In the property management industry, Section 8 housing is often looked upon with a jaded eye. Many property managers look at the program and see only the problems: too much paperwork, too much government involvement, low-quality tenants, and a host of legal issues and expenses. While there can be a lot of paperwork initially (and inspections, back-and-forth conversations with caseworkers, etc.), becoming a Section 8 landlord or property manager can end up benefiting you as much as providing Section 8 housing benefits your tenants.
What is Section 8 Housing?
Section 8 housing provides rental assistance for more than 4 million low-income households throughout the United States. In addition to providing affordable housing to a number of communities around the country, the Section 8 housing program also incentivizes landlords to work with local housing authorities.
A common misconception about Section 8 housing is that it’s a “free ride” for participants. The truth is, tenants are required to pay rent equal to 30% of their income, and the federal money allocated for the program pays the balance directly to the landlord or property manager. The federal portion of the payment is limited by fair market rent guidelines set by the Department of Housing and Urban Development. Guidelines are based on geographic area, unit size, and how utility payments are split between the landlord and tenant.
There is no time limit for participation in the Section 8 housing program—a family can participate in the program as long as they have a need.
What is the Housing Choice Voucher Program?
The largest housing assistance program is called The Housing Choice Voucher program, and it can be either project-based or tenant-based. For a comprehensive review of the Housing Choice Voucher program, we recommend reading HUD’s Housing Choice Vouchers Fact Sheet.
Project-Based Vouchers
Project-based vouchers apply to specific apartment communities that work with local public housing authorities (PHAs). Many of these types of programs have fallen by the wayside due to a less-than-admirable history of housing projects in the U.S.—for example, Chicago’s Cabrini-Green Homes or New York City’s Queensbridge Houses.
Project-based housing hasn’t completely disappeared, however; there are still many apartment communities that accept both voucher recipients and full-market-rate tenants. The benefits of going this route are that voucher recipients are not forced into “the projects,” and landlords have a pool of pre-screened applicants to choose from. In addition, property managers and owners can still provide safe, affordable housing to tenants renting at full market rate.
Tenant-Based Vouchers
Tenant-based vouchers allow tenants to choose any privately rented unit, as long as the landlord participates in the Section 8 housing program. Voucher recipients see the most significant benefits from this program, as they have greater freedom of choice in housing.
Section 8 Housing: Frequently Asked Questions
Is Section 8 Housing Free for Tenants?
Section 8 housing is not a “free ride” for tenants. They are required to pay their portion of the rent and abide by the terms and conditions of the lease, as well as the rules of the Section 8 program. A common misconception among residents is that if the rent is not being paid by the local housing authority (for any number of reasons, with several detailed below), then they do not have to pay, either. However, unpaid rent is still grounds for eviction from Section 8 housing.
Does the Section 8 Program Resolve Disputes?
Being a part of the Section 8 housing program does not provide provisions for dispute resolution or mediation between landlords and tenants. The local housing authority will not intervene if problems arise between the tenant and the landlord.
Is It Easy to Become a Section 8 Landlord?
It is not easy to qualify to become a Section 8 landlord. Interested landlords and property managers must complete several applications, undergo a number of property inspections, and be re-certified regularly. Once enrolled, landlords cannot raise rent prices whenever they want, and they cannot discriminate against prospective Section 8 tenants. It is worth noting, however, that Section 8 landlords are not required to participate in the Housing Choice Voucher program.
4 Advantages of Section 8 Housing
Section 8 Housing Can Provide More Consistent Rental Income
Because it’s government-subsidized, the rental income from Section 8 housing may be more consistent than market-rate rentals. The PHA will either write a check to the landlord or deposit the funds into a pre-specified bank account. Because late payments could result in the loss of voucher eligibility, residents are more likely to pay their portion on time as well. It’s difficult to get back into any housing assistance programs after an eviction. For these reasons, Section 8 rental income is considered some of the most reliable.
The Section 8 Housing Program Provides Pre-Screened Applicants
Section 8 housing authorities pre-screen all applicants, checking their income levels and criminal backgrounds. Most authorities will reject any Section 8 applicant with a criminal history. This provides extra protection for the owner’s property, and greatly reduces the risk of problem tenants.
The Section 8 Housing Program Helps Landlords Fill Vacancies
Accepting Section 8 housing assistance payments increases the visibility of a rental property in markets that may have hundreds (sometimes even thousands) of potential tenants on waiting lists. In major urban markets, the waiting list for Section 8 housing may be far greater than the number of available properties. If landlords are willing to cooperate with local housing authorities, then the PHA will be more than willing to fill vacancies from these waiting lists.
The Section 8 Housing Program Provides Free Advertising
The Department of Housing and Urban Development maintains a website that potential tenants can use to locate Section 8 housing called HUD Landlord Search. In addition, many local PHAs maintain their own websites containing lists of available units and contact information for landlords. It’s free for tenants to use these websites, and it’s also free for property managers and owners to list available Section 8 units.
4 Disadvantages of Section 8 Housing
The Section 8 Program Requires Mandatory Inspections
Section 8 housing units are subject to an initial safety inspection, as well as ongoing, routine inspections by the Section 8 housing authority.
During these in-depth inspections, the PHA looks at the overall quality of the unit, including exterior and common areas (hallways, basements, laundry rooms, etc.) in multi-family properties. Additionally, Section 8 units need to meet the following criteria:
- GFCI plugs for every electrical outlet
- Lockable windows with well-maintained screens
- Working smoke and carbon monoxide detectors in specific locations
- Deadbolts on all door locks
The Section 8 Program Limits Rent Prices
Local PHAs do not specify rent prices for Section 8 units, but they must be within range of the area’s median income rates. If an approved unit is located in an area that commands higher rents, the higher market rent is probably too high. On the flip side, if a nicer unit is located in a bad area, the landlord may lose out on being able to charge a slightly higher market rent that could have been charged outside of the Section 8 housing program.
