The Landlord Lens - Section 8 Housing

Episode Date: January 30, 2024

In our latest episode of Be A Better Landlord, Krista and Seamus talk through the details of Section 8 and the Housing Choice Voucher Program. 

I'm Seamus Nally, CEO of Turboretent, and I'm here with Krista Ruther. And she's going to help me be a better landlord. Krista, let's talk about Section 8. I've heard lots of information, some of which, to me, seem pretty dubious, so I'd love to get into the facts. So could you tell me first, what is a Section 8 housing program? So the Section 8 housing program is a government-subsidized housing assistance program. It is funded by the U.S. Department of... of housing and urban development, HUD, if you're cool,

they give money to local public housing authorities and agencies who then determine the area's median income and see if people are spending too much on their rent. If they are spending too much on their rent, if they are low income, disabled, elderly, then they can apply for this program and actually get part of their housing costs subsidized. Interesting.

So that is the same thing or that's different than a housing voucher program? There is a misconception that these are two separate programs, they're actually the same thing. Interchangeable terms, you'll see that housing choice voucher program is used more often now than Section 8 because of some bad stigmatization, but both are still the same thing. Gotcha. Okay, Housing voucher, Section 8, exact same thing, stop using them as different terms. Absolutely. It makes sense. So how do tenants actually qualify for a Section 8 program, though? Good question. So it's going to vary depending on where they live,

but more or less the PHA is going to look at their family income. Okay. They're also going to look at the size of the family and make sure that there are no disqualifying features. So a record of using illegal drugs, producing illegal drugs, violence, you are not likely to be accepted into the program. But otherwise, as long as you meet the income requirement, you should be in a good spot. You also have to be a U.S. citizen or a specific type of legalized immigrant in order

to apply and qualify. So because there's a qualification part of the Section 8 program, do I have to bother screening these tenants at all? Definitely should. So a common misconception about Section 8 is that landlords have no control over who comes in and participates in that program within their dwelling. But you can actually use your same rental criteria as you would screening any other tenant. And you really should. In order to qualify for this program, the applicants are going to undergo their own background and work verification. procedures. So you'll have that information, but it still pays to do your due diligence just in case there's something that doesn't align with your specific criteria. And you are allowed to turn

Section 8 tenants away if they don't qualify for your rental. Really? Okay. So I had that completely wrong. I thought you had to accept anyone that came to you from Section 8. No. And in fact, what people usually mistake there is that there are some states in which there's an income clause. So you can't deny someone based on how they get their income and Section 8 housing vouchers fall under that. So you can't deny someone just because they use Section 8. They participate in that program. But you could deny them if they had a history of evictions, for example. So let's use that as a perfect segue into how do you get paid from Section 8?

Are you actually getting paid from the tenant or are those funds coming from the government? So there is actually a split. You will receive 30% of the payment from the tenant themselves or the family. and then the other 70% is coming from the government. So one really important thing to know if you're interested in becoming a Section 8 landlord is that the first payment is likely going to be at least a month or too late as you get filed into the system. After that, you will receive payments on time. The tenant has to pay you on time.

And the government is pretty reliable after you get that first payment. You're set up in the system where it comes in and you get your pay. Gotcha. So pretty lousy first impressions from the government, paying late that very first payment. But then after that, every single one should be on time. Absolutely. So let's talk about the kind of worst case scenario. Let's say you have to go through a eviction. Can that be done with Section 8? What are the differences in that process versus any other tenant you may have? Yeah. So, of course, eviction should only be done as a last resort regardless of the income type for your tenant. However, you can evict Section 8 tenants. In this case, you would want to make sure that you contact the public housing authority that is supervising this plan to see if there's anything that they're. they can do in terms of mitigating any kind of conflicts or let's say rent hasn't been paid from the tenant side, maybe they can help.

