at work like this. There needs to be better oversight.

  4. Aly W.

    Something else to keep in mind is that if the tenant is dropped from the program, *you’ll* need to evict them, not the agency. They will not leave voluntarily. And it’s on your dime. Damages and lost rent will almost certainly exceed the amount of the security deposit.

    • Cory, the agency does NOT pay the security deposit; the renter does. They magically always have the money from somewhere for the deposit.

      The big con not listed is the difficulty/impossibility of getting annual rent increases. The 3 Section 8 agencies I deal with here in Illinois have “suspended” rent increases for the past 6 years. When the renter moves in, the market value rent might be fine, but after two, three, or 5 years your rent allowed by Section 8 may be far below market value. In perverse government logic, I can push my renter out, she can go to another landlord and Section 8 will pay current market value. I can put another Section 8 renter in the unit at fair market value. But they just about refuse to raise rents on current renters staying in their current unit.

  5. Tim Sabo

    Aw, Section 8, one of my favorite topics. Half of our units are Section 8, as we are in a extremely economically depressed area (city has been financially distressed for 25 years). We recognize that we must rent through Section 8 to find tenants that can pay the rent and pass a background check (checks here are done by the local police force and not available to landlords, meaning if we need to check out the tenant, we have to ask them to pay for a second check).

    Through Section 8 we have had our share of good and bad tenants, but “screen and be mean” is my approach: check them out well, have a tight lease, go over it with them completely, and enforce your lease when it is broken, otherwise they’ll drive you to the poor house.

    As Matt T. suggests, oversight of the S8 program is quite poor. At the outset, landlords are required to show all taxes and municipal utilities are paid in full, and submit to an inspection. I wouldn’t have a problem with these but for the fact that the housing office (HO) does not-at the end of the contract , when the tenant is moving out-make the tenant show all municipal utilities are paid up, nor do they complete a move-out inspection that requires the tenant to return the property to the landlord the same as they got it.

    S8 and the HO are a funding source only: they make you work as a landlord but ask nothing of the tenant, which supports what Brandon stated about a lack of accountability on the part of the tenant. When they have no “skin in the game” they don’t concern themselves with the property. I agree with Matt T. also that we should be requiring a S8 tenant to live up to their part of the bargain in order to get the NEXT voucher.

    Inspections here are also strange. We have different inspectors, each with their own personal pet peeve. One guy has to ensure all doors latch, even closet doors-really? One guy is obsessed with peeling paint-and I understand the concerns over lead-based paint-but test it first, and make sure it IS a danger before you write up a porch ceiling for the tiniest bit of peeling paint. Finally, we have a third guy who insists on making sure bathroom sinks have stoppers, or if there is an old water stain on a ceiling tile that it get painted. With the long list of folks waiting to get a voucher here, you think they could set their own idiotic rules aside and inspect for truly code and safety issues.

    The HO here does nothing to get tenants to behave: they have told us that if we have a problem with the tenant we need to take them to the magistrate and evict them: they are only a funding source. There is one small piece of leverage we do use with tenants getting out of line: we place them on Probation, letting them know how they have defaulted on their lease, and telling them-in writing-that if there are any further issues we will proceed to evict, which will cause them to loose their S8 voucher for 5 years.

    Finally, I have to agree with Tom Geier when he mentioned unwanted guests. These are tenants I call the “Inviter;” they get an apartment paid for by Uncle Sam, you approve and accept them, give them the keys, and soon-oh, so soon afterwards-some one has moved in with them. Family, friends, usually a boyfriend. We have become so accustomed to this trick that as soon as a single mom with a newborn (or young child) applies, the first question we ask ourselves is “where’s the Daddy?”, because we anticipate him showing up. This just happened this week with our newest S8 tenant, and she is already on Probation after less than a month in the unit. We have it stated clearly in our lease five times about this type of lease violation, but I guess some folks still think they can get one by us.

    So we take our lumps, and still rent S8, because without it, we would struggle to find tenants that can pay the rent and don’t have a mile-long record (just recently rented a non-section 8 unit and I went through 50 applicants in a month and a half; only 2 passed the background and financial check). We accept our fate, but we strive to get better at our part, and hope S8 can improve their end with some oversight and better interaction with landlords.

  6. Nancy Babbitt

    I am a middle-aged woman who’s been a Section 8 tenant since about 2004.

    We were homeless; I am disabled, and my SO is a senior citizen.

    The building has eight units. The guy next door to us has been here the longest (since about 2000), then us. Although most of the six other tenants are more recent, historically very few of our neighbors are or have been transients.

    There is one woman who perpetuates every unfortunate stereotype about professional tenants. I feel bad for the new landlord, who took possession of the building in September, for having to tolerate her crap.

    Otherwise, the occasional “bad apple” tenant here has been more of a nuisance with an attitude who, in spite of their bluster, quiety took their ball and went home at the end of their lease.

    I grew up in a family of rental-property owners and have owned a couple of homes myself. It wouldn’t OCCUR to me to call my landlord about light bulbs (?) and other small things. I keep a hair trap in my shower drain and a food trap in my kitchen one. I know how to change fuses and reset circuit breakers. I own and can use a plunger and all kinds of hand and small power tools. I think I’m a good tenant but don’t a bit blame landlords for being fearful.

    Our new landlord intends, I suspect, to tart this place up and get the going rate for the apartments. I don’t blame him: Although we are “out” on Staten Island, this is an incredible location two blocks from the beach with a Walk Score of 80.

    What I’ll do as a non-stereotypical Section 8 tenant is find a rental agent who works with Section 8.

    If I owned the building and wanted non-stereotypical tenants, I’d do the same.

  7. Half my renters are S8. We screen them thoroughly and non-renew or early-terminate (in agreement with the local authority) if there are problems. Most of our problems are either criminal activity and/or unauthorized occupants so we have agreement with the local PD for enhanced access and surveillance as well as permission to write citations for criminal trespass. Our standard lease has a provision for police calls, if the police get called 2x in 30 days then there is a violation of the lease and the renter is in breach (this is in ALL of our leases). We also have chargebacks for sanitation, cleanup, and pest control such as bedbugs. The renters that want a home, we provide a home and they tend to stay. The renters that want a crash-pad won’t be staying, or even applying after we tell them about our relationship with the police.

    • Bart Kabore

      Hi Schumway,

      thank you for sharing your experience. I am in the process of closing on a Multi-Family Home in Austin, IL. The property has an S8 tenant in the second unit has been there since 2009. It is going to be my first time dealing with S8 people. I heard Good and Bad stories about S8 people but I am open minded. I want to give it a try and have an S8 in the first unit. Currently, the first-floor unit is vacant, 2 bedrooms, 1 bath, 1 living room, and 1 dining room. The good thing about the first unit is it is duplex down to the basement. The basement is unfinished. Each Unit pays their own Gas, Heat, and Electricity.

      I would like some advices on:

      – How do deal with S8 Tenants?
      – How to deal with the S8 Programs?
      – Should I run a Background check on the S8 tenant living in the Second-Unit?
      – What should I put in my lease contract?
      – How to get my first-floor unit on the S8 Program?
      – Should I finish the basement and add a bedroom so that the first unit becomes 3 bed/1Bath for more money?
      – Can I raise the rent on my current S8 tenant living in the Second Unit?

      Thank you

  8. edd sylvester

    How does the income screening work here? If you say “income must be 3 times rent”, is it legal to turn down S8 if they don’t meet that income requirement? Or does a landlord have to factor in the voucher? I assume this is a state-to-state issue but curious because I always read the “three-time-rent” rule of thumb but then also read about S8. These must be different types of units?

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