Section 8 Tenant Quality is Inconsistent
Since Section 8 tenants do not pay the majority of the rent, they may be less likely to maintain the interior of the rental unit, and may also be more likely to cause problems for the property manager or owner. However, as previously noted, being evicted from Section 8 housing makes it difficult for tenants to receive housing assistance in the future; so this may motivate tenants to be on good behavior.
More desirable tenants (outside of the Section 8 housing program) may be less likely to rent in a property that accepts Section 8 payments. However, building a solid relationship with the local housing authority may allay the fears of other future tenants.
Section 8 Tenants Are Just as Much Work
There’s no decrease in a landlord’s workload simply because they accept Section 8 tenants. While most local PHAs assist in the Section 8 rental process, landlords and property managers still need to screen potential tenants, create and enforce leases, and maintain the property. Additionally, the PHA does not help to collect the tenant’s portion of the rent.
However, if a landlord is dedicated to the Section 8 housing program, maintains the approved units, and keeps an active watch on the property, there is no reason that they cannot be successful.
How to Become a Section 8 Housing Landlord
This section will cover the requirements to become an approved Section 8 landlord for the city of Chicago, my home base. However, the majority of Section 8 housing guidelines are federally established, so most housing assistance programs operate under the same set of requirements countrywide.
Note that each local PHA may create and enforce additional Section 8 requirements. You can locate yours through the Local PHA Finder.
Education for Section 8 Landlords
The Chicago Housing Authority (CHA) requires prospective Section 8 landlords to attend a mandatory Owners Briefing seminar. The seminar includes information on Section 8 housing inspections, Section 8 landlord rights, how Section 8 rental rates are determined, and how to list and market Section 8 properties. They usually take less than 4 hours, and they provide the opportunity for property owners to interact with CHA representatives face-to-face.
Listing and Marketing Section 8 Units
After completing the seminar, prospective Section 8 landlords are able to list and market the rental units through the CHA, in collaboration with ILHousingSearch.org, which provides a free listing service for available Section 8 properties. Other options are local Craigslist pages, and posting ads in local stores and supermarkets (this works best in smaller communities). When a prospective Section 8 tenant expresses interest, the landlord or property manager would process the application just as they would for any other tenant.
Section 8 Unit Inspection
If the prospective Section 8 tenant is approved by the property manager or landlord, then the CHA’s Request for Tenancy Approval Packet is completed and submitted to the CHA. Once it has been received and reviewed for accuracy, a Housing Quality Standards inspection is scheduled, usually within 3 to 5 days. The HQS inspection ensures that the Section 8 unit meets all health and safety standards set by the federal government.
There may be multiple inspections. The most important is the move-in inspection, which determines compliance with the HQS guidelines. Annual inspections occur when leases are up for renewal; and regular compliance inspections occur when repairs (that are the landlord’s responsibility) are required and completed.
Emergency inspections of Section 8 units usually relate to major safety issues, including non-working smoke and carbon monoxide detectors, utilities, and plumbing. As of September 2017, the full CHA HQS Inspection Guidebook was 134 pages long, so the CHA provides a two-page self-inspection checklist for landlords prepare for the initial Section 8 housing compliance inspection.
Setting Rent Rates for Section 8 Units
After a Section 8 unit passes the initial HQS inspection, the CHA works with the landlord to establish a reasonable rent in comparison with similar “unassisted” units in the neighborhood. HUD uses median income guidelines to establish income limits. In Illinois, limits are set for households of 1 to 8 people, and are broken into Low, Very Low, and Extremely Low income limits.
Lease Signing for Section 8 Units
Once the rent for a Section 8 unit is determined in accordance with the income guidelines, the lease is signed by both the tenant and the property manager or landlord. Next, the landlord signs a Housing Assistance Program contract with the CHA. This establishes the relationship between the CHA and the landlord and details the rights and responsibilities of both parties. The contract also contains the provisions that the residents must adhere to during their tenancy.
What If a Section 8 Unit Fails Inspection?
If a prospective Section 8 unit fails to pass the initial move-in inspection, it does not automatically terminate the landlord’s participation in the Section 8 housing program. If the failure occurs within the move-in inspection, the landlord has 30 days to make the required repairs and have the unit re-inspected.
It is the landlord’s responsibility to notify the CHA once the repairs are completed on a Section 8 unit; they will not track the progress of the repairs. If the repairs have not been completed within the 30-day window (or the re-inspection cannot occur within the same 30 days), the CHA will abate the contract, effective on the first day of the month following the end of the 30-day window. Section 8 rent payments from the CHA will cease until a re-inspection has occurred. It is common for the CHA to pay out any abated rent once the re-inspection has been completed satisfactorily.
If a Section 8 unit has failed an inspection due to tenant-caused violations, the CHA will begin termination proceedings. If the tenant misses a scheduled re-inspection, the CHA offers two more rescheduled inspections. If the final inspection is missed without notice, the CHA considers the tenant in violation of the program rules and will initiate termination proceedings.
Meanwhile, the unit can remain on the market as an affordable housing option for other Section 8 participants. A re-inspection would need to be completed once repairs have been made. Although this process may leave a bad taste in the mouths of Section 8 landlords, if they are diligent and cooperative with both the CHA and the tenant, most problems can be easily remedied or avoided altogether.
Read more on Scaling