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. The Be A Better Landlord series will cover various aspects of landlording, landlord-tenant law, how to market your rental property, and best practices to help you get the most out of your investment.
Seamus Nalley (CEO of TurboTenant): I’m Seamus Nalley, CEO of TurboTenant, and I’m here with Krista Ruther, content writer at TurboTenant, 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?
Krista Ruther (Content Writer at TurboTenant): The Section 8 housing program is a government-subsidized housing assistance program. It is funded by the U.S Department of Housing and Urban Development (HUD). 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, or elderly, then they can apply for this program and actually get part of their housing costs subsidized.
Seamus Nalley: Nice, interesting. So, that is the same thing, or that’s different than a Housing Voucher Program?
Krista Ruther: 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.
Seamus Nalley: Gotcha. Okay, “Housing Voucher” and “Section 8,” exact same thing. Stop using them as different terms. Absolutely, makes sense. So, how do tenants actually qualify for a Section 8 program, though?
Krista Ruther: Good question. So, it’s going to vary depending on where they live, but more or less, the PHA (Public Housing Authority) is going to look at their family income. They’re also going to look at the size of the family and make sure that there are no disqualifying features, like 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.
Seamus Nalley: So, because there’s a qualification part of the Section 8 program, do I have to bother screening these tenants at all?
Krista Ruther: You definitely should. 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 screen 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. You are allowed to turn Section 8 tenants away if they don’t qualify for your rental.
Seamus Nalley: Really? Okay, so I had that completely wrong. I thought you had to accept anyone that came to you from Section 8.
Krista Ruther: 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.
Seamus Nalley: 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?
Krista Ruther: So, there’s 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.
Seamus Nalley: Okay.
Krista Ruther: 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 two 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 paid.
Seamus Nalley: 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 except for that first time there may be a little bit of a delay.
Krista Ruther: Yes.
Seamus Nalley: It sounds like I can screen them in the same way I would screen any of my tenants.
Krista Ruther: Right.
Seamus Nalley: 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 rent prices go up, or even having them help be a mediator with any issues with the tenants.
Krista Ruther: 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 see on the market, and in fact, you still get a security deposit from people in Section 8 housing. So, you would subtract any damages from that. Let’s 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.
Seamus Nalley: Now tell me, is Section 8 popular? Like, how many tenants, how many people are using Section 8 across the country, if you have any stats around that?
Krista Ruther: There are about 2.2 million people who received housing assistance in 2018. That’s the last year that data was available. And in terms of the popularity of Section 8, usually, there’s at least a one- to two-year waitlist. 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 you 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. 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. Landlords have the ability to provide that. So, it’s a pretty good program.
Seamus Nalley: Yeah, that sounds like the dream long-term tenants that pay on time every time. Awesome. Well, Krista, thanks a whole bunch for teaching me a lot about Section 8 today.
Krista Ruther: Absolutely.
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