Are you a landlord looking for a new way to make more money on your rental properties? Are you tired of dealing with unpaid rent or late fees? Then you should consider becoming a Section 8 landlord. Not only will you enjoy certain perks, like consistent housing assistance payments and decreased vacancy rates, but you’ll also be helping low-income renters enjoy a safe, comfortable place to live.
In this post, we’ll discuss what Section 8 housing is, who is eligible for Section 8 housing programs, how to join the program, and the pros and cons of becoming a Section 8 landlord.
What Is Section 8 Housing?
Section 8 housing is a government-funded program that assists low-income families in paying for housing. It is sometimes called “subsidized housing” or a “housing choice voucher program.” The participants‘ rental assistance comes in the form of vouchers issued by local public housing agencies (PHAs) and can be used to pay for rental units approved for Section 8 tenants.
The Section 8 Housing Choice Voucher Program is run by the U.S. Department of Housing and Urban Development (HUD). President Lyndon B. Johnson established the housing program by signing into law the U.S. Housing Act of 1937, and this program has provided eligible families with vouchers they could use toward paying their rent with the participating property owner of their choice ever since. The purpose of Section 8 hasn‘t changed much over the years as its main goal is to provide affordable housing for low-income tenants across the country.
How Do Private Landlords Join Their Local Housing Choice Voucher Program?
Becoming a Section 8 landlord isn’t difficult. As long as you have an income-qualifying property and agree to abide by the program’s rules, you can apply to become a part of your local Housing Choice Voucher Program.
Though the process of becoming a Section 8 property owner varies from state to state, the following typically remains constant:
- The Section 8 program requires landlords to maintain certain rental housing quality standards. Property owners must have their properties inspected by the local public housing authority.
- The agency will inspect the piece of real estate for health and safety violations, determine if it‘s habitable, and assess whether or not the landlord has met any applicable requirements set forth by state or federal law.
- If they find that the unit meets these requirements, they will provide the landlord with an approval letter certifying that they are eligible to participate in their local housing choice voucher or Fair Housing program.
- Upon receiving the approval letter from their local housing authority, the landlord must request tenancy approval from HUD. This application includes information about themselves as well as their properties such as location details and how many units they own.
- Once HUD has determined that the property is eligible for the rental housing assistance program, they’ll send an approval letter detailing how much the government will pay as a subsidy for monthly rent — also known as “fair market rent.” For example, let‘s say you have a qualifying one-bedroom unit that you typically rent out for $1,800. If your Section 8 tenant has a housing voucher for $1,600, then you would receive $1,600 from your local PHA and $200 from your tenant in rent payments monthly.
- After HUD approves your application by returning it with the approved Request for Tenancy Approval (RPA) form, you can start to receive letters from potential tenants stating their interest in renting one of your units through the Section 8 program.
Who Is Eligible for Section 8 Housing?
To qualify for Section 8, an individual‘s household income must be at or below certain thresholds that are determined by their location and family size. If they meet these criteria and want to apply for Section 8 housing, they will need to contact a local public housing agency. The PHA will then conduct a screening process, including background checks, to determine whether or not the individual is eligible for the program. If they determine the person is eligible, their name will be added to the local Section 8 waiting list.
Though eligibility requirements vary from location to location, two of the most common requirements include:
- Maintaining a household income that‘s at or below 30% of the area median income level (AMI)
- Being elderly, disabled, or having children under 18 years old
What Are the Pros and Cons of Participating in a Section 8 Housing Program?
Before diving into this process, you’ll need to know the pros and cons of accepting Section 8 housing choice vouchers.
The Pros of Accepting Section 8 Housing Choice Vouchers
Section 8 landlords enjoy:
- Earning a steady income stream. Unlike tenants from the private market, you know that you’re guaranteed to receive at least a portion of the rent owed to you each month via a housing subsidy.
- Reduced vacancy rates. Once your tenant moves out, someone from the Section 8 waiting list is bound to get in contact with you.
- Renting to voucher holders who have undergone screening, including background checks, in order to qualify for the program.
- Helping people in need, which is many landlords’ favorite part of property management.
The Cons of Accepting Section 8 Housing Choice Vouchers
There are also a few downsides to accepting Section 8 housing choice vouchers, including:
- Being required to meet standards set by HUD’s Real Estate Assessment (REAC). REAC inspections can only be conducted by qualified inspectors as dictated by the local PHA. If your property doesn’t pass its inspection, you may be asked to perform additional maintenance and try again.
- Not receiving the initial rent payment for up to two months on average if there are any processing delays. As such, it’s recommended to have enough money available to pay your mortgage and operating expenses for the first few months.
- Limits to annual rent increases. Because the Section 8 vouchers are paid out based on the annual fair market rent in your area, you can’t increase rent beyond the established rate.
There’s much to consider when deciding whether or not to become a Section 8 landlord, but at the end of the day, it’s noble to use your property management business to help low-income tenants secure affordable and safe housing. That said, be sure it’s the right move for you by reflecting on the pros and cons as we’ve outlined them in this article, and don’t be afraid to reach out to your local PHA to ask further questions.