Otherwise, you would follow typical eviction proceedings. So you want to make sure you document everything. You send clear notices in the timelines as specified by your local ordinances. And then you can in fact evict the tenant if this situation does not get resolved. Again, treat it as a last case scenario, but it is something that you can still do with a Section 8 tenant. So we talked about kind of worst case having to go down the path of eviction. like best case, you have a wonderful Section 8 tenant in your property. Is there anything different

when that lease comes up for renewal that I have to do as a landlord? Oh, so nothing too big. You're going to undergo the same kind of lease renewal situation that you would with a typical tenant. Okay. Although something to keep in mind, you don't have to keep a Section 8 family on a year-long lease every single time. Okay. The landlord at that point can talk with the family. You might want to move to a month-to-month lease. Or you could sign up with another year-long lease to either or fine. Gotcha. How does Section 8 handle rent price increases? Is that something that happens automatically? Is that the market changes? Is that something is the landlord? I have to push for. Yeah. So the local public housing authority is going to be

looking at all of these prices and comparing your property to the surrounding properties in a way. So if they see that the local areas, red prices are increasing, they will reevaluate your property. They want to make sure that you're charging a fair rent. And if they see that you have the ability to charge a higher rent than what they would subsidize, they'll let you know. The tenant usually has the option to stay with that property. But they would be responsible for the additional cost beyond what the program would pay. So instead of that 70-30 split, it might look a little bit different where they are picking up additional costs to stay in that particular space.

So it sounds like there's a real benefit as the landlord to be in touch with the local HUD to make sure. up-to-date on kind of any changes that may be dating place. Yeah, absolutely. And they will definitely keep in touch with you too, because as a member of the Section 8 program from the landlord perspective, you'll have to undergo regular inspections. So the first one, when you're applying for the program, they go through 13 key points,

just making sure that it's a safe, sanitary space for someone to live. And then annually after that, you'll be having that place reinspected. And at that point, they can let you know if there are any changes in terms of the rent being able to go up or not. Awesome. So, so far, what I've gathered from our conversation is with Section 8, the rent payment split is going to be 30% coming from the tenant, 70% coming from the government, which is going to be on time every time, except for that first time. There may be a little bit of a delay. Yes. It sounds like I can screen them in the same way. I would screen any of my tenants. And it sounds like the local public housing authority is kind of my best friend in terms of learning more about. the program, talking to them if market rates are changing and run prices go up, or even having

them help be a mediator with any issues with the tenants. Very much so. In fact, if you get into a situation, let's say you have a Section 8 tenant, they've moved out, and you notice that there's damage in your property, just like it can happen with any other type of tenant you would go through, document the damage, you still get a security deposit from people in Section 8 housing. So you would subtract any damages from that. say that the amount of damages supersedes what's the amount of the security deposit. You then could

go to the local PHA and sometimes they have funds and mitigation help to help you secure more of that money to restore your property. Hopefully it doesn't come to that, but there are those resources available if that should happen. Now tell me, is Section 8 popular? Like how many tenants, how many people are using Section 8 across the country? Do you have any stats around that? Well, there are about 2.2 million people who received housing assistance in 2018. That's the last year the data was available. And in terms of the popularity of Section 8, usually there's at least a one to two year wait list. So people could be putting their names on this list and it really takes a long time for that to come up, which is good on the landlord side because that means that there are always people

looking to fill those vacancies and I can get them in. Also, there's nothing that shows that Section 8 tenants are inherently worse tenants than any other renters you would see on the market. And in fact, they tend to stay longer than their non-section 8 counterparts. Okay. So traditionally, Section 8 folks stay in the program for about eight years, which is pretty long, if we consider that most people are moving almost every year. That's not always the case with these folks. So they really want to get in somewhere that's safe and comfortable and thrive.

Landlines have the ability to provide that. So it's a pretty good program. Yeah, that sounds like the dream long-term tenants that have. on time every time. Yeah. Awesome. Well, Krista, thanks a whole bunch for teaching me

a lot about Section 8 today. Absolutely. TurboTenant is the all-in-one platform for landlords to manage their rental properties. From vacancy to tenancy, we have you covered

with industry-leading tools and expert advice. Landlord better, from anywhere for free at turbotenant.com.